“The world has changed dramatically since 2020, with one crisis after another.” There’s Ukraine, there’s the refugee issue and there are the associated geopolitical challenges intertwined with the knots of Europe’s green and digital transitions. For this reason, the 2021-2027 budget agreed by the European Union in the context of the pandemic, including the attached chapter of the national Pnrr, is no longer sufficient. 75 billion are needed: 50 for Kiev, another 15 to “strengthen external border management” (i.e. to prevent emigration of migrants from third countries) and finally 10 billion for investments in “deep tech, clean technologies and biotechnologies”. This was announced by the President of the European Commission, Ursula von der Leyen. The company has also developed a series of proposals to get more resources not only from the states but also from companies (whether EU or non-EU states).
More homework, more money
Von der Leyen’s announcement was long overdue in Brussels. The multiannual financial framework, i.e. the budget that is set every seven years by the national governments for the diverse activities of the European Union (money that then largely flows back to the countries themselves), is no longer up to the associated challenges. “We have used the greatest possible flexibility of the funds previously provided for Brussels,” said von der Leyen. And “we allocated 30 billion to Ukraine, which was absolutely unpredictable,” he reminded. A task of supporting Kiev that all (or almost all) EU governments agree on. Likewise, there is broad consensus that Brussels is working to reduce the flow of illegal migrants. However, von der Leyen made it clear that Europe must ask for more performance and also provide it with the means.
The reconstruction of Ukraine
The budget has been cut as much as possible, explained the Commission President, but at least another €66 billion is needed by 2027 to cover the €75 billion needed to tackle the new priorities. Or emergencies if you like. First Ukraine: The purpose of the requested new funds is first to get the Kiev budget back on track and then to start reconstruction. However, the 50 billion will not be awarded without grants: Only a small part will be paid out in the form of grants. The rest will be in the form of loans, and for each payment tranche, as in the case of the PNRR, Ukraine will have to implement reforms (which will also make it easier for it to join the EU).
Stop the exodus of migrants
Perhaps aware that the number could be swung around by the populist forces of some member countries as a gift to Kiev (already hit by post-war bill hikes) with taxpayers’ money, Brussels has also included in its budget revision proposal an issue that it Heart lies to these forces: migration. “The many challenges of today when it comes to migration require quick and urgent answers,” said von der Leyen. “We propose to provide Member States with financial support to strengthen external border management. We must work more closely with the neighborhood to strengthen economic development and stabilize these countries”. And to block exits, as is one of the cornerstones of the new EU refugee plan. Not surprisingly, von der Leyen followed the example Tunisia, as well as Turkey, Lebanon and Jordan, Brussels expects 15 billion more for this goal.
strategic autonomy
The third element is the so-called strategic autonomy, that is, reviving domestic production and reducing foreign dependency on key technologies for the future: the Commission has renamed it the “Step Project” and will focus on “three priority sectors that are essential for the future”. our competitiveness, ie deep tech, clean technologies and biotechnologies”, which will be further funded with “an increase of 10 billion euros to top up some funds already earmarked for these sectors”.
In asking for new funds, Brussels also recalls the need to cover the rise in interest rates, which has had two repercussions on European treasuries: the first concerns the loans taken out for the Pnrr, the cost of which has increased. The second concerns the adjustment of workers’ wages to inflation.
Where can I find the money?
The Commission’s proposal is now in the hands of the Member States. Countries like Germany and the Netherlands are already ready to put up the barricades: Berlin and The Hague know that more efforts are needed for Ukraine and that it would be counterproductive for them to resist these efforts. Therefore, the struggle of the frugal will essentially focus on reducing the overall budget increase demanded by Brussels.
New EU taxes: Parliament’s proposal
For its part, the Commission is trying to soften the pill (albeit in ways that may not convince governments). For example, some of the additional resources could be raised through the issuance of new European debt (as has been done for the PNRR, and indeed this hypothesis could be attractive for Italy). Then there is the question of the so-called “own resources”, which go beyond the state contributions: In other words: not the entire EU budget comes from the coffers of the countries. Part comes from taxes and the like that Brussels collects directly. In a document presented shortly after von der Leyens’ announcement, the Commission calls for an increase in this type of own resource.
On the one hand, there are the existing own funds. The first is the ETS, the carbon trading scheme (which the industry concerned sees as a tax): the revenues from the ETS are shared between Brussels and the Member States. Now the Commission is calling for an increase in the share allocated to the EU coffers (from 25% to 30%). In this way, around 1.2 billion more would arrive in Brussels between 2024 and 2028.
Also on the table is the proposal to get 75% of the revenue (the rest goes to the states) from a kind of levy (the CBAM) levied on some particularly polluting products, such as steel and cement, which are important non-EU -Countries: Brussels expects 1.5 billion per year from this tariff between 2024 and 2028.
Politically, the new financial lever proposed by the Commission is certainly the most complicated and affects European companies: Brussels points out that it is not a new tax but a (provisional) levy on corporate profits that could bring in 16 billion euros a year .
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