MEPs voted to boost EU budget to 1.3% GDP

A general view of the hemicycle of the European Parliament during the openning session of the European Parliament in Strasbourg, France. [EPA/LUCAS DOLEGA]

The European Parliament backed on Wednesday (14 March) an ambitious reform of the EU budget, calling for an increase to 1.3% of GDP to fund new priorities and transform farming and cohesion policies, which make up the bulk of EU funding.

In May 2018, the European Commission will publish its proposal on the EU’s post-2020 funding strategy. To meet the challenges the EU faces, from youth unemployment, lack of investment, climate change, and migration and those that are yet to come, MEPs said the EU needs a stronger and more flexible budget.

“There can be no new European policy without additional means to carry it out,” said S&D MEP Isabelle Thomas, co-author of the Parliament’s report.

The Parliament voted on two joint reports, one on Parliament’s vision for the next multiannual financial framework (MFF) and one calling for new means of raising genuine own resources for the EU budget, instead of relying on annual contributions from member states.

“The budget can no longer be based mainly on the contributions of the member states. This financing system means, in practice, a budget reduction year after year,” insisted Thomas.

“New own resources must be introduced, such as the Financial Transaction Tax, a tax on multinationals, and a carbon adjustment mechanism at the EU’s borders,” she added, stressing that MEPs will not vote for any deal until new own resources are included as revenue for the European budget.

A survey shows that Europeans expect solutions from the EU. Most respondents think that Europe should do more to tackle a wide range of issues, from security, to migration and unemployment.

More than 94% of the EU budget is redistributed to member states. Only 6% goes to running the EU’s administrative machine.

Budget Commissioner Günther Oettinger told MEPs in a debate on Tuesday before the vote that their 1.3% of GDP target was too ambitious and 1.2x% [to be determined] might be also acceptable as long as the second digit reflects the unknowns, such as the deepening of the European Monetary Union and the European Development Fund.

The Commission, which is expected to issue its proposal on 2 May, wants spending between 2021 and 2027 to be between 1.1% and 1.2% of EU gross national income, compared to the current 1%.

 “At a time when the Common Agriculture Policy and Cohesion policy form 80% of expenditure, you could calculate quite exactly what money would flow back. But in the new MFF, only 60% of expenditure will be earmarked for the CAP and Cohesion Policy, while 40% will go to Erasmus plus and migration,” Oettinger added.

“We need to convince that member states that this idea of looking at things as a net recipient is obsolete,” he added.

Oettinger: EU budget should increase despite Brexit funding gap

The EU’s next seven-year budget should increase the bloc’s spending, despite the impending departure of the UK from the bloc, the EU’s budget chief said on Wednesday (14 February).

Own resources

The Parliament’s proposal builds on the Report of the High Level Group on Own Resources, and calls for a substantial reduction (aiming at 40%) in the proportion of GNI-based direct contributions, thus creating savings for member state budgets, while at the same time doing away with the logic of “fair return” leading to a “zero-sum game” between net payers and beneficiaries.

MEPs also want to abolish all rebates and corrections which benefit only some member states.

“By progressively replacing GNI-based contributions, we could end the anti-European focus on fair return and net balances. Europe must depart from the concept of net operating balance. There is now a strong case for eliminating all rebates and corrections. Brexit gives us a unique opportunity to make this happen,” stressed Polish MEP Janusz Lewandowski (EPP), who co-authored the report.

The UK has made an average net contribution to EU finances of €10 billion per year since 2013. Brexit is expected to leave a €90 billion hole in the EU budget, while the new priorities could add €100 billion in fresh spending.

Reforming the EU budget as proposed would cover the ‘Brexit gap’ without increasing the overall fiscal burden for EU taxpayers, MEPs said.

At the last EU summit, leaders tried to iron out their differences on the budget. They are split over how to square the circle of having more common objectives as well as less money.

Nonetheless, 14 or 15 member states “declared their intention” to increase the level of their contribution. Portuguese Prime Minister Antonio Costa, who addressed the Parliament on Wednesday, stressed that his country was “ready to step up its contributions. This is the only way we can follow on our commitment to our citizens.”

Juncker warns of cuts to MFF despite member states’ promised additional cash

Most EU leaders accepted on Friday (23 February) that they will add more funds to the EU budget after 2020, but European Commission President Jean-Claude Juncker said that funds for farmers and cohesion would still be reduced.

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