The first payments from the EU reconstruction fund have arrived in countries hit by the pandemic, such as Italy. The Commission will explain on Wednesday how the joint debts taken on for this purpose are to be repaid. Your ideas are controversial.
A lot of money is being moved within the EU, but it is not always clear who will be responsible for the payments.
Monika Skolimowska / DPA
While the fear of the Omikron variant in Europe is triggering new social restrictions to contain the Covid-19 pandemic, The first money is flowing from the EU development fund. They are intended for the rebuilding of the economy.
Spending money running, repayment unclear
Italy, as a particularly affected country, received the largest payment from Brussels to date with € 25 billion. Other countries, on the other hand, have not yet seen a cent for various reasons. While in Poland and Hungary the dispute over the rule of law is in the foreground, the Netherlands have not yet submitted the expenditure plan to the EU Commission as prescribed because of the formation of the government.
Italy has so far received by far the most money from the EU reconstruction fund
Payment status, in € billion, as of December 20, 21
In total, Brussels only paid 8% of the € 724 billion available to the member states. And while the money has started to be spent, it is unclear how the EU will repay the debts it has taken on together for the first time.
The majority of the available 724 billion euros has not yet been distributed
EU development fund, in € bn, as of December 20, 21
Almost half of the sum consists of grants. This does not have to be reimbursed by the country that received the money. Rather, the 27 member states will serve this part through the common budget. This leads to a redistribution effect, since the EU budget is funded by the countries according to their economic strength. The development fund, on the other hand, distributes its funds on the basis of other criteria.
On Wednesday, the EU Commission wants to explain in more detail how the debts are to be repaid. Because the development fund was explicitly set up on the premise that it is a one-off show of strength in an exceptional situation. Unsurprisingly, there are already the first voices, for example from France, who want to perpetuate this type of communal debt. But for this the legal basis would have to be adapted.
As long as that is not the case, either the Member States will have to increase their contributions to the budget or spending cuts would be necessary to finance debt servicing. But the Commission does not want that. Rather, she is planning three new taxes. This is based on a draft of the proposal. This means that dispute is inevitable.
New taxes, new dispute
The body around the German President Ursula von der Leyen wants to use part of the income from the EU emissions trading system (ETS) to repay the development fund. The ETS currently covers around 40% of greenhouse gas emissions in the EU from. The commission now wants the system, among other things, also Expand heating oil and gasoline to reduce emissions by 55% by 2030 compared to 1990 levels. Brussels has envisaged these additional funds. In addition, the recent sharp rise in price ensures the corresponding CO 2 – Certificates for higher Income.
But the ETS is controversial. France is afraid that the yellow vests protests will be brought back to life, and Poland, still heavily dependent on coal, is fighting back with hands and feet and is talking about speculation that would destabilize the country’s economy. At the December summit in Brussels there was a dispute , and von der Leyen felt compelled to write a guest post in the « Frankfurter Allgemeine Zeitung »to answer the criticism from Warsaw.
In addition, the Commission wants to collect part of the income from the planned EU climate tariff (Carbon Border Adjustment Mechanism, CBAM ) to back up. This is intended to burden imports that come from countries with less stringent climate protection regulations. Individual goods such as cement, iron, steel, aluminum, fertilizer and electricity are initially affected. But the introduction of the CBAM could lead to trade disputes
And finally Brussels should also benefit from the most recent within the framework of the national association OECD global tax reform benefit. In the future, companies should pay more taxes where their customers are and less where they are based. That should lead to more income for large countries like Germany and France. Part of this is to serve the EU debt service. However, the countries are unlikely to simply want to pass this money on to Brussels.
And because unanimity is generally required in the EU on tax issues, the Commission will have to use a lot of persuasive power to get its controversial ideas through.
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