Brussels, 30/06/2011 (Agence Europe) - The European Commission has presented its proposals setting the framework of the next financial perspectives, that is, its multi-annual budget for the period 2014-2020, to the EU Council of Ministers and the European Parliament (EP). Commission President José Manuel Barroso and Budget Commissioner Janusz Lewandowski set out the Commission proposals at a press conference on Wednesday evening 29 June, after presenting them to the EP. Barroso laid great stress on the impact that the EU budget, “relatively small” compared with the national budgets of the larger member states, could have on Europe's growth and competitiveness, security and influence in the world.
The Commission projects overall expenditure of €1,025 billion over the seven-year period, with an increase of 5% and innovations in revenue generated, with the introduction of a “Tobin tax” (see related article) and VAT changes. The Executive's proposals, long awaited and carefully prepared, signal the start of negotiations that are likely to be difficult and are expected to last until the end of 2012 among the member states in the EU Council of Ministers and in the EP. The first of the numerous reactions (see the articles on pages 9 and 10 of this newsletter) provide an indication of how far apart and how different starting positions are.
The overall envelope would appear to be the first issue in negotiations, which the Polish Presidency will open during its six-month term of office which begins on Friday 1st July but which will build up steam especially in the course of next year ahead of decisions to be taken before the Commission drafts its 2014 budget. The most significant battle will not be over figures but on the potentially controversial creation of a tax on financial transactions and of a European VAT to supply the future EU budget. Even before Barroso and Lewandowski announced their proposals, UK Prime Minister David Cameron had condemned the initiative as being “totally unrealistic”, given the rigour in place everywhere, and rejected “new European taxes”. In the hours that followed, reservations, even negativity, were expressed in Paris, Berlin and other capitals: this was only to be expected since no one goes into negotiations having declared him-/herself satisfied at the outset. The Commission president defended the proposal that he tabled: “We have proposed an ambitious budget but one which is, at the same time, responsible”, he opined. He did not hide his annoyance with the reactions which preceded the announcement. There were not only detractors, however, and, from the EP, came voices of support: Vice-President Gianni Pittella (S&D, Italy) welcomed the innovations of the Tobin tax and in relation to VAT, though he was disappointed that no reference was to be found on eurobonds.
Compared with the current budget of 1.07% of European gross domestic product (GDP), Brussels is proposing a nominal increase of 5%, to €1,025 billion, or 1.05% of European GDP. Expenditure has been capped - payments should not exceed 1% of GNP. While the three main contributors, Germany, France and the UK, are calling for a freeze in the European budget, given the general climate of austerity and rigour imposed by Community authorities, Barroso reminded capitals of their responsibilities: “All governments are calling on Europe to do more”, he said, adding: “Our first priority is the creation of jobs and growth”.
In terms of content, Brussels is suggesting, inter alia, that funding for agriculture be held stable at €386.9 billion, a move seen as positive by Agriculture Commissioner Dacian Cioloº. France, which is the biggest winner from the common agricultural policy (CAP) had demanded - according to AFP - that the agricultural budget should remain unchanged “to the euro”.
The most delicate proposals relate to how to fund the budget. Brussels wants to create new own resources, beginning with the tax on financial transactions, which could bring in €30 billion annually. To be passed, the proposal requires unanimity among the 27 member states, and this will be difficult to achieve. Also to be put in place are value added tax (VAT) amendments: a standard proportion of this tax, one point, will be transferred directly to the EU budget. This mechanism will replace a similar, already existing, arrangement which is deemed too complicated and not sufficiently effective. Counter-balancing this, contributions paid by the member states, which make up 76% of the budget, will be reduced by the amounts generated by the new arrangements. By 2020, the new own resources could provide “more than 40%” of the budget. This would mean less reliance on member states for the budget. For the opposite reason, “this poses a problem (for governments) as it would mean a loss of control over budgetary resources for them”, said a diplomat quoted by AFP.
A final delicate issue: the Commission wants to amend the system of rebates on contributions enjoyed by several countries - the UK and, to a lesser extent, the Netherlands, Sweden and Austria. These states will still enjoy preferential treatment, but under a different form. (Gp/transl.rt)