European Commission warns budget choices hard but urgent

The EU faces hard budget choices in responding to Brexit and the ambition of embracing new spending priorities such as dealing with immigration, common border protection and completing monetary union, the European Commission warned on Wednesday.

It strongly pressed EU leaders to agree their next seven-year budget rapidly, ahead of the European Parliament elections next year to give predictability to recipients of funding from farmers to researchers.

In a “communication” to heads of government for their informal meeting on February 23rd, the commission has set out scenario implications for the next seven-year Multi-Annual Financial Framework (Maff), due to run from 2020 to 2026, of cutting farm and structural/cohesion funding which it warns will be necessary to balance the budget.

Both have traditionally been key to Ireland – if the European Regional Development Fund and the European Social Fund were, as one scenario suggests, to completely end support for the more richer “developed and transition regions”, Ireland included, this would amount to a reduction of approximately €95 billion over the period, some quarter of current allocations from those funds.

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Farm income

A scenario involving a 30 per cent cut in agriculture spending could see average farm income drop by more than 10 per cent in a number of states, including Ireland, and potentially more pronounced income drops in specific sectors.

Speaking to journalists in Brussels, budget commissioner Gunther Oettinger said it was crucial to get an early decision.

“Farmers need to know if they will get funding,” he said, and cited the urgent need, for example, to be able to plan the decommissioning of Lithuania’s largest and most unsafe nuclear plant.

The commission is recommending a review of funding sources for the EU including  the possibility of  using monies raised using a common consolidated tax base (CCCTB) , a proposal that will be vigorously resisted by Dublin which is leading a campaign against such harmonisation of corporate profit calculation.

“Large companies greatly benefit from the single market,” the commission argues. “The CCCTB is a single set of common rules for the calculation of companies’ taxable profits in the union. A contribution based on a harmonised corporate tax base, possibly including a digital component, would reinforce the link between the benefits of the single market and the financing of the union.

“Depending on the model chosen...a tax linked to the CCCTB could bring between €21 billion and €140 billion over seven years, not including expected revenue from the decrease of tax evasion.”

European taxpayers

Mr Oettinger also reiterated his call for an increase from 1 per cent by between 10 and 20 per cent in the EU budget share of EU GDP. He pointed out that most European taxpayers contribute on average some 50 per cent of their income in tax – the EU cost them only one 50th of that.

He said the commission was engaged in discussions with member states about the possibility of imposing “conditionality” on EU funding – clawing back cash from those who do not adhere to fundamental EU values notably on the rule of law.

Poland and Hungary are clearly in his sights, but a new regulation is certain not to be passed by heads of government where unanimity is required.

The commission meeting on Wednesday also gave its endorsement to the Spitzenkandidaten – "lead candidate" – system of nominating its next president.

Jean Claude Juncker, himself the beneficiary in 2014 of the first use of the system, told journalists, perhaps unsurprisingly, it had worked well in providing a double level of legitimacy to the president – the system requires the heads of government to nominate as commission president the pre-announced candidate of the party which wins most seats in the Parliament.

MEPs have voted by a significant majority to endorse only a candidate nominated through the system, so EU leaders will grudgingly have little choice but to comply.

Merging jobs

Mr Juncker said the commission would defer further discussions of what he saw as the desirable merging of the jobs of commission and council presidents. He said that although he and President Donald Tusk got on well, the possibility of two such presidents at loggerheads would be a "nightmare".

Similarly it deferred decisions on shrinking the number of commissioners from 27, with Mr Juncker saying that many commissioners maintained the view that one member per state was still necessary.

Asked to respond to the assertion by UK foreign secretary Boris Johnson that the EU was building a "super-state", Mr Juncker insisted the immovable foundation of the EU was its 28 member states and would remain so.

“Total nonsense,” he said of Mr Johnson.