July 17, 2018
Finance

France wants more ambitious, tougher EU budget

PARIS — As with most things European, Emmanuel Macron has lofty goals for the EUs next multiannual budget.

And as with most of his initiatives so far, he will run into the reality that the blocs member countries and institutions have diverging interests.

The French president has, in his own words, “ambitious” aims for the next European budget covering the years 2021 to 2027, and will push for the financing of what he sees as the EUs new priorities — such as innovation and digitization, security and border protection, and defense.

“France is ready for an expansionary budget,” he said in a press conference in February after the first, preliminary discussion of European leaders on the matter.

The European Commission is expected to unveil its proposal for the budget early next month. Shortly thereafter, Macron has said, France and Germany will try to come up with a common view on the Brussels draft.

“[A]lthough Macron has promised change, the real test will be when negotiations start in earnest” — Senior Commission official

Both countries have some common ideas on the overall direction. The next budget should try to make up for the loss of the U.K.s contribution, which will leave an annual gap of around €10 billion. Both countries also agree in principle that their own contributions should increase, and even appear open to expanding the overall size of the EU budget.

From its current 1 percent of the EUs gross domestic product, the budget might end up amounting to 1.1 percent of the blocs GDP, according to a senior Commission official. But that would be the “landing strip,” he added — the end goal after the Commission and member countries have haggled over both the amount and the content of the budget, known as the multiannual financial framework.

France for now hasnt put a specific number on Macrons general ideas. And the discussion among governments is complicated this year by the departure of Britain — a significant net contributor to the budget despite the yearly rebate it receives from the EU coffers.

A French government adviser said France would push for an end to the rebates system, which makes the whole budget “indecipherable and incoherent.”

French President Emmanuel Macron visiting a cow farm in Aurieres, France | Thierry Zoccolan/AFP via Getty Images

German Chancellor Angela Merkel formally shares Macrons goals, but her ideas about where to find savings to finance new initiatives may conflict with her French friends.

“A big discussion will be on the Common Agricultural Policy and although Macron has promised change, the real test will be when negotiations start in earnest,” the senior Commission official said.

In a speech devoted to Europe in September last year, the French president said France would look at CAP reform ideas “without complex and with a fresh eye,” in line with its critics, who see it as too bureaucratic and cumbersome. It must be “modernized and more flexible,” Macron insisted again in February.

Macrons remarks have been interpreted as a shift from the traditional French stance of protecting the CAP, as Frances politically influential farmers are among its biggest beneficiaries. But the French president so far has never hinted that his reform ideas could end up saving on CAP spending, which amounts to about 40 percent of the EU total budget.

And France is pushing for the next EU budget to have more of its own resources — like a revenue tax on internet giants, if it can be agreed in time. Back in September, Macron also suggested that member countries corporate tax receipts might be pooled, but that would presuppose a hard-to-reach agreement on defining the base on which the tax should be calculated.

“We want taxes and spending to be discussed as a whole and not separately,” the French government adviser said.

Attaching conditions

The most contentious element of Macrons approach, however, is that he wants part of the spending to be made conditional on member countries policies.

According to Macron, so-called cohesion funds — the largest part of the EU budget after the CAP — shouldnt be paid out to governments that engage in what the French leader calls tax or social dumping. Nor should they be paid to governments that violate the EUs core values of democracy and rule of law.

“I will oppose a European budget that would help finance social, fiscal divergence or differences on values” — Emmanuel Macron

That proposal would put Poland and Hungary in the crosshairs, although Macron has refrained from naming them explicitly.

“We have to show … that at least we dont subsidize [those two countries] repugnant policies,” the French government aide said.

Overall, Macron said that conditionality could affect up to 40 percent of total EU spending.

“I will oppose a European budget that would help finance social, fiscal divergence or differences on values,” he said in February. Countries which take money while making a mockery of EU rules and values, he added, “make idiots out of us.”

But the Commission official expressed skepticism on how such conditions could be imposed as part of a budget process that requires the unanimous consent of EU members.

Thats just another harsh reality that Macron will face when the budget battle gets into full swing.

Original Article

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