New budget battle in sight in the European Union. The Commission of Ursula von der Leyen on Tuesday asked the Member States to contribute 66,000 million euros extra to the community coffers for the next four years. The objective is cover unexpected spending increases derived from the war in Ukraine, the rise in interest rates of the debt generated by the Next Generation funds, migratory pressures and a new technological fund.
“We are asking our 27 member states to provide us with 66,000 million euros to meet three priorities: Ukraine, migration and competitiveness,” Von der Leyen said at a press conference. The president has justified her request by alleging that The EU has lived “three years of crisis after crisis”with the focus on the war in Russia, which have exhausted all budgetary margins.
“We are fully aware of the fact that Member States have also been hit by crises. And after years of great public support for their economies, now it is time to consolidate your public finances. That is why we have presented a selective and limited proposal for what is absolutely necessary,” argues Von der Leyen.
[La UE acuerda el fondo de rescate a España e Italia: 750.000 millones y “freno de emergencia” para los frugales]
However, this extension of the multi-year budget of the EU (which was agreed in 2020 with an endowment of 2 trillion euros and which in principle should last without changes until 2027) clashes with entry opposition from Germany and the ‘club of the frugal’ led by the Netherlands. These Member States, which are net contributors to the Community coffers, they want to limit as much as possible any increase.
“Before increasing contributions from Member States, additional financial needs should be covered by reallocations or using existing flexibilities in the EU budget for unforeseen events. Therefore, we do not see the need to introduce new funds,” German Finance Minister Christian Lindner said. in an interview last week.
For her part, the first vice-president and head of Economic Affairs, Nadia Calvinodoes not welcome the increase in national contributions to the EU budget either and I would prefer to finance them with community taxes. Calviño has made it clear that he will not accept any cuts in the common agricultural policy or in the structural funds that Spain receives.
“We are waiting for both the mid-term review (of the EU budget) and the new own resources to be presented, which would precisely have the objective of being able to repay the Next Generation debt without the need for additional contributions from national budgets. We are going to work along these lines under the Spanish presidency,” Calviño said at the Eurogroup on Thursday, before learning of Brussels’ proposals.
The president of the Commission, Ursula von der Leyen, during the press conference this Tuesday
However, the Community Executive has made a minimum proposal for new sources of revenue. A package that includes a contribution for the income from the trading of CO2 emission rights; the collection generated by the new border carbon tax (CBAM); and a temporary own resource based on statistics on company profits.
The budget increase of 66,000 million euros requested by Brussels is broken down as follows. A total of 50 billion euros will go into a financial reserve for Ukraine for the next four years. Of this amount, 17,000 million will be non-refundable grants and another 33,000 million soft loans (which are not counted in the final figure, because the financing is obtained in the markets using the EU budget as collateral).
The next important chapter is the payment of the interest generated by Next Generation debtwhose endowment amounts to 19,000 million euros. In their 2020 agreement, the European leaders had reserved a total of 15,000 million euros for this item, but this money will run out in August due to the sharp rise in interest rates in the last year.
In third place, Von der Leyen demands an extra 15,000 million euros to finance migration policies, particularly agreements with third countries such as the one that was closed with Turkey so that the Syrian refugees would stay. Another 1,900 million will go to the increase in administrative expenses derived from inflation.
The tight budget has left one of the star initiatives promised by the president of the Commission with hardly any resources: the creation of a European Sovereignty Fund, which should be used to strengthen the competitiveness of the community economy and respond to initiatives such as the Inflation Reduction Act in the United States.
Finally, Von der Leyen has proposed redirecting money already existing in the community budget to this instrument, adding a additional contribution of 10,000 million euros. In any case, the president maintains that, in collaboration with the private initiative, this fund could mobilize up to 160,000 million euros.
The request from Brussels for additional resources has to be approved by both the governments and the European Parliament. The Community Executive demands an urgent agreement before the end of the year, so the management will correspond to the Spanish presidency of the EU. “The chances of an agreement are half and half,” warns a senior European diplomat.
