Brussels, 07/04/2011 (Agence Europe) - As previously announced in Agence Europe (No. 10351), three influential MEPs from the EPP, S&D and ALDE groups, Alain Lamassoure, Jutta Haug and Guy Verhofstadt, made a proposal for the budget on Wednesday 6 April in Strasbourg. This will revolutionise the EU budget by putting an end to contributions to it from each of the EU member states. The proposal calls for the maintenance of traditional own resources (customs duties) and the setting up of a new own resources system “providing the EU with sufficient budgetary autonomy, so that it can resolutely undertake all the different policies the Lisbon Treaty conferred upon it”.
The real problem in the European Union budget can be located in the structure of its resources. Currently, national contributions fund almost 80% of the EU budget. Nonetheless, resources originally based on Gross National Product (GNP) were only expected to last for a short time until they were replaced by the Community's genuine own resources. This was the case between 1970 and 1988, before national contributions were reintroduced. The EU has gradually lost its financial autonomy. This return to the old system has made budgetary procedures more opaque and has transformed these procedures into a kind of cattle trading obsessed by the quantity of European funds later paid back to member states. Key to all this are the different rebates negotiated, particularly the United Kingdom's.
Getting rid of national contributions. The three MEPs have based their proposals on current European budget figures (€125.5 billion, corresponding to around 1% of EU Gross National Product). The proposals are also based on the principle that if a new resource is raised at a European level, a respective area of national taxation will decrease. According to their calculations, it is possible to fund European budget expenditure sustainably with the help of genuine European VAT of which a 1% rate would produce revenue of €57 billion. In addition to this VAT rate, there would also be a carbon tax (estimated revenue is between €38.5 billion and €48.5 billion) and also, possibly, a new own resource in the form of a tax on financial transactions (estimated revenue of €10 billion at a rate of 0.05%). This would all be added to the current system of resources made up of customs duties and agricultural deductions. In this way, the contribution made by each EU country to the European budget could, in the long-term, be eradicated.
Eurobonds for funding projects. With the economic crisis, governments are cutting public funding just when the need for it is so pronounced, explain the three MEPs. The Commission has estimated that investment required in infrastructure is around €1, 800 billion for the period leading up to 2020. Issuing euro bonds to fund major infrastructure projects (“project bonds”) would help to ensure the funding of EU projects in the transport, energy, information technology and research sectors. The three MEPs suggest that the European Investment Bank should be used to play a role in this context because it already has broad-based experience in this area.
Savings. The final raft of proposals consists of the promotion of synergies between the national budgets and Community budget, in addition to simplifying the latter. Such measures would help improve the efficiency and visibility of Community action and achieve significant economies of scale and subsequently ease pressure on member states' public spending. For example, the European External Action Service (EEAS) is aimed at replacing the respective national services. By achieving savings of 10% in the national services, it would be possible to save €750 million every year at an EU level. There are considerable savings margins to be made in the personnel employed by the national central banks, defence, development aid and even research.
Jutta Haug (S&D, Germany) explained that over time, cardinal sins had been committed: - and resources based on VAT had been raised by way of the statistical method, which had created a system with zero transparency; - in the area of traditional own resources (customs duties and agricultural production), the system had been completely overturned; - the British rebate (in 1984) had led to a debate around the notion of “fair return”. Haug concluded: “This is why we want to finish with this debate of fair return and net contributors.”
Alain Lamassoure (EPP, France) said that in the future they should avoid creating this “zenith of absurdities and the democratic charade we are participating in during current negotiations on financial perspectives” (negotiations took place in December 2005 at the European Council under the British Presidency). The allocation of national contributions is described in a nine-page EU Official Journal description and includes 41 exceptions for a range of different countries, explains Lamassoure. He denounced a system that is “obscure, undemocratic and unfair”. He explained that “we need an integrated budget. ' Fair return' is an economic, budgetary, accounting and political lie. Nonetheless, this is the only thing being debated at the Council. We want to change this logic and replace the logic of fair return with the logic of fair levels for raising resources (at national, regional, local and European levels).”
Europe has to “tackle its budgetary crisis”. Four successive treaties have increased the EU's remit. Nonetheless, in proportion to the wealth created every year, the European budget has, according to the MEPs, decreased. Under the British Presidency in 1992, the European budget ceiling was set at 1.24% of GNP. The maximum level reached was 1.18% in 1998 in payment appropriations and, according to Lamassoure, “we are currently at a level that is less than 1%”. If the letter sent by the leaders of the five main net contributor countries last December is taken into account, the budget will be below 0.9% of EU GNP by 2020. Lamassoure concluded that “the initiative we are proposing is not intended to hurt countries but rather, help them”.
Two scenarios. Guy Verhofstadt (ALDE, Belgium) explained that their proposal is nothing other than a return to the letter and spirit of the Treaty of Rome which contained a clear aspiration to achieve financial autonomy. He explained that this does not target increasing the level of the European budget but raising funds differently. The three MEPs say that two different scenarios are possible. Verhofstadt said that “the Council is free to choose from these two possibilities”. The first includes a new European VAT rate of 1%, which would generate €57 billion, in addition to a tax on CO2 emissions (import and production) with €20 per tonne, which would generate a revenue of €48.5 billion. The second scenario includes these two elements but involves a lower carbon tax (€38.5 billion) and the addition of another European own resource on stock market transactions and bonds, which would account for €10 billion.
The debate promises to be a fraught one. The European Commission is due to make its own proposals at the end of June on the next multi-annual financial framework. The big EU member states, however, which are also the main contributors (France, Germany and the United Kingdom at the head of them), have already rejected the idea of a European VAT rate. (L.C./transl.fl)