The EU should in the future have more possibilities to finance itself directly instead of being mostly funded by member states, according to a report to be presented to Parliament on Thursday 12 January. Such a system of own resources was already in place for decades in the past and should be readopted. Report co-author Alain Lamassoure spoke to us ahead of the presentation, pointing out that the proposals would not result in a power shift from national governments to Brussels.
At the moment 80% of the EU's budget comes from direct contributions by member states based on their gross national income. The EU budget only represents less that 1% of the gross domestic product of all member states and about 94% is reinvested in the countries themselves in areas such as agriculture, infrastructure and research.
Former EU commissioner and Italian prime minister Mario Monti was tasked in 2014 with reviewing how the EU budget could be financed without burdening the member states.
On 12 January, Monti will be at the Parliament to present the final report with proposals on how the EU can in the future create a new system of own resources to finance its budget.
Commissioner Günter Oettinger, who is expected to take over the budget portfolio, implied during Monday's confirmation session at the Parliament that he would be likely to use the report in the upcoming mid-term review of the EU's long-term budget.
Monti was assisted in his task by a number of people chosen by Parliament, the Council and the European Commission. Parliament was represented by former Bulgarian MEP Ivailo Kalfin, Belgian ALDE member Guy Verhofstadt and French EPP member Lamassoure.
Speaking to us ahead of the presentation, Lamassoure highlighted that since the late 1980s national contributions had gradually replaced the own resources in place and said that this development had at least one obvious drawback: “Whenever there is a discussion in the Council on the [long-term budget] or during the annual EU budget negotiations, instead of discussing how to finance our common objectives, every minister has one single concern which is ‘how do I get back what I give?’ The latest [long-term budget] negotiations in 2013 were appalling.”
The EU has other options for financing itself, for example by developing or increasing other resources in a new system. This system could for example include more traditional resources, such as customs duties on imports from outside the EU or one based on value added tax (VAT).
Lamassoure said that the three Parliament representatives had insisted that the final report would not be limited to just one or two proposals, but would offer a wide range of possible solution to ensure balance. For example, if one year a specific tax would bring in less income as expected, it would not mess up the EU's budget as there would also be other sources of revenue.
Maintaing the power balance
Some fear that a system of own resources could lead to more power for EU institutions at the expense of the member states. However, Lamassoure said: “Of course this will be the finance ministers’ argument, but it’s an argument based on bad faith. There’s not going to be a transfer of power at all.” For example, a decision on a supplement on VAT would be taken by the same people who decide on it at the national level. “At EU level they will play the role they do at the national level,” he said.
Increasing the budget
The Monti group was not asked to identify ways to increase the EU budget, but it could be a consequence of returning to a system of own resources. Lamassoure said: “As long as [the EU budget] is funded by national contributions, it is politically impossible to increase it. But if you have as a basis an indirect tax, be it VAT or a carbon tax etc., the resources coming from this tax increase automatically with annual economic growth. So without making new political decisions and without increasing the relative burden for the tax payer, you will get more money. That’s the idea.”