Kalfin: Brexit is an opportunity for the future EU budget

Ivailo Kalfin [European Parliament]

The EU budget should become more transparent or other countries will follow the UK’s example. But Brexit also provides an opportunity to get rid of all rebates, which nobody can actually explain, Ivailo Kalfin, member of the Monti group on the future EU budget, told EURACTIV in an exclusive interview.

Ivailo Kalfin, is a member of the high-level group on own resources, representing the European Parliament’s S&D group. An economist by formation, he has previously served as deputy prime minister, foreign minister, social affairs minister of Bulgaria and as an MEP.

He was speaking to EURACTIV’s Senior Editor, Georgi Gotev.

After a year and a half of work, the high level-group on own resources, better known as the “Monti group”, presented today (12 January) its report on the possible reform of the next long term EU budget in the European Parliament. What is your impression? How was it received by MEPs?

It was a very good discussion. I will quote one of the members of the Budgets Committee, who said that the report exceeds by far the initial expectations.

Who said it?

It was Ms Isabelle Thomas, vice president of the socialist group. But she had a reason, because for a very long time the Council never allowed the other institutions to discuss the own resources. And now not only did we succeed as a parliament to make this high level group work, but also we managed, under the very able chairmanship of Mr Monti, to agree a compromise text. There are only one or two where one of the members disagrees.

So we agreed a text which is indeed consensual and a very good tool for all the institutions to start working on the reform of the budget. There are some proposals that have been done before, there are some new proposals, there is a very deep expert analysis. What we are suggesting is very feasible, very much needed, this is done without changing the treaty, without shifting powers and by keeping the subsidiarity principle. But also making the EU budget much more transparent and predictable. Of course, it is very important how the proposal will be used further.

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Member states are extremely jealous of the European Parliament interfering in the budget field, which they see as the utmost symbol of their sovereignty. Member states could simply ignore the report, couldn’t they?

They could. The report is an instrument. If you want to change the European budget, and I think it would be changed inevitably, it’s better to change it based on a concept and on research, rather than by pressure of the circumstances. The report gives a very good tool to change it feasibly, without changing the treaty, without shifting powers, by keeping the budget neutrality, without asking for a higher budget. But this has to be explained.

I understood that in today’s Handelsblatt a deputy finance minister of Germany, speaking about the Monti group report, said that this was about asking more money from the member states…

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But this is not true, I have read the report.

This is absolutely not true, but if a deputy finance minister doesn’t understand what is in the Monti report, we have a problem of communication. I would like to bring arguments to this gentleman. Of course, he is very much concerned about the German taxpayer’s money. But the way the European budget is funded now is not exactly in the interest of the German taxpayer. This has to be changed, and we are suggesting a change which is, I think, in the best interest of all member states, including Germany.

How about own resources from innovative sources, like the Financial Transaction Tax (FTT) or the CO2 levy, which one do you see as the biggest novelty?

We have suggested several possibilities, nine all together, for alternative sources for the budget. Everything that goes directly to the European budget is going to diminish the national contribution. Our basic idea is to look for taxing areas where the EU creates added value, be it with the single market, be it with the common legislation. And if we say that the single market adds added value – so far we have the duty revenues that go directly to the EU budget, it makes sense to see what is the added value brought by the digital market, by the financial markets. It makes sense to thing that once the EU policies create more possibilities to businesses to make profit, a very small part of this could fund the EU budget. This is the logic.

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I would also mention the taxes on pollution, possible carbon taxes. We suggest also an indirect taxation. Let’s take the example of China or the USA, who do not observe the international agreements for carbon emissions for example. They have a competitive advantage, what’s the point of allowing their goods to come to the European market? Those goods should be taxed, so that players would be put on equal footing, and that’s a new proposal. The idea is to look for sources that are not additionally burdening the taxpayers.

The report seems to see Brexit as an opportunity to get rid of the UK rebate, and of all rebates. Is that so?

In this case, yes, Brexit is an opportunity. I would say there is a window of opportunity linked to Brexit and to post 2020 financial framework. The case of Brexit is very particular, because the UK rebate, the only one which exists in the treaty, is going to be lifted once the country is out of the EU. Then the rebates on the rebate should also be scrapped. But there is something more important. We shouldn’t underestimate the vote in the UK. This was not only the result of voters being misled. If the EU is not changing, if citizens don’t have the feeling that what they are paying to the Union is delivered back in the form of services, security, solution of problems etc., we risk seeing other countries following the UK example. With Brexit, we need to rethink the EU in order to bring it closer to the citizens, and budget is probably the most sensitive issue, among others.

But it is complicated.

It is complicated, but it would be even more complicated if you change it under the pressure of the circumstances and the different elections in one or another country. It’s much easier to make a plan what you would like to do from the European public resources, and follow this path. And there are plenty of things that could be done, again, without increasing the tax burden on the citizens, and creating much more transparency and efficiency for the budget.

I would even go further. This Monti report is a mild option, a mild scenario for change. I would go for a more ambitious scenario, which my require changes in the treaties and changes of the basic rules in the Union. We need to put all public budgets in a single constellation. National budgets, European budget and the very much needed budget for the eurozone have to work in coordination, because they concern the same taxpayers. I would look at the broader picture and try to identify what could cover different types of expenditure.

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You are an economist but also a politician. Can you give a political answer: what could prevent the same thing happening in other countries, like Nigel Farage telling the British that their country pays too much and receives nearly nothing?

This is the so-called net balance approach, how much we give and how much we receive from the EU. Nigel Farage and the Brexit campaigners misled the public, the UK is not paying that much as this double-decker in the streets of London was saying – £350 million per week. If we don’t change anything, we risk having similar developments in other countries. If you want to be transparent with EU citizens, EU budget should be decided by a very transparent procedure. The EU budget is not transparent at the moment. Nobody can explain how is made. Nobody can explain the UK rebate. You have an Oriental bazaar at night in the Council, with the Council President having bilateral meetings with the heard of government and providing gifts to one or another country to cobble a consensus. This has to change.

The EU budget should become more transparent or other countries will follow the UK's example. But Brexit also provides an opportunity to get rid of all rebates, which nobody can actually explain, Ivailo Kalfin, member of the Monti group on the future EU budget, told EURACTIV in an exclusive interview.

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