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Europe needs more cash, Belgian PM says

Europe needs more cash, Belgian PM says

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The European Union needs more of its own money, Belgian Prime Minister Alexander De Croo told POLITICO just as Brussels is hitting the limits of what it can ask national governments to contribute to finance their priorities.

Amid Russia’s invasion of Ukraine, the ebbing of a global pandemic, and Israel’s ongoing war in Gaza, European citizens are looking ever more toward the EU for strategic solutions to global issues, said De Croo, whose country took the helm of the Council of the EU on January 1.

“With every major challenge we face, the European population, even the more Euroskeptic ones, look to Europe to solve those challenges because countries alone cannot do it,” he said. “If you want to answer those calls, you’re going to have to rearrange your priorities, which for us inevitably leads to a discussion: Where does the money come from?”

De Croo’s proposal comes as EU leaders negotiate a review of the bloc’s 2021-2027 budget, which includes funding for Ukraine. EU states previously opposed the European Commission’s request for €66 billion in extra money to cover unforeseen expenses such as higher borrowing costs on the bloc’s post-pandemic cash. During the last European Council meeting in December, the fresh funding amount was trimmed to €21 billion to get member countries on board.

The EU currently has some cash of its own, primarily from the contributions of its 27 member countries and customs duties on imports from outside the EU, which funnel into the larger EU pot. In 2021 Brussels introduced a EU-wide plastic tax designed to bring around €6 billion per year into the coffers of the Berlaymont, the headquarters of the Commission, but that amounted to a drop in the ocean compared to the bloc’s €1.2 trillion budget for 2021-2027.

De Croo’s proposal raises the controversial possibility of levying more bloc-wide taxes ahead of a European election in June, when more than 400 million people across the Continent will head to the polls amid soaring interest rates and ongoing funding for Ukraine, now approaching its third year of war following Russia’s February 2022 invasion.

But the Belgian liberal avoided specifying where the extra revenue would come from, whether from European taxes, other financial measures such as member country contributions, or cuts to EU budget items. “If we want to have a good discussion, I don’t want to comment too much on that,” De Croo said. He added that most other EU leaders find it difficult to raise their own national contributions, but understand that asking Europe to pay more while refusing to do so themselves poses a dilemma.

So far, proposals for new resources have been blocked by a coalition of countries, mainly from Northern and Eastern Europe, which oppose shifting tax collection from their respective capitals to Brussels. Spendthrift countries such as the Netherlands and the Nordics have repeatedly called for a smaller EU budget.

“Many frugal countries would pay a lower share of EU taxes, as they emit less carbon. But theirs is a philosophical issue: They don’t want the EU to levy taxes,” said an EU official who was granted anonymity as they were not authorized to speak on the record.

Hungary’s right-wing government also opposes plans to levy bloc-wide taxes to cover higher interest rates on the bloc’s post-pandemic cash. Budapest’s share of EU funding has been frozen over shortcomings concerning the rule of law.

There is currently a push from the European Parliament for EU-wide taxes on carbon emissions and the profits of multinationals; the measures are expected to generate €36 billion annually once the new budget takes effect in 2028. Those who support additional revenues for the Commission hope the Belgian presidency will broker a compromise.

“The technical deadline is to get this done before the new [budget] is finalized in 2027. But the political deadline is the June 2024 election,” the EU official said. The stakes are high and the timeline short because in six months Belgium passes the presidency to Hungary, which opposes EU-wide taxes and is blocking €50 billion in aid to Ukraine.

The stakes are high and the timeline short because in six months Belgium passes the presidency to Hungary, which opposes EU-wide taxes and is blocking €50 billion in aid to Ukraine | Nicolas Maeterlinck/BELGA MAG/AFP via Getty Images

Another issue is how the EU spends the money, De Croo said. The two largest pots of EU money currently go to agriculture and to supporting member countries with lower GDP per capita, known as the Cohesion Fund. “Agriculture and cohesion are not going to disappear, but … other things will have to be added, that it is inevitable. On the next budget you will have the discussion: What are the European priorities?”

Those conversations become even more important as the bloc prepares to welcome new member countries such as Ukraine, De Croo said. In December, EU leaders agreed to open accession talks with Kyiv, a key step toward integrating Ukraine into the European project.

“Before we get bigger, we need to get better,” De Croo said.

Direct European funding would also give the bloc greater democratic legitimacy, the Belgian leader added.

“Democratic legitimacy is tied with your own funding. That is inseparable. Today, the European funding is indirect and hangs together in a precarious way. We all have our methods of consulting the national parliaments, but if Europe continues in the direction it is going — and that push is there — you have to have something that is more direct. You have to have a piece of funding you are accountable for.”

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