The battle for the EU's long-term budget

"The European Parliament will not accept less money for the European budget." These were the words with which the Parliament's president Martin Schulz opened the conference on the EU's long-term budget framework for 2014-2020 on 22 March 2012. Only with a reasonable budget can Europe invest to boost growth at a time of austerity, Schulz said. He added that the EU budget should be fully funded by own resources, thus avoiding arduous negotiations with member states over national contributions.

The conference, which was attended by 42 members of 21 different national parliaments, focused on the EU's budget for 2014-2020: how it should be financed and what it should be spent on. Today, about 75% of the EU budget comes from member state contributions based on their gross national income. As a result negotiations on the EU budget centre on what each member states contributes and gets out of it. To reduce member states' contributions, the Commission has proposed a financial transaction tax and a simple value-added tax resource, which would make it easier to agree on budgets. In principle the Parliament supports both suggestions.

Schulz remarked that it would not work if heads of state kept giving the EU new tasks to do while at the same time cutting the funds needed to implement the policies.

Danish prime minister Helle Thorning-Schmidt added that it was important to get the budget reform right, as the opportunity to do so only arises every seven years. She said that a good budget should focus on research and development, green policies and solidarity, especially with poorer regions.

Jose Manuel Barroso, president of the European Commission, said the EU budget was an instrument for investment and not an investment for Brussels or the institutions. The budget would be used to support projects in regions and cities all over the EU.

Budget commissioner  Janusz Lewandowski  said the financial transaction tax could halve member states'  contributions by bringing in €54 billion for the EU budget, assuming that two-thirds of the income from the tax would go to the EU budget and one third to national budgets. 

Andreas Mavroyiannis, Cyprus's deputy minister for European affairs, said the real questions were being obfuscated by talks on the dependency on national contributions and member states' insistence that net contributions are not excessive.

Eva Kjer Hansen, chair of the Danish parliament's European affairs committee, warned that it was not clear how the financial transaction tax would affect growth and competitiveness and that it was unlikely that it would gain the necessary support from member states.

Danish Liberal Democrat MEP Anne Jensen,  one of the MEPs responsible for drafting the Parliament's position on the long-term budget, said the EP wanted to have a simple system without exemptions or rebates. It was not about higher net taxes, but about focusing on the quality of the expenditure side. She said it was also important to cut national contributions.

French Social-Democrat MEP Pervenche Berès said she supported the financial transaction tax as it taxes an area of activity that has thus far escaped taxation.

Milan Cvikl, from the Court of Auditors, warned that revenue from the financial transaction tax was likely to be volatile, as the volume of financial transactions is subject to variation.

Story originally published on 23 March 2012