European Commission publishes proposal for the long-term EU budget (i.e. Multiannual Financial Framework 2028-2034). While there are steps in the right direction, the financing mobilized for industry and defense might come at the expense of other fundamental objectives.
Late on Wednesday 16 July, the European Commission published its proposal for the long-term EU budget (i.e. Multiannual Financial Framework 2028-2034) after much political wrangling. It is the first step of a long and complex decision-making process involving Member states and Parliament. IndustriAll Europe sees some steps in the right direction but there is still room and necessity for improvement. Member states and MEPs must act on the warnings of Mario Draghi’s report last year and ensure that at the end of the political negotiations an ambitious EU budget is agreed.
In a context of multiple crisis where industry is facing unprecedented investment, the EU long-term budget is an important piece of a broader financial puzzle to cope with the twin climate and digital transition while strengthening EU’s strategic autonomy. The proposed envelope nearing two trillion Euros (1.26% of average GNI) is significant, especially if funds earmarked for industry are considered. With €409 bn foreseen for the EU Competitiveness Fund and €80 bn for the transport and energy infrastructures (i.e; Connecting Europe Facility), this budget proposal focuses on industry needs.
“Industry, energy and innovation are clearly identified as strategic priorities for the next budget which is a positive message for workers in industrial sectors at a time where industry is confronted with a storm of challenges. We have a proposed budget with industry’s future at its core which is the least our members could expect given the dramatic situation we are in. Social conditionalities are necessary throughout to ensure that this welcome investment delivers good industrial jobs which are high quality, secure and sustainable, ” stressed Judith Kirton-Darling industriAll Europe’s general secretary.
Now, when digging into numbers and taking into account inflation, the total envelope looks narrower, especially given the additional expenditures for defence and the need to repay the post COVID 19 recovery plan and the related joined borrowing. This EU budget must also be seen in a wider context where many governments are implementing national budgets that entail massive cuts in public expenditures.
“With its slightly broadened envelope to tackle a much extended list of challenges, this proposal for the next EU budget is a bit like robbing Peter to pay Paul. The financing mobilized for industry and defense might come at the expense of other fundamental objectives. We must also keep in mind that in the real world these resources will not compensate the dramatic impact that national austerity budgets are having on public and private investment” according to Judith Kirton-Darling.
Having a proposal to create new own resources for the EU budget is welcome, especially the proposal for a contribution on turnover of large compagnies. However, using possible CBAM revenues in that context is a source of concern since CBAM revenues must first and foremost be used to ensure the proper functioning of CBAM which is a complex and first of a kind instrument that will require financial resources to secure implementation, enforcement and verification. In the same way, the EU ETS should not be dealt with as a cash machine for the EU budget but as a policy instrument incentivising emission reductions in the sectors it covers, including industry.
“New own resources are crucial to providing the EU with a budget commensurate with what is at stake, while making the EU budget less dependent on burdensome haggling between Member States. But it is important that financial instruments are not diverted from their main purpose of promoting social fairness and redistribution. In this light, asking for a fiscal contribution from the largest companies is a welcome proposal but it’s a shame that the Commission is not politically brave enough to propose wealth or financial transaction taxes are proposals to ensure that the broadest shoulders support investment in our economies and not speculation” stated Judith Kirton-Darling.
Proposed defence spending has increased five times compared to the previous MFF, with the €131 billion earmarked in the European Competitiveness Fund. Investments into Europe’s defence industry are needed, especially after years of under-investments. However, industriAll Europe warns against cuts to social and cohesion funds at the expense of defence, fearing that this is exactly the trade-off that the Commission has made, turning a blind eye to the growing anxiety of people.
One of the EU’s recent Eurobarometer shows that the top two concerns of Europeans are the cost-of-living crisis and the socio-economic situation. Moreover, 88% of Europeans consider a social Europe important for them. These concerns have become very visible with recent elections showing a steep increase of the far right. The Commission risks fueling this trend by trading-off social and cohesion spending. As a consequence, the social dimension of the MFF proposal raises many questions too.
Having the ESF+ included in the proposal is a positive sign for workers. In the same way, having 14% of resources from the Regional and National Partnership Plans earmarked for social expenditures is welcome. However, the scrapping of the Just Transition Fund, the lack of clear binding social conditionalities and the lack of guarantees for the involvement of social partners in the EU budget governance cast doubts on the EU commitment to social justice. Moreover, making access to EU funds conditional to “reforms” in the current context of austerity budgets and push for deregulation raises the risk that EU money will come at the expense of social objectives.
“Not securing adequate resources for social cohesion would be a dramatic political mistake. The ongoing cost of living crisis, labour precariousness, cuts in social spending, unprepared ageing of the population, rising inequalities and de-industrialisation, are corrosive for the social cohesion and for the EU in general. Social cohesion requires adequate and predictable funding, not neo-liberal conditionalities and political blackmail,” concluded Judith Kirton-Darling.