Monti: Time to limit chaos in EU budget negotiations

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EU leaders should avoid horse trading over the budget. Such chaotic negotiating damages the image of the European Union, said Mario Monti, in an interview with EURACTIV Italy.

Former prime minister of Italy, Mario Monti, is currently chair of the EU High Level Group on EU own resources. The group has been tasked with studying the current system of income to the EU budget and suggesting possible improvements to it, as agreed by the institutions during negotiations on the EU’s seven-year budget.

He spoke to EURACTIV’s Alessandra Flora.

Mr Monti, is the reform of the EU own resource system a reform of the EU budget?

The work of the high-level group is about reforming the EU own resource system, which is an important part of the EU budget. This means we are thinking about the ways that the EU will be financed in the future.

Why is it so tough to reform the EU budget? Why has nobody been able to achieve it so far?

Unless there is unanimity, the system cannot be changed. Now that the number of member states has increased, it is tougher than before. Applying the principle of unanimity does not necessarily make taking decisions impossible. Unanimity means that each country can exercise a veto, but not every country wishes to do so. For instance, taxation is another field where unanimity is required. The EU has managed to make important progress here, though not sufficient, in my opinion.

In the 1990s, we took important steps forward in the field of taxation.  I remember that as being encouraging. We decided to “politicize” this issue and to discuss it as a political package. Even if the finance ministries at that time were reluctant to tackle such a complex and thorny issue, we were able to upgrade the debate by making it clear that without any further action, taxation on capital and enterprises (both mobile production factors) would have remained unchanged at lower levels as compared to the higher ones on labor (fixed factor). Even then, this was one of the main causes for unemployment, and it was an important topic of discussion.

Thus, finance ministers, under strong pressure from public opinion, were unable to ignore the issue. In December 1997, during the Luxembourg Presidency lead by Jean-Claude Juncker, we put a package of measures together, including the taxation on savings directive and the code of conduct on taxation. Each member state had to swallow a bitter pill as well as a sweet one.

Why is the current system inefficient? MEP Alain Lamassoure, for example, stated that “the richer a country, the less it pays and that is also anti-European: at times it seems we have 28 Mrs Thatchers around the negotiating table.”

Even if we haven’t submitted any proposals yet, in our first report published last December and discussed with the Parliament we are looking at the current system, assessing it from different points of view: equity, fairness, sufficiency, stability, transparency and simplicity.

We also consider other specific criteria,s such as the focus on European added value, and the constraints (of) narrow self- interest, the subsidiarity and fiscal sovereignty of Member member States states, and the limit to political transactions costs.

The criteria in limiting political transactions costs means that when we take a decision on the budget, we should avoid a chaotic negotiation similar to a horse trading. Such negotiating damages the image of the European Union.

The first assessment report does not include any proposal. Why?

Both the member states and the institutions will discuss our guidelines.  Maybe the proposals will not be well-received and we will have to debate both the benefits and disadvantages.

If the proposals do not meet the target, there is the risk that nothing changes. That is the reason why, before presenting our guidelines, we want to promote a serious and open discussion.

When I accepted this responsibility, I did not consider it useless, or that it was an impossible mission. In 2011, when I was appointed as Italy’s Prime Minister, I had to face another arduous task as well. Yet the EU own resources group is not one of the many. For the first time ever, all EU institutions agreed to set up a group. In former times, other groups left a mark (i.e. the Delors and de Larosière ones), but were not created by all the institutions.

In December 2013, the Council adopted the regulation laying down the EU’s multiannual financial framework for 2014-2020, after two and a half years of negotiations. The Parliament approved it on condition that all the Institutions would promote a true reform of the EU own resources system.

Our group is different from anyone else, because it has “three parents” and because of its political nature. In 2016, for the first time, there will be a unique democratic moment: an inter-parliamentary conference, that will involve both the European Parliament and the national ones on the EU own source system issue. We hope this debate will be able to empower the Parliaments.

The members of the Budget Committee at the EP welcomed your first assessment report.

All their comments are very constructive. I was not surprised at their suggestions, because they really wanted this reform.

Several MEPs called for a carbon tax or Financial Transaction Tax.

In the past, all those taxes have been mentioned, but there was no agreement on them. We will analyse all those solutions over the next months and we will reflect upon them.

What if a national parliament rejects the reform?

In that case the reform would stop. But if a member state does not agree on some aspects, the institutions will open additional negotiations aimed at discussing further reform. It happened, for example, both with the Nice Treaty and the Lisbon Treaty. The inter-parliamentary conference aims precisely to promote a dialogue on this issue.

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