In the run-up to the financial EU summit, EU President Charles Michel has presented a compromise proposal for the multiannual budget, aimed at accommodating the wishes and demands of EU governments, the European Commission, and the European Parliament.
There has been considerable wrangling over the upcoming multiannual budget for some time, with some threatening boycott or blockade. Next week, a proposal will be on the table in Brussels that features a budget lower than what the European Commission and the European Parliament sought, but still higher than what most EU countries, including the Netherlands, have so far wanted.
The expenditures in EU President Michel’s final proposal amount to 1.074 percent of the collective European income (GDP), which translates to 1,094 billion euros. The European Commission wanted to increase the budget substantially to about 1,300 billion euros, or 1.11 percent. The European Parliament wants an even larger budget and is considering more around 1,500 billion euros (1.3 percent) for the 2021–2027 period.
At 1.074 percent, Michel holds on to the level of an earlier rejected proposal by the previous Finnish EU presidency, but he incorporates some proposals and demands from various parties. For example, he cuts spending on agricultural subsidies and rural development by more than 50 billion to 329 billion euros. For some EU countries, this is virtually non-negotiable, while for others it is still insufficient.
A similar cut is planned for support to less developed regions (cohesion fund), bringing the total to 323 billion. The richer a country, the less it receives from this fund. Consequently, the wealthier EU countries will soon lose some revenue. Additionally, some 'rebates' for economically strong countries are abolished.
Countries that disregard the rule of law would be subject to possible reductions. However, in Michel’s proposal, this becomes much more difficult compared to an earlier plan. This is somewhat a demand of both the Commission and the European Parliament, but the prime ministers and heads of state so far do not dare to directly confront reluctant EU countries such as Poland and Hungary.
The proposal also provides for more own resources for the EU budget, although these may not yet be called EU taxes. These revenues come from auctions of CO2 allowances and a tax on non-recycled plastic packaging, as co-financing for the Green Deal. This could amount to 14 to 15 billion euros.
Michel further proposes that member states keep only 12.5 percent of the levies they collect on import goods. This is currently 20 percent. Additionally, the EU countries should contribute an extra 10 billion euros to the European Investment Bank to generate an extra 500 billion euros in investments for climate and digitalization.
During the EU summit next week, tough negotiations will take place over the size of the budget and what the money should be spent on. EU President Charles Michel has not indicated how long the summit will last. It is expected in Brussels that an agreement will not easily be reached. It is thought that several nights of continuous negotiations may be necessary. It is even possible that an additional summit will be needed later. All 27 member states must agree on the budget.