Monti group to focus on added-value for future EU budget

Ivailo Kalfin [Georgi Gotev]

The so-called Monti group, named after its chairman, the former Italian Prime Minister Mario Monti, is trying to identify what exactly creates European added value, so that more resources for the EU budget would come from there in the future, to the relief of taxpayers, member Ivailo Kalfin told EURACTIV.

Ivailo Kalfin, a member of the high-level group on own resources, spoke at length about the group’s work since it was established last year, and about the recommendations it will submit by 2016. Kalfin currently serves as Bulgaria’s Deputy Prime Minister, and represents the centre-left S&D in the Monti group, on behalf of the European Parliament.

The Monti group aims to start a discussion on the EU’s own resources and to open up the debate about the future EU budget, involving national parliaments and other stakeholders.

Open discussions about the shape of the future EU budget have not taken place so far, as the issue is decided in the European Council, where Member States sit. In most of the cases, issues are decided behind closed doors at the level of finance ministers, Kalfin explained.

‘No illusions’ regarding treaty change

However, in order to introduce more transparency to the EU budget and to make budget procedures more effective, treaty changes are needed, while for introducing new own resources, consensus is necessary.

“We have no illusions. Treaty changes will not be made only because of the EU budget,” Kalfin said, adding that if there was another major reason for reopening the treaty, and if there was consensus that EU budget procedures should be reconsidered, then the work of the Monti group would prove helpful.

New ideas around own resources are not aimed at increasing the budget, but at making it more autonomous, Kalfin said. He added that this doesn’t mean that Member States would have no say. They would still decide the budget’s size, spending areas and ceilings of the budget chapters should be. But once the decision is taken, the need for new decisions to subsidise the budget should be avoided, he insisted.

Deciding ‘four times for the same thing’

Indeed, Member States decide the EU budget on at least four occasions: once for the seven-year Multiannual Financial Framework (MFF), a second time for the EU annual budgets, a third time by when they actually transfer the sums to Brussels, and a fourth time, because of need for ‘amending budgets’ to bridge the gap between commitments and payments. In 2013, this budget gap was €11 billion, and the same situation is repeated today, with €25 billion of accumulated delayed payments, Kalfin said.

“It doesn’t make sense that EU countries decide four times over the same thing, but that’s how they like to do it”, Kalfin said.

“We are not talking about infringing the rights of the Member States to decide. We are talking about a more transparent procedure which would allow the EU to function more effectively,” he added.

Avoiding paying more on the basis of GNI

The proposals of the Monti group are aimed at avoiding situations, such as when member countries are periodically asked to pay more on the basis of their GNI, Kalfin said.

The EU budget GNI-based resources (the shares individual countries pay to the EU budget according to their wealth), which were introduced in the 1980s, because the EU’s own resources had proved insufficient, are being recalculated by the Commission. On the last occasion, certain countries didn’t like the bill.

>> Read: Furious Cameron vows not to pay EU budget bill

In times of crisis, countries sometimes need to cut from their social programs to foot the EU bill, which contributes to fuelling anti-EU sentiments.

Today, the GNI-based resource amounts to 83% of the EU budget, which means that Member States subsidise it, instead of relying on a more autonomous revenue source.

The idea is therefore that the Monti group would identify what exactly creates European added value, and that the own resources would come from there, Kalfin explained.

In his words, the single market is the typical EU added value. This is why one of the traditional own resources components of the EU budget is the revenue from taxes raised on behalf of the EU as a whole, principally import duties on goods brought into the EU.

Common digital market a source of revenue?

If a common digital market is created, this would raise the companies’ revenues and generate a potential source of EU budget revenue, Kalfin said.

But, he added, a simple raise of VAT-based own resource would be an “easy, but bad decision”. VAT-based own resources are derived as a proportion of the VAT levied in each member country. The EU applies a call-up rate to the tax base, generally of 0.33%, but this is varied for some countries.

The Financial Transaction Tax (FTT) also logically applies for a source of EU own resource, simply because the EU capital market would look quite differently if it was broken up into 28 segments, Kalfin said.

In his words, the leading idea for the Monti group is that whenever EU added value is identified, possibilities would be explored to use it for the EU budget, so that taxpayers would not be burdened. Actually, taxpayers would only benefit if the system is introduced, he insisted.

The rebates – a ‘sensitive issue’

Another sensitive issue for the Monti group is the rebates or “corrections” several countries have been able to negotiate, starting with the one British Prime Minister Margaret Thatcher obtained at the EU summit in Fontainebleau in 1986.

The various rebates create a problem, especially for France and Italy, which are the biggest net donors without a rebate, and also the largest contributors for the rebates. A proposal of the Commission to introduce lump sums that would be scaled down over has been rejected.

Asked how this problem could be solved, Kalfin said it was very difficult to open discussion on the rebates, but added that the Monti group would likely point out that those are “incomprehensible and unexplainable”.

“The lack of will to reform the EU budget is linked to the rebates. When countries have no arguments to defend the rebates, the only thing they do is to keep the status quo,” Kalfin said.

Involving the parliaments

The Monti group meets once or twice every two months. A report from the end of 2014 describes the state of play with the EU budget, and says that problems exist, that previous attempts to solve them did not succeed, and that in the meantime are growing worse, with negative consequences for EU policies.

The group has recently tasked experts to conduct in-depth research, and it has also auditioned various external experts. This in-depth research will be ready in the autumn. Then, the group will see more clearly potential directions to continue its work.

The Monti group also decided that its first report provides sufficient substance to start discussions with the national parliaments. The group plans to involve various stakeholders. Mario Monti has already informed the centre-right EPP, with the participation of national parliaments, and Kalfin has participated in the work of an S&D group in charge with budgetary issues.

MEP Isabelle Thomas, who is S&D Vice President, and Eider Gardiazabal, the S&D coordinator for budget,  will visit various national parliaments, Kalfin said. One of the issues to be discussed is that it’s in the interest of Member States to change the current way of dealing with the EU budget, he added.

Monti is also reported to have spoken to the Ecofin ministers. Their reactions included concerns about “better spending” and suggestions to include provisions for a budget for the Eurozone, under the jargon term CCI (Convergence and Competitiveness Instrument).

According to its mandate, the Monti group’s work would end up with an inter-parliamentary conference between the EP and the 28 national parliaments, followed by a final report.

The idea is that the inter-parliamentary conference should take place in 2016, before the group puts together its final report.

The high-level group on own resources (HLGOR) was established in February 2014 to find more transparent, simple, fair and democratically accountable ways to finance the EU. The group will deliver its final recommendations by 2016, when the Commission assess whether new legislative initiatives to amend the own resources system are appropriate.

The group is chaired by former Italian Prime Minister and EU Commissioner Mario Monti, and is composed of members designated by the European Parliament - Alain Lamassoure (EPP), Guy Verhofstadt (ALDE) and Ivailo Kalfin (S&D), the European Commission and the Council.

The reports of the Monti group are presented to the three institutions, the Commission, the Parliament and the Council. The Commission is represented by Vice-Presidents Kristalina Georgieva and Frans Timmermans, and Economic and Financial Affairs Commissioner Pierre Moscovici. 

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