The European Commission’s publication of its draft of the union’s €2 trillion 2028-2034 budget, the Multiannual Financial Framework (MFF), once again opens up a tortuous two years of likely acrimonious budget negotiations.
Twenty seven states and the European Parliament must unanimously agree – in talks as complicated as four-dimensional chess – a new package of political imperatives, from defence, immigration, climate change, industrial innovation and inflation to safeguarding historic programmes such as CAP and cohesion. By all appearances, this will be an utterly impossible reconciliation.
Helping to steer a path towards it will be the onerous central challenge of next year’s Irish presidency. And complicating that challenge for cash-strapped Dublin negotiators will be a plethora of threats to programmes that are particularly important to us to us – CAP; changes to delivery mechanisms; new demands such as defence; and arguments about the scale of increasing burdens on budget net contributors.
In truth, according to Zsolt Darvas from think tank Bruegel, MFF spending needs to double to finance the climate transition and pay off its Covid-19 debts. His views echo those in an important report last year from former Italian prime minister Mario Draghi, calling for an additional €800 billion a year of private- and public-sector investment to revive Europe’s economic competitiveness.
The commission’s budget is more modest, some €1.816 trillion (plus €165 billion in pandemic recovery debt repayments), up from the current 1.1 per cent of union gross national income to 1.15 per cent. And all at a time when member states are all adamant they will not pay a penny more, although commission president Ursula von der Leyen insists unconvincingly their contributions do not need to go up.
[ The Irish Times view on the EU budget: major barriers to getting an agreementOpens in new window ]
Irish farmers should be pleased to see direct income payments to farmers ring-fenced. However, agricultural economists here worry that rural development and environmental support payments are to be hived off into a broader regional fund pot and are likely to be squeezed – similar to the cohesion fund for poorer regions, which was once an important Irish staple.
MEPs from the regions are also already screaming blue murder at the “renationalisation” or centralisation of regional funding – 27 national plans would replace more than 500 current programmes. They are alarmed it would substantially reduce regional autonomy and funding which makes up more than one-third of the current budget.
Von der Leyen’s juggling trick also involves fancy footwork in respect of expanding the union’s “own resources” – or funding from non-member state sources. Such taxation needs to be targeted so that it does not impinge on the domestic tax base and revenues of governments. Most controversially this time is the suggestion of levying a tax on companies with a net annual turnover of at least €100 million. This is expected to generate only €6.8 billion but is already facing determined opposition. Speaking like an Irish finance minister, Germany’s chancellor Friedrich Merz has warned that “there is no question of the EU taxing companies, as the EU has no legal basis for this”.
Other proposed new “own resources” include taxes targeting electric waste (around €15 billion annually), tobacco products/companies (€11.2 billion), a carbon border tax (€1.4 billion), and a tax on revenues generated by emissions trading (€9.6 billion).
EU capitals will also worry how the new budget would affect the politically sensitive difference between national contributions and receipts.
[ Proposed €2tn EU budget would increase funding for defenceOpens in new window ]
From 1973 to 2018 Ireland was a net recipient, in nominal terms, of more than €40 billion in EU funds. By 2023, 10 countries, including Ireland, were net contributors, and 17 were net beneficiaries. Top of the net contributors were Germany (€19.8 billion), France (€9.3 billion), with Ireland in eighth place (€1.3 billion). Poland was the top net beneficiary, receiving €7.1 billion. Ireland was second in net contribution per head, at €240 per person.
Courtesy of our growing relative wealth (measured dubiously by “GDP per cap”) we displaced Luxembourg in 2024 in paying the most to the EU budget on a gross per capita basis – with every Irish person contributing some €53.20 a month to the union’s coffers compared to the EU average of €25.20 and Germans’ €29.70. Bulgarians contributed €10.70 a month. Net cash contributions have been seized on by many national politicians and the press as evidence that the countries of the supposedly indolent south are unfairly milking the system at the expense of fiscally responsible northerners. But the real benefits of membership to the countries of the north amount to far more than can be measured by such direct transfer figures.
Apart from the progressive aims of redressing EU-wide economic imbalances, helping poorer neighbours and levelling the playing field, the EU provides huge indirect and non-cash benefits disproportionately to net contributing members such as Ireland. These include financial rewards from the European Central Bank in maintaining financial stability and financial returns, valuable access to the single market and research grants through the Horizon programme.
Making the political case for increasing our contribution yet again will not be easy but it must be done.
