Recently the European Parliament debated two reports: one examining the costs tied to paying down the debt linked to financing the Reconstruction Fund, and another looking at the so-called second own resources package, which involves new EU taxes.
The tone of the first report, delivered by Johan Van Overtveldt, the chair of the Parliament’s budget committee and a member of the ECR group, former Belgian finance minister, was especially troubling. He stressed that debt servicing costs have risen above the levels assumed when the Reconstruction Fund concept was created, and will climb further due to additional ECB interest rate increases. He also highlighted that the European Commission, for reasons unclear, did not share data with Parliament showing the actual rise in these costs, resulting in a report that relies on estimates.
In this debate, it was noted that concerns about the higher indebtedness of the EU Next Generation Fund have materialized. For example, the expected 1 billion euros for 2023 would reach almost 2.4 billion euros, with even higher figures expected in the coming years. It appears that during 2021-2027 the costs will be at least double the previously projected €15 billion.
There was also emphasis on financing these costs from existing tools, particularly the flexibility instrument. In the mid-term review of the MFF that is about to begin, the focus should be on creating a fund to cover the costs arising from Russia’s aggression against Ukraine, the war’s impact on the agricultural sector, the development of technical infrastructure on the EU-Ukraine border, and the security of the EU’s external borders. These costs have historically been borne by member states, especially frontline countries like Poland, amounting to at least 2.5% of GDP, with EU repayment remaining largely symbolic to date.
New own resources
On the second topic, the so-called new own resources, it was pointed out that the EC’s basket of proposals includes measures such as ETS and CBAM, which would levy taxes that place a greater burden on less wealthy countries than on richer ones, reversing the current contribution model based on each member state’s Gross National Income. It was added that this approach conflicts with Protocol 28 of the Treaty on the Functioning of the European Union and therefore cannot be supported by Poland.
There was also concern about elements within the En basket, such as dedicating 25 percent of ETS revenue to the EU budget, which would deprive a country like Poland of substantial revenue and hamper the implementation of EU climate and energy policy. Regarding the Basket of Own Revenues, the EC is seeking proposals related to the activities of large companies in digital and financial markets that benefit from serving the vast EU market of nearly 450 million consumers.
All signals suggest that generating additional resources within the current multi-annual budget for debt repayment will be challenging, and proposals from the EC may call on member states to shoulder these costs through an extra contribution. For Poland, this prospect is unacceptable, as is any reduction in revenues from the sale of CO2 emission allowances (EU ETS) that would channel part of those funds into the EU budget. [Attribution: wPolityce]