Stuff dreams are made on?

The Next Generation EU programme has reopened the debate about EU’s own resources. Is this an historical opportunity? 

The old debate over the financing of the EU budget is loaded with dreams and fantasies. Many see the assignment to the Union of dedicated resources as a first step towards its taxing autonomy. But it is also a very concrete issue, whose relevance has been highlighted by the launching of the NGEU programme. How will the corresponding debt be repaid eventually, that is the question. Will member states need to increase their contributions? Or will new resources be found?

Which are the concrete proposals on the table?

The European Council in July mentioned several possibilities: a tax on disposable plastic (which is going to be implemented), revenues from a carbon border adjustment mechanism, the proceeds from auctioning off emission permits, a digital service tax, a financial transaction tax… Those are very heterogeneous resources in terms of nature and potential revenues. True own resources are those with a genuinely common dimension that makes them suitable to finance the EU. And then there is a quantitative dimension: the EU will borrow €390 billion, so there is not much point in relying on a resource that provides only a few billion per year.

So, how do we identify the most realistic and most effective one?

Any solution will be looked at from the point of view of effectiveness, but inevitably also from a distributional standpoint. The EU budget is currently financed on the basis of contributions that are proportional to national income. This is the status quo option. Any new solution will be compared to this benchmark to assess who wins and who loses. Any reform will need to find ways to accommodate this concern.

Jean Pisani Ferry is a Senior fellow at Bruegel

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