The financial summit of the European heads of government on the multiannual budget was prematurely ended without results. According to EU President Charles Michel, it was not possible to reach an agreement. Due to the departure of the British from the EU, a shortfall of 60 to 75 billion euros has arisen on the revenue side of the EU budget.
Attempts by Michel to bridge the divergent positions of the 27 member states were unsuccessful. The deadlock arose because the Netherlands, Denmark, Sweden, and Austria do not want to increase their annual contributions. Many other EU countries want a higher budget. There is also strong opposition to possible cuts to agricultural subsidies and to funds for regional development.
The disagreements among the EU governments are not only about how to compensate for the loss of the British contribution, but also concern the future vision of the new European Commission on climate policy, the Green Deal, new technology, improved border control, and other new policies. New revenues must be tapped for that, or there must be significant cuts to current expenditures.
In addition, the European Commission and the European Parliament believe that 'other revenues' should be tapped. By this euphemistic term, many mean that the European Union should start to impose its own 'taxes', something most EU countries have so far fundamentally opposed. This would mean that the EU could directly collect tax money from the inhabitants of EU countries. Until now, all EU revenues run through the budgets of each of those individual EU countries.
Within the EU framework, there have already been talks about introducing a kind of internet tax whereby global tech companies must pay taxes on profits they generate in those countries. There are also ideas about a 'sustainability tax' on environmentally unfriendly imported products and on disposable plastic bottles.
The Dutch government does not want the Netherlands to contribute more than it already does. The Netherlands already pays more than it receives and ranks fifth in that respect as a so-called net contributor. In 2018, the Netherlands contributed 2.5 billion euros more to the EU budget than it directly received. "The benefit that the Netherlands derives from the internal market is not included here," a European Commission spokesperson clarified.
Dutch Prime Minister Mark Rutte called the breakdown of the negotiations "not a disaster. Last time, we also didn’t reach an agreement within a few months," Rutte said. Several elements from a compromise document by EU President Michel that eventually appeared on the negotiation table on Friday evening pleasantly surprised Rutte. It contained interesting items for the Netherlands, including about discounts, but that document was wiped off the table by 17 member states. The document also suggested granting the Netherlands a few extra years of revenue from customs duties.
According to Michel, the meeting with the heads of government was useful and necessary. In the coming days and weeks, he said, many informal consultations will take place. When the heads of government will meet again is not yet known. Michel considered the time not ripe to set a date for a new summit.