They failed. They held all the cards, they had all the objective and subjective elements and even so, their report card came back with a U on it! This, at least, is what a neutral observer would conclude, as it is quite a different matter in the hearts and minds of the protagonists. The Royal International Club of the Frugal has scored points against its opponents, even though it was the underdog in terms of pure numbers; it will regroup once again to make sure that its players are match-fit for the Cup Final. But the opposing team has yet to admit defeat: the Cohesion Champions League will have its revenge, this time forcing the referee to recognise their sheer power after a massive and decisive attack!
How has it come to this? Flashback. In 1978, 55% of the European budget came from customs duty and 44% from the direct financial contributions of the member states. 20 years later, the system was more balanced: 41% came from national resources (GNI), 39% for own resources based on VAT, 17% from customs duty and other income accounted for 3% (agricultural levies, sugar quotas, fines). But after that, things changed for the worse: in 2018, national contributions represented 71% of revenue, customs duty 16%, VAT 12% and other income 1%. In the meantime, the Treaty of Lisbon had entered into force, setting in stone the practice of ‘financial perspectives’ in the legal form of a multi-financial framework and giving the Parliament a greater role.
The public budget has to be a reflection of political priorities set out following an in-depth discussion of the strategic challenges looking to the future, to the ultimate benefit of the citizens. The opposite is what has in fact happened: the debate focuses entirely on the share to be paid in by each member state, bearing in mind what it gets out of the budget. And as the Council of the EU cannot manage to agree, irrespective of which country holds its Presidency, the matter is escalated to the European Council, which is tasked with giving the necessary impetus to the development of the Union and to define its general orientations and political priorities (art. 15 TEU), but in actual fact negotiates all the figures, right to the death, calculators in hand, disregarding the Commission’s proposals and ignoring the positions of the Parliament.
The question of having sufficient genuine own resources has been the subject of countless reports and reflections. You would need to be completely lacking in any sense of history to fail to see that the EU’s responsibilities are becoming more and more numerous and weighty under the pressure of events, that resources must increase accordingly and that to this end, the decision-making powers of the inter-governmental system need to be scaled back. As early as 2010, the ‘Barroso II’ Commission, although hardly the most progressive of institutions, proposed to reduce the member states’ share of financing of the MFF and beef up the other resources, even going as far as to consider a European VAT (see EUROPE B10239). The MEPs were on board. But to no purpose.
On 8 February 2013, following interminable discussions, the European Council reached an agreement on the multi-annual financial framework (MFF) 2014-2020: for the first time in history, the European budget fell (see EUROPE 10782/2). The media identified the major winner in the negotiations: David Cameron, who would go on to father the referendum result of which would subsequently deprive the EU national contribution of more than €10 billion a year. The European Parliament expressed its opposition to this bargain-basement compromise, but ultimately agreed to include a political agreement with the Council on 27 June 2013, which stated that a reform of the system of resources would be launched, to identify new resources and disconnect the national budgets from the European budget (see EUROPE 10876/8).
In June 2017, following its White Paper on the future of Europe, the ‘Juncker’ Commission published a ‘Reflection paper on the future of EU finances’ (see EUROPE 11818/1). This feature list of proposals for possible new resources: common energy or environmental taxes, a percentage of the common corporate tax base or of the financial transactions tax, seigniorage revenue (currency issuance), proceeds of the auction is under the emissions quota trading system, premiums on vehicle emissions and, in the longer term, fees paid by individuals crossing a common border of the EU.
It also featured a rejection of the rebates awarded to certain member states and a wound condemnation of the system in place, based principally on the contributions of the member states, as it ‘reinforced a false perception that the value of the EU budget to a member state can be measured by the net balance of contributions made and funds received. This ignores the essence of a modernised EU budget: the value added results from pooling resources and delivering results that uncoordinated national spending cannot’.
However, less than a year later, on 3 May 2018, the ‘Juncker’ Commission unveiled its proposals for the multi-annual financial framework 2021-2027 (see EUROPE 12013/1): measured in commitment appropriations, it rose from 1.03% of GNI to 1.114%. Higher figures had been mooted; it was the lowest option that was agreed upon. Why? The main reason lay in the political timetable: the Commission hoped that the new MFF would be adopted before the European elections of May 2019 (and would therefore be shielded from the populist rhetoric) and that with this in mind, a more modest amount would be easier for governments to swallow. What happened next showed just how naive a gamble this was. (To be continued).
Renaud Denuit