EU Budget is running out of money

“In just four years’ time, vital EU funds supporting research, innovation, agriculture, health or the green transition, may be cut drastically. In fact, the whole EU Budget will have to be reduced by over €15 billion per year unless we secure new sources of direct revenue to sustain it”, warned José Manuel Fernandes MEP, EPP Group Spokesman on Budgets, ahead of today’s European Parliament vote on a new Report insisting on new own resources.

“Higher interest rates have added pressure to the EU’s long-term budget, making debt repayments more expensive. Coupled with other unexpected crises, the EU’s budget is already squeezed to the point of having no margins left in some areas. The reality is the current EU Budget is running out of money to deliver on the jointly agreed objectives”, emphasised Fernandes.

“The introduction of new direct revenues is essential to ensure Europe can continue to recover and rebuild post-pandemic, without overburdening the next generation or Member States with mountains of debt”, Fernandes stressed.

A 2020 legally-binding agreement between the EU Institutions set out a plan to gradually introduce new own resources for the EU Budget in order to repay the debt incurred on money borrowed for the Union’s COVID-19 Recovery Fund. The first of these new own resources, a plastics tax, was introduced in 2021. Other new revenues from the Carbon Border Adjustment Mechanism (CBAM) and a revision of the EU's Emissions Trading System (ETS) are being prepared. A corporation tax on the largest multinationals based on the OECD-G20 deal is slowly advancing at international level.

In today’s Report, the Parliament outlines a number of ideas for potential revenue, which the Commission must assess before tabling its proposals for a second round of new own resources in September. Suggestions include: corporate taxation, a Financial Transaction Tax and share buyback, a tax on cryptocurrencies, a digital levy, and statistics-based tax models on bio-waste, food waste or in relation to the gender pay gap. An EU ‘fair border mechanism’ is also highlighted, which would require companies importing goods into the EU Single Market to pay a charge for third country workers in their global supply chain who are paid below the poverty line.

New direct revenues into the EU Budget can only be introduced by the Commission after consultation with the Parliament, a unanimous decision by the Member States and ratification by all national parliaments.