Brussels, 19/10/2010 (Agence Europe) - On Tuesday 19 October, the European Commission suggested that funding of the European budget should be reformed, including through the creation of a European VAT to reduce the contributions of member states to EU coffers. The Commission is cautious when it comes to spending. Its targeted proposals on the next multiannual financial framework (post 2014) are not due until spring 2011.
“At times when public spending is under pressure, we suggest ways to achieve a European budget that is up to the challenges we are facing collectively, not necessarily through increased expenditure, but by focusing on the right priorities, the added value, results and the quality of European spending”, European Commission President José Manuel Barroso comments after the adoption of the Commission on review of the EU budget.
Ten-year financial framework. In its communication, the Commission states that the EU budget has been a cornerstone for achieving Europe's aspirations in fields such as growth, solidarity and security. However, when new events occur (food crisis, natural disasters, etc), it does not react fast enough. The transfer of funds in accordance with current rules is a long and complicated process. The budget would be more flexible with a financial framework over 10 years (as opposed to seven at present) and deep mid-term review (after five years) and major reserves set to one side to this end. Other instruments would improve the EU's response to unforeseen events: - the possibility of easier transfer of funds and of margins left unused, flexibility in the spending for multiannual programmes (“front or backloading”) and the reinforcement and enlargement of the tasks of existing financial instruments.
The EU budget accounts for just 2.5% of all public spending in Europe. In cooperation with the European Investment Bank (EIB) and using financial instruments such as EU project bonds, the EU budget could attract more financial resources without having to increase itself. Reserves could be set aside and their release made dependent on the achievement by partners of key measurable objectives.
Priority given to EUROPE 2020 strategy. The EU budget must identify where one euro spent at European level is more useful than one euro spent at national level (added value). The heavy investment in research and innovation as well as the main transnational infrastructure projects should be funded at European level, the Commission states. The Commission explains that “placing our resources in common on key dossiers would allow member states to make savings while avoiding duplication”. The budget must also finance the change of direction of the European economy towards green services and technology.
Common agricultural policy (CAP) must develop, first of all as historic references for direct payments are 10 years' old. The Commission identifies several possibilities for reforms of varying intensity: - reduction of differences between countries in direct payment levels, until phasing out of direct aid and market measures to the benefit of measures to meet environmental objectives and climate protection. In 1988, the share of agriculture in the EU budget amounted to 65%, while today it only accounts for 40%.
Cohesion policy must give more support for the key common priorities of Europe as a whole instead of focusing on reducing disparity between rich and poor regions, the Commission states. Funds should contribute to attaining the objectives of the EUROPE 2020 strategy. The Commission suggests the creation of a contract for investment and development partnership based on a joint strategic framework. This framework follows an investment strategy on which member states would take support to explain how their development strategy would follow the priorities of EU 2020 strategy.
The European Social Fund must focus on EU 2020 strategy objectives. The EU must show solidarity with victims of crises. The role of the EU solidarity fund is limited to natural disasters, and this role could be extended to all kinds of disasters.
Europe on the world stage. Europe must remain a leading international player. Europe “is committed to increasing development aid to 0.7% of GNI by 2015, while at the same time improving donor coordination and governance, for example through EU trust funds: delivering on our climate change financial commitments, either directly through the EU budget or through a dedicated instrument”, the
Commission explains in a press release.
Reform of budget funding. In 1988, member state contributions made up 10% of the European budget. Today, they represent 70% of the budget. This runs counter to the spirit of the Treaties of Rome and Lisbon, causes painful debate on the concept of “net contributor” and is at the origin of complex rebate systems.
From now on, the Commission suggests reducing member state contributions by abolishing VAT-related own resources, and gradually replacing this by one or several new own resources, for example: - part of tax receipts from the financial sector, EU revenues from auctioning under the Emissions Trading System, an EU charge related to air transport, an EU value-added tax, an EU energy tax and an EU corporate income tax.
On the subject of the various budget rebate correction mechanisms, including the British rebate, the Commission explains that it is ultimately the composition of the expenditure and the reforms of the own resources system that will determine whether correction mechanisms are justified in the future. (L.C./transl.jl)