As EU leaders gather for a crucial summit on Thursday, a radical rethink of the next seven year EU budget is needed, argues Margarida Marques.
Margarida Marques MEP is the Vice-Chair of the Budgets Committee on Budgets, and co-rapporteur on the MFF co-rapporteur.
Three months ago, an unknown virus started changing the World, our lives and our economies. The way we respond to this pandemic in the short-run and how we support the economic and social recovery will shape our economies and societies in the next decades. Last week, the Eurogroup agreed an unprecedented package of measures of more than half a trillion euro. Even if far short of what we could wish for, it is a package which includes significant elements of EU solidarity as the interest rates and the funding conditions of the SURE instrument and ESM credit line are subsidised by the countries fiscally better. Two issues were left open: the features of a new Recovery Fund and the role of the next EU budget (MFF) in the economic recovery. Both are crucial to the European recovery and its transformation and they shall apply to all member states.
The current Commission proposals of the EU budget are very small regarding its size and not equipped to provide the real catalyser for the recovery and transformation that the Union needs in these unprecedented times. The Commission should come up with a revised MFF proposal, as asked by the Parliament, and it is an opportunity to have a robust and flexible MFF where the priorities can be reassessed in face of the current challenges and allocate significant resources to build a resilient, inclusive and climate neutral European economy.
The next MFF should prioritize in the first years the areas in which could bring a significant value added to the economic and social recovery (research and innovation, healthcare, employment and social policies, SMEs and investment, digital transformation and a modernised agriculture and cohesion policy to support the principles of the green deal) and a mid-term revision should be mandatory.
The Recovery Fund, limited in time, covering all Member States and with an adequate democratic accountability controlled by the European Parliament and Council, shall be equipped with enough resources to really support and help to transform the European economy. It is the most efficient way to address the major health and economic crisis by supporting a long-term vision in the recovery that brings sustainability and human and societal resilience and that repairs the functioning of the internal market.
The European Council of this week should give clear guidelines on five issues:
Size: the MFF is not enough and a recovery fund should be additional and significant enough to be ready to act with the proper stimulus according to the severity of the crisis and the magnitude of the needs.
Actions to finance: Only when it is clear what it will exactly finance we can talk about size and the remaining features. I would see here three possible options: (i) to support specific EU programmes by topping up notably in the first years of the MFF; (ii) to support a new Instrument for the Recovery and Resilience of the European Economies aligned with the principles of the European Green Deal. This instrument could support national investments that provide a macroeconomic stimulus and projects that allows to build a more sustainable economy; (iii) to support EU common projects linked to the implementation of the European Green Deal and / or the Industrial Strategy. Here, it could probably entail measures dedicated to EU strategic sectors and to ensure European sovereignty over strategic value chains.
To guarantee that national debt is not increased: the Commission, on behalf of the Union, should borrow the funds in the market at very long maturities and low interest rates, and it should be backed by the EU budget. The ECB should act as a last resort. Commission will be the bond issuer. The EU has to be liable to repay it. In case guarantees of MS play a role, it should be followed the same logic of the ESM guarantees provided by MS, the Commission will be considered an “institutional unit” by the Eurostat and therefore debt incurred won´t be counted as public debt.
Guarantees: issuance of debt without guarantees is limited to the margins between the expenditure ceilings in the MFF and the revenue ceilings in the OR Decision. Commission either proposes a new OR decision proposal increasing the ceilings (it might need to be up to 2.5% GNI but as it has to go through national parliaments it might take time) otherwise the EU should receive irrevocable and unconditional guarantees from member states (given the considerable dimension of this fund).
Repayment: an agreement on perpetual bonds is very unlikely so there should be a resource-commitment by all member states. Repayment features should be previously decided and its obligations should envisage mainly new own resources and the remaining should be a % GNI of each member state at the time of the repayment. On the own resources, a digital tax – a consensus at OECD level might be reached soon and this sector will probably be the least affected by the crisis – the carbon adjustment tax and the CCCTB should be included.
Last week, European Parliament with the support of main political groups asked for the creation of Recovery Bonds. It is time for the European Council to stand up for Europe and fight hard for its recovery.