The European Parliament was back in full motion this week and hit the ground running.
For the Budgets Committee (BUDG), the big topic was the new Own Resources proposal and the need to develop new income sources to sustain the Next Generation EU recovery instrument’s borrowing.
From the parliamentary debate earlier this week, one thing is certain: MEPs are divided on the issue.
Own resources: Is it really a ‘Hamiltonian’ moment?
The debate clearly illustrated that, through the eyes of centrist and centre-left MEPs, the new Own Resources proposal must be urgently pushed through, presenting they believe, a long-awaited ‘Hamiltonian’ moment offering new permanent tax opportunities and debt offsets.
However contrary to the hopes of the parliament’s centre and centre-left political groups, the European Commission’s proposal should not establish a permanent federal budget entity.
In principle, I agree with the argument that the ‘Next Generation EU instrument requires financing beyond current means, and that a proposal for new Own Resources could provide an answer. Nevertheless, such a measure must be carefully deliberated.
Our primary concern however, should be ensuring that the proposal's contents do not stretch beyond the means of EU Member States, as opposed to fretting over dates and deadlines.
"Our primary concern should be ensuring that the proposal's contents do not stretch beyond the means of EU Member States, as opposed to fretting over dates and deadlines"
The proposal must include an impact assessment of the individual resources of each Member State; a component promised by European Commissioner for Budget and Administration Johannes Hahn.
Is the timeline issue of the Inter-institutional Agreement really so crucial?
Rather than pushing through a proposal just for the sake of it, we should develop an appropriate structure that respects all Member States accordingly. The Parliament’s ECR Group is clear that the quality of Own Resources justifies the extended calendar deadlines.
And we approach the Inter-institutional Agreement, on a roadmap for the EU’s future own resources through the same prism.
During this week’s debate, several political views emphasised the legally-binding aspect of the agreement. But does this really mean that the Parliament is impatient to go to court against the Commission or the Council for not meeting the deadline prescribed in the Inter-institutional Agreement?
Although the Own Resources proposal was due in June 2021, Commissioner Hahn, when discussing with BUDG MEPs on Tuesday, put forward a reasonable argument that the entire Own Resources package should be presented at the same time.
It is far more valuable to place it alongside the digital levy and global corporate tax than in segments.
The Commission has put the proposal on hold until the OECD/G20 level agreement is finalised.
We should also consider that the proceeds of a digital tax organised, at an EU level, could feed into national budgets before it eventually supports the EU budget through Member States’ Gross National Income (GNI) contributions.
"Although the Own Resources proposal was due in June 2021, Commissioner Hahn, when discussing with BUDG MEPs on Tuesday, put forward a reasonable argument that the entire Own Resources package should be presented at the same time"
The Own Resources proposal should also be prepared in the context of global issues, such as those that influence global competition aspects. An example of which is the introduction of changes to the EU Emissions Trading System (ETS) incorporating maritime and aviation, which, could reduce European companies’ competitiveness globally.
Certain MEP colleagues in the Parliament expect that most of the Next Generation EU’s debts will be paid by third countries through the proposed carbon border adjustment mechanism (CBAM), digital levy, or similar revenues.
Unfortunately, economic logic works differently, and the Next Generation EU instrument’s debt will be paid by ourselves - European citizens and companies.
Fit for 55 - a new dimension in the MFF and Own Resources issue?
In July, the Commission presented its long-awaited Fit for 55 package, a new aspect for the Multiannual Financial Framework (MFF), Own Resources and budgetary issues - which was the central topic in this week’s discussions.
During the debate, we asked Commissioner Hahn if there would be sufficient financing for these programmes. If not, how could it be ensured?
Knowing that the new Own Resources structure will be set against mitigating debt from the Next Generation EU instrument, while at the same time, over the next seven years, the expenditures will be those planned for the Social Climate Fund.
"Setting up a new Own Resources framework is imperative. But, we must ensure that it applies to all Member States, does not impede the Union’s global competitiveness, and does not create more problems than solutions"
It appears that the Fit for 55 package brings a lot of uncertainty. MEPs have expressed criticism from across the political spectrum and their committees. While it may well provide new opportunities and future options, it will undeniably bring about extra expenditures; costs that risk being distributed unequally.
The proposal must avoid having disproportionate effects among Member States. The Fit for 55 package will raise the average living costs for households across the Union. However, even with the Social Climate Fund reducing the financial strain, it will only serve to make households reliant upon the fund and create an unsustainable quality of life.
Proportionately, this will be felt more harshly in less affluent Member States than it will in wealthier ones.
There also appears to be some disappointment surrounding the Fit for 55 package, because it suggests a blanket approach towards other projects, such as the New Forestry Strategy.
It lacks consideration towards the differences in the forestry industry across the Union and instead wants to govern all forests under the same rules from Brussels.
Setting up a new Own Resources framework is imperative. But, we must ensure that it applies to all Member States, does not impede the Union’s global competitiveness, and does not create more problems than solutions.