“Battle” over EU funds and plans for new EU taxes

Summary

With the difficult negotiations for the EU’s new multiannual budget (Multiannual Financial Framework 2028-2034) entering the final stretch this month, the European Parliament is creating a political counterweight to the Northern countries that want austerity, especially in spending on Cohesion and the Common Agricultural Policy (CAP), which are of particular interest to Greece. At the same time, it proposes new European taxes on digital services, online gambling and crypto-assets to finance common policies.

Officials of the European Parliament recall the crucial role it has in the negotiation, as the new multiannual budget is not enough to be agreed by the member states and the Commission (the goal is for this to happen by the end of the year), but it must also be approved by a majority (with at least 361 votes) by Parliament.

It is noted that the negotiation enters its final phase from the second ten-day period of October. The Irish presidency (rotating presidency of the Council of the EU) is called upon to present a new compromise proposal to the member states, in the wake of the attack launched on the Commission’s initial proposals by the so-called frugal countries, led by Germany, which has requested cuts of around 400 billion euros from the spending proposed by the Commission, emphasizing cuts to Cohesion policies and the CAP, in order to make room for spending on Defence and Competitiveness.

What changes now

The European Parliament, although it is the weaker institutional link in these negotiations, has since April approved a resolution that moves completely contrary to the general spirit of restraining spending in the EU budget and “trimming” spending from policies with historically great weight, such as Cohesion and the CAP.

In practice, through its stance Parliament strengthens the negotiating position of Greece and other Southern countries, which are trying to put up resistance to the… advance of austerity from the North.

New European taxes

With its proposals, the European Parliament is taking a step toward strengthening the resources that support EU policies, reinforcing the related proposals already submitted by the Commission for “own resources” (European taxes).

The primary practical objective is the smooth repayment of the borrowing cost of the Recovery Fund (NGEU – NextGenerationEU), which amounts to about 25 billion euros annually for the period 2028-2034.

While the Commission has submitted five proposals with a revenue target of 44 billion euros for the period 2028-2034 (plus 14.3 billion euros from corrections, such as the abolition of rebates), Parliament proposes broadening the base with three additional sources that can yield up to 32.1 billion euros.

More specifically, it favors a tax on digital services yielding 13.0 - 25.2 billion euros, the taxation of online gambling (2.6 - 3.9 billion euros), as well as the taxation of capital gains from crypto-assets (2.6 - 3.0 billion euros).

It is noted that the EP has warned that it will not approve the new multiannual framework unless there is an agreement on new own resources that will yield at least 60 billion euros. The new resources are considered extremely critical, because without them the repayment of the NGEU debt will burden national contributions or lead to cuts in European programs.

However, many express concern, especially about the imposition of a tax on digital services, which will mainly hit the American giants, as it could provoke new attacks on Europe from Trump’s White House.

The major differences in the Commission - Parliament proposals

Otherwise, the most significant differences between the proposals of the European Commission and the European Parliament (EP) for the 2028-2034 Multiannual Financial Framework (MFF) focus on the overall size of the budget and its architecture. Specifically:

1. Repayment of NextGenerationEU (NGEU) loans

The Commission proposes a budget corresponding to 1.26% of the EU’s Gross National Income (GNI) (almost 2 trillion euros in current prices). This percentage also incorporates the cost of repaying the NGEU debt (which corresponds to 0.11% of GNI). The European Parliament counters that the budget should be set at 1.27% of GNI, exclusively for EU programs. The cost of repaying NGEU should be calculated additionally and above the ceilings, raising the real total to 1.38% of income. The EP considers that the Commission’s proposal amounts to a de facto “freeze” of the budget, which is insufficient for the new geopolitical and climate challenges.

2. No to the “nationalization” of the budget

The Commission proposes radical restructuring, merging almost 60 programs into 19, with the central pillar being the logic of “one plan per member state.” States will have enormous flexibility to transfer resources between different policies. The European Parliament categorically rejects this “à la carte” approach. It warns that this will lead to the re-nationalization of the budget, unfair competition between states, and the exclusion of regional authorities. The EP demands separate, ring-fenced funds (ring-fenced – with earmarked funds that are not transferred) for traditional policies (CAP, Cohesion).

3. Financing of key policies

Parliament considers the Commission’s proposed cuts to key policies unacceptable, including those of particular interest to Greece. It proposes significant increases, such as:

1. An increase of 139 billion euros in the CAP, so that it reaches 433 billion euros, compared with the 293.7 billion euros proposed by the Commission.

2. An increase of about 78 billion euros in the Cohesion Funds, so that spending reaches 307 billion euros, compared with the 228 billion euros proposed by the Commission.

Parliament also asks for the European Social Fund (ESF+) to be preserved as an autonomous program with 124.19 billion euros and not absorbed into the general national plans.

4. No to a Recovery Fund-type mechanism

The Commission introduces extensively through its proposals the model applied in the Recovery Fund, where funds are given based on the achievement of targets and not on actual proof of expenditure. The EP warns that the Commission’s new payment model (without control of the actual cost) entails enormous risks of mismanagement and inability of oversight by the European Court of Auditors.

5. “Punishments” for the Rule of Law

Parliament calls for a strict, unified Rule of Law mechanism, which will ensure that, when funds to a problematic government are “frozen,” the final beneficiaries (e.g. farmers, researchers, regions) will not be punished and will continue to receive funding directly from Brussels.

Watch Now