Brussels asks the states for an additional 66,000 million to support the common budget

by archynewsycom
0 comment

The EU needs a spill, but an important part of its ‘owners’, the net contributors, resists it. Brussels does the budget calculations for periods of seven years. There are always oscillations, and a certain cushion for the unforeseen, but what happened in this legislature has unbalanced everything. First a pandemic, then a war and then an energy crisis. The accounts do not come out and resources are needed. The European Commission wants the capitals to contribute up to an additional 66,000 million to face the increase in financing costs, after the repeated increases in rates by the European Central Bank, to sustain financial aid to Ukraine or to alleviate the effects of inflation. But the most orthodox governments, led by Germany or the Netherlands, are resisting, and want that before weighing in new contributions, they study how to tighten their belts.

The Union, unlike its members, does not have an annual Budget. Decades ago this was the case, but in the 1980s the fights between capitals and institutions due to the growing mismatch between available resources and real needs forced a search for a more creative solution. That is where the concept of a multi-year financial plan arose, which sought to avoid huge recurring discussions that paralyzed everything for months, improve the discipline of spending and the execution of more and more funds. The first financial perspectives were those for the period 1988-1992 (known as the Delors I package), and since then they have been repeated, now consolidating the duration at seven years.

In the summer of 2020, a very tough negotiation was closed, one of the most intense in a long time. In the midst of the pandemic, with meetings by videoconference, the challenge was enormous: create a Recovery Fund with unprecedented joint debt and agree on the Financial Framework for the period 2021-2027. It was achieved after strenuous haggling. The Commission had proposed a Budget of 1.1 trillion euros, but the so-called frugal (Austria, the Netherlands, Denmark or Sweden) fought to ‘modernize’ community spending, that is, to divert resources from the Common Agricultural Policy and Cohesion with respect to the previous legislature. To focus on the games of the green or digital transition.

The problem is that there is now an aid package of 50,000 million euros on the table to assist Ukraine (mainly through loans), 15,000 million are needed to support the Mediterranean countries after the increase in arrivals of asylum seekers and at least 10,000 million more so as not to be left behind on the global board through a strategic technology platform that should scratch resources from Cohesion and other funds dedicated to innovation.

Not to mention the cost of debt. Interest rates on 10-year EU bonds have gone from 0.09% offered in the first issue of NextGenerationEU in June 2021 to 1.53% in May 2022 and 2.82% last November, similar returns but somewhat above those of the reference German bond. And that added cost, not considered when the program was designed, must be covered in some way. For that, the Commission calculates that it will need around 19,000 million euros more, although it recognizes that the amount may vary. To these four variables must be added some 1,900 million more in administrative costs due to inflation and some 3,000 for the so-called flexibility instrument. The total is almost 100,000 million euros, but 33,000 million of those destined for Ukraine will be loans, not transfers, the result is the aforementioned amount of 66,000 million euros.

Related Posts

Leave a Comment