Commission advisor: EU needs bigger budget, and needs to start debating it now

Ivailo Kalfin, an adviser to budget Commissioner Oettinger, says EU leaders must soon start debating the next multi-annual budget as it will be more complex than before. [European Parliament]

EU leaders should start debating the next multi-annual budget as soon as possible because the talks will be more complex than ever and may produce legal disputes that will force the union to revert to an interim budget in 2020, a senior adviser to Commissioner Günther Oettinger told

Ivailo Kalfin, a former Bulgarian minister and MEP, who was a member of the Monti group on the future EU budget, also said that proposals to condition disbursement of EU funds on compliance with basic political criteria would be hard to implement properly, just like any attempts to have a eurozone finance minister and budget any time soon.

Stressing that he was speaking in his private capacity, Kalfin said that the main problems facing the EU’s budget were how to calculate the UK contributions, which will be absent from 2020, and reconcile the lower revenues with higher expenditure, particularly for migration and defence.

The EU should therefore abandon its usual practice of agreeing the budget among EU leaders behind closed doors at the very last moment, he said, because the plan to reach a budget agreement by the end of this mandate is already “very ambitious”.

“This time it is different because of the fact the UK is going to leave, it’s a fact you’re not going to have enough funds. You have the clearly formulated ambitions for defence, for migration, and they have to be there… So inevitably there should be changes, they cannot do business as usual, you discuss, you clash, and then in the end, you adopt something that is very similar to the previous one.”

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“The question there is whether they will have the incentive to solve this issue before the end of this European legislature or not. If they don’t agree, it would mean in 2020 the EU is going to enter without the multiannual budget, which means on the basis of the current budgetary agreements”.

Kalfin is convinced the EU needs a “much higher” European budget, but that will require an agreement on own resources – the EU’s own revenues, mostly customs and VAT – but he said the proposed level of 1.1% of EU GDP would be “a good step ahead”.

He said it was not clear whether contributions of the UK, which is scheduled to leave the bloc after March 2019, are to be deducted from budget calculations, and whether their rebates should be excluded or not.

“And here we give plenty of food for the lawyers, which is always a very bad idea in the European institutions. That would open not a political but a legal fight, which is going to be very detrimental to the EU. And it’s going to take time… It is the perfect way to make the EU even less attractive.”

Conditionality remains difficult

Commenting on initiatives to use the EU budget to punish ‘rebel’ countries like Poland for failing to comply with basic democratic standards, like the rule of law, Kalfin said the “will is there but the instruments are not very clear, what exactly could be done so that it falls within the Treaty”.

One option is to further enlarge and sophisticate the current ‘conditionality’, whereby a member state is given a list of shortcomings to improve on, and is then under review before funds are disbursed.

“That (expanding the conditionality) is quite weak because it requires the agreement of the member states. Secondly, the problem is you cannot affect all the funds with this. You can affect only the national envelopes, you cannot touch direct payments. So what is there is the cohesion, European social fund, rural development funds”.

Hungary and Poland defend larger European budget

The Hungarian and Polish governments expressed on Monday (8 January) their readiness to contribute with more money to the EU’s multi-annual financial framework after the UK exits the EU in 2019.

But, he cautioned, there is strong opposition to that “because regions will tell you ‘are we to be punished because the central government is doing I don’t know what?’. And there is no way out of this mechanism.”

Eurozone reform – a tall order

As for the ambitious plans for a reform and deepening of the eurozone, mostly advocated by French President Emmanuel Macron, Kalfin said many of those ideas were “overambitious” because economically they are going in the right direction but are politically unrealistic.

“There is actually no need for a separate eurozone budget. It would be enough to have a single line in the current budget, a pro memoria line with no money, which will be used for the eurozone members hit by a crisis. Then there should be a mechanism for how to fill the line with money but you don’t need to keep some funds there”.

Having a finance minister for the eurozone, he said,  “is not doable”.

“You have the leader of the eurozone but he cannot decide on behalf of the national governments how they are going to spend their budget. It’s more like an economic than a finance minister… It will be rather somebody to follow the macroeconomic situation in the member states and trigger the safeguard mechanisms when needed.”

The proper course, according to Kalfin, is first to ensure the EU has a substantial budget.

“Then it makes sense to speak about a finance minister to manage it, but this is the distant future.”

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