The current system of EU revenues is opaque, complicated and unfair. That is the reason why it ought to be changed. The forthcoming budget review therefore offers the opportunity for a significant reform. The European Union needs greater financial flexibility in order to fulfil its global commitments. An EU tax should be considered, which would raise the level of the EU's own resources

Schüssel, Wolfgang.

English

Archive of European Integration

  spotlight europe     # 2007/08spotlight europe # 2007/08 – November 2007 Europe's Finances - The old system at its limits     Wolfgang Schüssel Leader of the Parliamentary Group of the Austrian People’s Party (ÖVP)  Former Chancellor of the Austrian Republic, wolfgang.schuessel@oevpklub.at The current system of EU revenues is opaque, complicated and unfair. That is the reason why it ought to be changed. The forthcoming budget review therefore offers the opportunity for a significant reform. The Euro-pean Union needs greater financial flexibility in order to fulfil its global commitments. An EU tax should be considered, which would raise the level of the EU's own resources.  The negotiations devoted to the EU financial framework for 2007–2013 have demonstrated that the current EU financial system has reached its limits. On 10 Sep-tember 2007 the European Commission launched a “no taboos” debate about the post-2014 budget structure. José Manuel Barroso, the President of the Commission, has emphasized that “everything will be discussed”. If honest financial arrange-ments are what we really want, then the forthcoming review by the Commission will have to scrutinize all the various dif-ferent issues – own resources, rebates, ex-ceptions, and expenditure.  An important feature of the agreement on the financial perspective for 2007-2013 reached by the heads of state and govern-ment at the European Council in Brussels on 15 and 16 December 2005 was the re-vision clause, which stipulates that there will be a comprehensive review of the EU financial framework as early as 2008/2009.  This does not leave us with a great deal of time. In the coming months we need to conduct a debate about a comprehensive and qualitative reform of the EU budget, and this needs to be initiated now.  I The old system From 1958 to 1970 the Community budget was financed exclusively by contributions from the member states. In April 1970 the Council meeting in Luxembourg voted to  spotlight europe    Europe’s Finances         page 2 # 2007/08 introduce a system which envisaged reve-n u e s  i n  t h e  f o r m  o f  o w n  r e s o u r c e s  t o  f i -nance the Community budget.  Initially the only own resources were the customs and agricultural duties levied as a result of EU responsibility for the areas of agriculture and foreign trade. These were trans-ferred di-rectly to the EU. Since 1980 these revenues have been augmented by a per-centage of VAT, which is calculated on the basis of a compli-cated for-mula that takes into account gross national income (GNI). Currently, to put it simply, it constitutes about 0.3 per cent of the VAT tax base.  Furthermore, there are also national budget subsidies, which are calculated on the basis of GNI, that is, the economic size of the individual member states. They in-clude the “UK rebate”, and, in the current financial perspective, rebates for other “net contributors” (Netherlands, Germany, Sweden, Austria).  The time is now ripe for reforms and changes. There is an urgent need to alter the present system. For this reason a reso-lution of the disagreements about the EU budget framework cannot be deferred until 2013, when the next financial perspective will be drawn up. During the negotiations of the European Council in 2005 the Commission was asked to carry out an analysis of all aspects of EU expenditure, including the Common Agricultural Policy and the UK budget rebate, and to present a report on this in 2008/2009. The European Council will be able to use this to make the urgently needed decisions, and at the same time will take into account the pre-paratory work for the next financial framework and the period after 2014.  However, differing interpretations of this issue began to emerge as early as 2005. The then French President Jacques Chirac described the budget review as being noth-ing more than a “fig leaf” designed to con-ceal the British budget concessions, and he sought to defer any kind of reform of the Common Agricultural Policy to the pe-riod after 2014. On the other hand, the British construed the 2008/2009 review as the basis for a substantial reform of the expenditure side of the budget before 2014.   The debate about the EU budget has re-sumed as a result of the European Com-mission’s internet presentation of the EU’s medium- and long-term expenditure priori-ties, which covers all aspects of the issue.      spotlight europe    Europe’s Finances         page 3 # 2007/08 II Commission prepares budget review  The Commission believes that the budget review constitutes a unique opportunity to include the numerous EU budget issues in a wide-ranging “no taboos” debate which can be conducted without the looming presence of negotiating pressure. It is unlikely, in the wake of all the topics that have been discussed, that the Commission will submit a proposal for the new 2014 budget framework before the autumn of 2009, by which time its membership will have changed.  The wide-ranging debate envisaged by the Commission will be preceded by a Com-mon Agricultural Policy “health check”. In addition to agricultural policy, it will be necessary to discuss the structural and cohesion policies and how they function within the framework of a European Union that now has 27 member states. The Fourth Cohesion Report published in May 2007 contains the material required for such a debate.   I think that the reforms which must sub-sequently be introduced should take their bearings from four salient points:  •  The current system is opaque, compli-cated and unfair.  •  The reforms relating to revenue and ex-penditure are interdependent.  •  The discussion must include all of the rebates.  •  An additional EU tax based on income or wages is out of the question.  Of course, the participants are all well aware of the fact that it is difficult to change a structure which has developed over the course of several decades. How-ever, I do not think it is right that 90 per cent of EU budget revenue derives from the national budgets.  The EU is in urgent need of new own re-sources. As we have seen, 50 per cent used to come from customs duties. So we should think about those things which are currently not taxed at all and could in fact be used to generate own resources.  III A “no taboos” debate  I suggested as early as 2005 (Süddeutsche Zeitung, 31.12.2005) that, if the reform debate fails to come up with a new   budgetary mechanism, the governments will be “up in arms” by 2011 at the latest. For this reason, when presenting the pro-gramme of the Austrian EU Presidency to the  European Parliament on 18 January 2006, I emphasized that the financial per-spective is a particularly important subject for the Commission, the Council and the European Parliament: “Greater self-financing is maybe not popular,  but necessary.” “The financial perspective, which covers seven years, provides security and makes it possible to plan ahead. (…) I want to be clear: we will reach our limits if we keep imposing new tasks on our national   budgets. If we carry on like this, the pre-sent financial perspective could be our last. I am now going to say something that not all of you will agree with: Europe needs more self-financing. We cannot con-tinue to carve everything that we need for Europe out of the national budgets. It could end in that uncomfortable  tension between net payers and net recipients. Greater self-financing is maybe not popu-lar, but necessary. The President of the Commission, Mr. Barroso, also takes a similar view. The Commission must put all of these aspects on the table in its 2008/2009 review. We cannot have a  spotlight europe    Europe’s Finances         page 4 # 2007/08 situation where short-term financial specu-lation is entirely exempt from taxation, or where air or ship transport are entirely exempt from taxation. I would ask the Commission to include these topics in its review. I would also ask the European Par-liament to back me up: those who want a strong Europe cannot shy away from this subject.”  Greater financial flexibility provides us with greater political flexibility. And this is what we need if the EU is to fulfil its global commitments.  IV One world – Europe’s  special responsibility The European Union is the largest eco-nomic bloc in the world; it is the biggest donor when it comes to humanitarian as-sistance and development aid, and it pro-vides a guarantee for stability, democracy and human rights. Europe must make an even greater effort than in the past to be-come a genuine global player.  Today Europe is already very active in the area of development cooperation with the poorest countries in the world, and does more than the U.S. or the Asian countries. It places special emphasis on Africa. The most important areas in which the Euro-pean Union and its member states are in-volved are war, oppression, hunger, pre-ventable diseases, the situation of women and children, the development of trade, the expansion of the infrastructure, educa-tion and the environment. We subscribe to the UN’s Millennium Development Goals, which were discussed at the summit in September 2005.   However, development aid should not be confined to disaster assistance. It should facilitate sustainable development in the countries concerned. This is not only a humanitarian issue, it is also something which is in our own interests. We have this ONE earth and no other, we are di-rectly and indirectly affected by develop-ments in countries on the other side of the globe.  “The ecosocial market  economy is our response to the American  way of life.” For this reason we wish to and indeed must make a contribution in this area, so that people in the most underdeveloped countries also have something to look for-ward to in their local communities. And that is why we support the initiative for a global Marshall Plan, an important partner on the road leading to the long-term goal of a global ecosocial market economy.   The successful model of European integra-tion is the European form of the ecosocial market economy. In essence it consists of a synthesis of a competitive economy, so-cial justice, and ecological responsibility.   The ecosocial market economy is our re-sponse to the “American way of life”, it is the model of our European success, and constitutes an answer to the challenges posed by a globalized world. Furthermore, in global terms this is the model of the fu-ture, because it is the economic and social order which, even under changed circum-stances, is capable of providing the great-est benefits for the individual human be-ing.   The ecosocial market economy is in fact based on the idea that a free economic or-der which is surrounded by “railings” can provide the individual and society as a whole with stability, security, a sense of direction, and, in the final analysis, the freedom needed to attain growth and pros-perity.       spotlight europe    Europe’s Finances         page 5 # 2007/08 V A new initiative A demonstrable willingness to play a part in shaping the ongoing process of global-ization is just as important as specific measures designed to reach the UN’s Mil-lennium Development Goals. For this rea-son I have made it unmistakably clear that I am in favour of a tax on foreign exchange transactions. An autonomous source of revenue would make the EU less depen-dent on the national budgets.  The Union’s reve-nues originally consisted primar-ily of customs du-ties and levies, and only a small percentage came from national con-tributions calcu-lated on the basis of GNI data. In 1989 gross do-mestic income (GDI) revenues constituted about a tenth of the EU’s own resources. By the end of the cur-rent financial framework in 2013 the propor-tion will have risen to three-quarters. In the final analysis this is due to a decline in VAT-based revenues and in traditional own resources (in particular customs revenues, which have decreased and are decreasing rapidly as a result of GATT and WTO liberalization agreements). Thus, even if the budget were to increase only slightly, the proportion of GNI revenues would rise strongly. The question now arises of whether or not EU revenues should be placed on a more reliable foot-ing.  These deliberations have led to a joint ini-tiative by all the parties in the Nationalrat, the Austrian parliament. On 27 April 2006 the four parliamentary parties tabled a motion to discuss taxation proposals de-signed to finance supranational tasks such as EU own resources revenues, climate change, and cooperation with developing countries.  More financial resources are needed in or-der to reach the UN Millennium Develop-ment Goals. The proposed autonomous sources of revenue are designed to ensure that such resources will become available and that they will not be dependent on the national budgets.  In this motion, which is currently being debated in parliament, the parties in the  spotlight europe    Europe’s Finances         page 6 # 2007/08 Nationalrat call on the Austrian govern-ment “in the context of its past initiatives within the framework of the European in-stitutions to investigate the feasibility of an EU-wide tax, such as, for example,  •  a tax on foreign exchange transactions,  •  a tax in the areas of aviation, shipping, natural resources, etc.,  and to support consistent implementation, though without endangering the Lisbon targets.  The revenues thus procured will be as-signed to an EU fund, which in an even-handed manner will finance supranational tasks such as EU own resources, climate change and cooperation with developing countries.  Implementation should be based on an EU directive, and be binding for all EU mem-ber states. Autonomous sources of revenue should be evaluated on the basis of whether or not they are consistent and consonant with free competition. The in-troduction of an EU-wide tax must be per-ceived in the European context and, when it is implemented, should not be permitted to distort competition. It is not supposed to constitute an additional burden for EU citizens, and will be revenue neutral on account of the simultaneous reduction in member state contributions.”  VI Exporting security Security is a basic human need. The main-tenance or reestablishment of security comes high on the list of what people value most. The desire for security is a fundamental aspiration of modern socie-ties. It is in the first instance the task of the authorities of a nation-state to guaran-tee the security of a particular polity both externally and internally.  However, it has now become impossible to formulate security policy on an exclusively national basis or with reference to a single ministry. What is needed is international and cross-ministerial coordination and co-operation.  In the context of EU budget reform, some thought should be given to the question of whether, under the circumstances, suffi-cient funds have been allocated on a me-dium-term basis to deal with such issues – especially in the area of foreign and secu-rity policy.   Numerous security risks and threats to stability confront the EU, both in the im-mediate vicinity and in the more remote neighbourhood. On a global level there are various kinds of conflict. These range from the greater professionalism of inter-national terrorism and the proliferation of weapons of mass destruction to regional crises and the consequences of failed states. “Is the Common Foreign and Security Policy  adequately financed?” The new threats make it imperative for us to play a role beyond the confines of Europe in places where these develop-ments have their origins. If we are not in a position to export security, we might very well find ourselves confronted with im-ported insecurity.  Each of these threats can be dealt with by combining a number of different policies. It is possible to contain the proliferation of weapons of mass destruction by imposing export restrictions and exerting political, economic and other kinds of pressure, whilst at the same time tackling the root causes of the problem. Combating terror-ism may require a differentiated combina-tion of diplomatic and economic activity, intelligence work, and police, judicial and military resources. In the case of failed states, there may be a need for military in-tervention to restore order and for hu-manitarian assistance if there is an emer-gency.   spotlight europe    Europe’s Finances         page 7 # 2007/08 Regional conflicts require political solu-tions, but in the period after the end of the conflict there may also be a need for mili-tary resources and effective police work. Economic policy instruments can promote reconstruction, whereas civil management can help to re-establish a civilian govern-ment.            VII The vision of global responsibility Thus the EU’s vision and its responsibility in the future must be to build on the sta-bility which exists within its borders, to promote stability in its immediate geopo-litical vicinity and in its more remote neighbourhood, and to make sure that it is sustainable. This is the key to peace in Europe in the 21st century.   But in order to be able to implement all the various aspects of this project, we need the appropriate financial resources. That is why there is such a pressing need for a reform of EU finances.              Responsible  Bertelsmann Stiftung Carl Bertelsmann Straße 256 D-33311 Gütersloh www.bertelsmann-stiftung.de/spotlight  dominik.hierlemann@bertelsmann.de Phone +49 5241 81 81537  joachim.vannahme@bertelsmann.dePhone +49 5241 81 81 421   Center for Applied Policy Research Maria-Theresia-Straße 21 D-81675 Munich www.cap.lmu.de  matthias.chardon@lrz.uni-muenchen.de Phone +49 89 2180 1334  sarah.seeger@lrz.uni-muenchen.dePhone + 49 89 2180 1375   ISSN 1865-7451 Latest editions:  spotlight europe # 2007/07 A Chance for Wise Men Matthias Chardon, Dominik HIerlemann, Sarah Seeger  spotlight europe # 2007/06 A Time to Take Action:  Europe’s Responsibility in the Middle East Almut Möller   spotlight europe # 2007/05 Testcase Energy Stefani Weiss          All editions of the spotlight europe can be downloaded from: www.bertelsmann-stiftung.de/spotlight 

spotlight europe 2007/08, November 2007: Europe's Finances - The old system at its limits

  
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spotlight europe 
# 2007/08 – November 2007 
Europe's Finances - 
The old system at its limits 
 
 
 
 
Wolfgang Schüssel 
Leader of the Parliamentary Group of the Austrian People’s Party (ÖVP)  
Former Chancellor of the Austrian Republic, wolfgang.schuessel@oevpklub.at 
The current system of EU revenues is opaque, complicated and unfair. 
That is the reason why it ought to be changed. The forthcoming budget 
review therefore offers the opportunity for a significant reform. The Euro-
pean Union needs greater financial flexibility in order to fulfil its global 
commitments. An EU tax should be considered, which would raise the 
level of the EU's own resources. 
 
The negotiations devoted to the EU 
financial framework for 2007–2013 have 
demonstrated that the current EU financial 
system has reached its limits. On 10 Sep-
tember 2007 the European Commission 
launched a “no taboos” debate about the 
post-2014 budget structure. José Manuel 
Barroso, the President of the Commission, 
has emphasized that “everything will be 
discussed”. If honest financial arrange-
ments are what we really want, then the 
forthcoming review by the Commission 
will have to scrutinize all the various dif-
ferent issues – own resources, rebates, ex-
ceptions, and expenditure. 
 
An important feature of the agreement on 
the financial perspective for 2007-2013 
reached by the heads of state and govern-
ment at the European Council in Brussels 
on 15 and 16 December 2005 was the re-
vision clause, which stipulates that there 
will be a comprehensive review of the EU 
financial framework as early as 
2008/2009. 
 
This does not leave us with a great deal of 
time. In the coming months we need to 
conduct a debate about a comprehensive 
and qualitative reform of the EU budget, 
and this needs to be initiated now. 
 
I 
The old system 
From 1958 to 1970 the Community budget 
was financed exclusively by contributions 
from the member states. In April 1970 the 
Council meeting in Luxembourg voted to 
 
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introduce a system which envisaged reve-
nues in the form of own resources to fi-
nance the Community budget. 
 
Initially the only own resources were the 
customs and agricultural duties levied as a 
result of EU responsibility for the areas of 
agriculture 
and foreign 
trade. These 
were trans-
ferred di-
rectly to the 
EU. Since 
1980 these 
revenues 
have been 
augmented 
by a per-
centage of 
VAT, which 
is calculated 
on the basis 
of a compli-
cated for-
mula that 
takes into 
account 
gross national income (GNI). Currently, to 
put it simply, it constitutes about 0.3 per 
cent of the VAT tax base. 
 
Furthermore, there are also national 
budget subsidies, which are calculated on 
the basis of GNI, that is, the economic size 
of the individual member states. They in-
clude the “UK rebate”, and, in the current 
financial perspective, rebates for other 
“net contributors” (Netherlands, Germany, 
Sweden, Austria). 
 
The time is now ripe for reforms and 
changes. There is an urgent need to alter 
the present system. For this reason a reso-
lution of the disagreements about the EU 
budget framework cannot be deferred until 
2013, when the next financial perspective 
will be drawn up. During the negotiations 
of the European Council in 2005 the 
Commission was asked to carry out an 
analysis of all aspects of EU expenditure, 
including the Common Agricultural Policy 
and the UK budget rebate, and to present a 
report on this in 2008/2009. The European 
Council will be able to use this to make 
the urgently needed decisions, and at the 
same time will take into account the pre-
paratory work for the next financial 
framework and the period after 2014. 
 
However, differing interpretations of this 
issue began to emerge as early as 2005. 
The then French President Jacques Chirac 
described the budget review as being noth-
ing more than a “fig leaf” designed to con-
ceal the British budget concessions, and 
he sought to defer any kind of reform of 
the Common Agricultural Policy to the pe-
riod after 2014. On the other hand, the 
British construed the 2008/2009 review as 
the basis for a substantial reform of the 
expenditure side of the budget before 
2014.  
 
The debate about the EU budget has re-
sumed as a result of the European Com-
mission’s internet presentation of the EU’s 
medium- and long-term expenditure priori-
ties, which covers all aspects of the issue. 
 
 
 
 
 
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II 
Commission prepares 
budget review  
The Commission believes that the budget 
review constitutes a unique opportunity to 
include the numerous EU budget issues in 
a wide-ranging “no taboos” debate which 
can be conducted without the looming 
presence of negotiating pressure. It is 
unlikely, in the wake of all the topics that 
have been discussed, that the Commission 
will submit a proposal for the new 2014 
budget framework before the autumn of 
2009, by which time its membership will 
have changed. 
 
The wide-ranging debate envisaged by the 
Commission will be preceded by a Com-
mon Agricultural Policy “health check”. In 
addition to agricultural policy, it will be 
necessary to discuss the structural and 
cohesion policies and how they function 
within the framework of a European Union 
that now has 27 member states. The 
Fourth Cohesion Report published in May 
2007 contains the material required for 
such a debate.  
 
I think that the reforms which must sub-
sequently be introduced should take their 
bearings from four salient points: 
 
• The current system is opaque, compli-
cated and unfair. 
 
• The reforms relating to revenue and ex-
penditure are interdependent. 
 
• The discussion must include all of the 
rebates. 
 
• An additional EU tax based on income 
or wages is out of the question. 
 
Of course, the participants are all well 
aware of the fact that it is difficult to 
change a structure which has developed 
over the course of several decades. How-
ever, I do not think it is right that 90 per 
cent of EU budget revenue derives from 
the national budgets. 
 
The EU is in urgent need of new own re-
sources. As we have seen, 50 per cent 
used to come from customs duties. So we 
should think about those things which are 
currently not taxed at all and could in fact 
be used to generate own resources. 
 
III 
A “no taboos” debate  
I suggested as early as 2005 (Süddeutsche 
Zeitung, 31.12.2005) that, if the reform 
debate fails to come up with a new  
budgetary mechanism, the governments 
will be “up in arms” by 2011 at the latest. 
For this reason, when presenting the pro-
gramme of the Austrian EU Presidency to 
the European Parliament on 18 January 
2006, I emphasized that the financial per-
spective is a particularly important subject 
for the Commission, the Council and the 
European Parliament: 
“Greater self-financing is 
maybe not popular,  
but necessary.” 
“The financial perspective, which covers 
seven years, provides security and makes 
it possible to plan ahead. (…) I want to be 
clear: we will reach our limits if we keep 
imposing new tasks on our national  
budgets. If we carry on like this, the pre-
sent financial perspective could be our 
last. I am now going to say something that 
not all of you will agree with: Europe 
needs more self-financing. We cannot con-
tinue to carve everything that we need for 
Europe out of the national budgets. It 
could end in that uncomfortable tension 
between net payers and net recipients. 
Greater self-financing is maybe not popu-
lar, but necessary. The President of the 
Commission, Mr. Barroso, also takes a 
similar view. The Commission must put all 
of these aspects on the table in its 
2008/2009 review. We cannot have a 
 
sp
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situation where short-term financial specu-
lation is entirely exempt from taxation, or 
where air or ship transport are entirely 
exempt from taxation. I would ask the 
Commission to include these topics in its 
review. I would also ask the European Par-
liament to back me up: those who want a 
strong Europe cannot shy away from this 
subject.” 
 
Greater financial flexibility provides us 
with greater political flexibility. And this 
is what we need if the EU is to fulfil its 
global commitments. 
 
IV 
One world – Europe’s  
special responsibility 
The European Union is the largest eco-
nomic bloc in the world; it is the biggest 
donor when it comes to humanitarian as-
sistance and development aid, and it pro-
vides a guarantee for stability, democracy 
and human rights. Europe must make an 
even greater effort than in the past to be-
come a genuine global player. 
 
Today Europe is already very active in the 
area of development cooperation with the 
poorest countries in the world, and does 
more than the U.S. or the Asian countries. 
It places special emphasis on Africa. The 
most important areas in which the Euro-
pean Union and its member states are in-
volved are war, oppression, hunger, pre-
ventable diseases, the situation of women 
and children, the development of trade, 
the expansion of the infrastructure, educa-
tion and the environment. We subscribe to 
the UN’s Millennium Development Goals, 
which were discussed at the summit in 
September 2005.  
 
However, development aid should not be 
confined to disaster assistance. It should 
facilitate sustainable development in the 
countries concerned. This is not only a 
humanitarian issue, it is also something 
which is in our own interests. We have 
this ONE earth and no other, we are di-
rectly and indirectly affected by develop-
ments in countries on the other side of the 
globe.  
“The ecosocial market  
economy is our response 
to the American  
way of life.” 
For this reason we wish to and indeed 
must make a contribution in this area, so 
that people in the most underdeveloped 
countries also have something to look for-
ward to in their local communities. And 
that is why we support the initiative for a 
global Marshall Plan, an important partner 
on the road leading to the long-term goal 
of a global ecosocial market economy.  
 
The successful model of European integra-
tion is the European form of the ecosocial 
market economy. In essence it consists of 
a synthesis of a competitive economy, so-
cial justice, and ecological responsibility.  
 
The ecosocial market economy is our re-
sponse to the “American way of life”, it is 
the model of our European success, and 
constitutes an answer to the challenges 
posed by a globalized world. Furthermore, 
in global terms this is the model of the fu-
ture, because it is the economic and social 
order which, even under changed circum-
stances, is capable of providing the great-
est benefits for the individual human be-
ing.  
 
The ecosocial market economy is in fact 
based on the idea that a free economic or-
der which is surrounded by “railings” can 
provide the individual and society as a 
whole with stability, security, a sense of 
direction, and, in the final analysis, the 
freedom needed to attain growth and pros-
perity. 
 
 
 
 
 
 
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V 
A new initiative 
A demonstrable willingness to play a part 
in shaping the ongoing process of global-
ization is just as important as specific 
measures designed to reach the UN’s Mil-
lennium Development Goals. For this rea-
son I have made it unmistakably clear that 
I am in favour of a tax on foreign exchange 
transactions. An autonomous source of 
revenue would 
make the EU less 
depen-dent on the 
national budgets. 
 
The Union’s reve-
nues originally 
consisted primar-
ily of customs du-
ties and levies, 
and only a small 
percentage came 
from national con-
tributions calcu-
lated on the basis 
of GNI data. In 
1989 gross do-
mestic income 
(GDI) revenues 
constituted about 
a tenth of the EU’s 
own resources. By 
the end of the cur-
rent financial 
framework in 
2013 the propor-
tion will have 
risen to three-
quarters. In the 
final analysis this 
is due to a decline 
in VAT-based revenues and in traditional 
own resources (in particular customs 
revenues, which have decreased and are 
decreasing rapidly as a result of GATT and 
WTO liberalization agreements). Thus, 
even if the budget were to increase only 
slightly, the proportion of GNI revenues 
would rise strongly. The question now 
arises of whether or not EU revenues 
should be placed on a more reliable foot-
ing. 
 
These deliberations have led to a joint ini-
tiative by all the parties in the Nationalrat, 
the Austrian parliament. On 27 April 2006 
the four parliamentary parties tabled a 
motion to discuss taxation proposals de-
signed to finance supranational tasks such 
as EU own resources revenues, climate 
change, and cooperation with developing 
countries.  
More financial resources are needed in or-
der to reach the UN Millennium Develop-
ment Goals. The proposed autonomous 
sources of revenue are designed to ensure 
that such resources will become available 
and that they will not be dependent on the 
national budgets. 
 
In this motion, which is currently being 
debated in parliament, the parties in the 
 
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s 
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/0
8 
Nationalrat call on the Austrian govern-
ment “in the context of its past initiatives 
within the framework of the European in-
stitutions to investigate the feasibility of 
an EU-wide tax, such as, for example, 
 
• a tax on foreign exchange transactions, 
 
• a tax in the areas of aviation, shipping, 
natural resources, etc., 
 
and to support consistent implementation, 
though without endangering the Lisbon 
targets. 
 
The revenues thus procured will be as-
signed to an EU fund, which in an even-
handed manner will finance supranational 
tasks such as EU own resources, climate 
change and cooperation with developing 
countries. 
 
Implementation should be based on an EU 
directive, and be binding for all EU mem-
ber states. Autonomous sources of revenue 
should be evaluated on the basis of 
whether or not they are consistent and 
consonant with free competition. The in-
troduction of an EU-wide tax must be per-
ceived in the European context and, when 
it is implemented, should not be permitted 
to distort competition. It is not supposed 
to constitute an additional burden for EU 
citizens, and will be revenue neutral on 
account of the simultaneous reduction in 
member state contributions.” 
 
VI 
Exporting security 
Security is a basic human need. The main-
tenance or reestablishment of security 
comes high on the list of what people 
value most. The desire for security is a 
fundamental aspiration of modern socie-
ties. It is in the first instance the task of 
the authorities of a nation-state to guaran-
tee the security of a particular polity both 
externally and internally.  
However, it has now become impossible to 
formulate security policy on an exclusively 
national basis or with reference to a single 
ministry. What is needed is international 
and cross-ministerial coordination and co-
operation. 
 
In the context of EU budget reform, some 
thought should be given to the question of 
whether, under the circumstances, suffi-
cient funds have been allocated on a me-
dium-term basis to deal with such issues – 
especially in the area of foreign and secu-
rity policy.  
 
Numerous security risks and threats to 
stability confront the EU, both in the im-
mediate vicinity and in the more remote 
neighbourhood. On a global level there are 
various kinds of conflict. These range from 
the greater professionalism of inter-
national terrorism and the proliferation of 
weapons of mass destruction to regional 
crises and the consequences of failed 
states. 
“Is the Common Foreign 
and Security Policy  
adequately financed?” 
The new threats make it imperative for us 
to play a role beyond the confines of 
Europe in places where these develop-
ments have their origins. If we are not in a 
position to export security, we might very 
well find ourselves confronted with im-
ported insecurity. 
 
Each of these threats can be dealt with by 
combining a number of different policies. 
It is possible to contain the proliferation of 
weapons of mass destruction by imposing 
export restrictions and exerting political, 
economic and other kinds of pressure, 
whilst at the same time tackling the root 
causes of the problem. Combating terror-
ism may require a differentiated combina-
tion of diplomatic and economic activity, 
intelligence work, and police, judicial and 
military resources. In the case of failed 
states, there may be a need for military in-
tervention to restore order and for hu-
manitarian assistance if there is an emer-
gency.  
 
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Regional conflicts require political solu-
tions, but in the period after the end of the 
conflict there may also be a need for mili-
tary resources and effective police work. 
Economic policy instruments can promote 
reconstruction, whereas civil management 
can help to re-establish a civilian govern-
ment. 
 
 
 
 
 
 
 
 
 
 
 
VII 
The vision of global 
responsibility 
Thus the EU’s vision and its responsibility 
in the future must be to build on the sta-
bility which exists within its borders, to 
promote stability in its immediate geopo-
litical vicinity and in its more remote 
neighbourhood, and to make sure that it is 
sustainable. This is the key to peace in 
Europe in the 21st century.  
 
But in order to be able to implement all 
the various aspects of this project, we 
need the appropriate financial resources. 
That is why there is such a pressing need 
for a reform of EU finances. 
 
 
 
 
 
 
 
 
 
 
 
 
 
Responsible 
 
Bertelsmann Stiftung 
Carl Bertelsmann Straße 256 
D-33311 Gütersloh 
www.bertelsmann-stiftung.de/spotlight 
 
dominik.hierlemann@bertelsmann.de 
Phone +49 5241 81 81537 
 
joachim.vannahme@bertelsmann.de
Phone +49 5241 81 81 421 
 
 
Center for Applied Policy Research 
Maria-Theresia-Straße 21 
D-81675 Munich 
www.cap.lmu.de 
 
matthias.chardon@lrz.uni-muenchen.de 
Phone +49 89 2180 1334 
 
sarah.seeger@lrz.uni-muenchen.de
Phone + 49 89 2180 1375 
 
 
ISSN 1865-7451 
Latest editions: 
 
spotlight europe # 2007/07 
A Chance for Wise Men 
Matthias Chardon, Dominik HIerlemann, 
Sarah Seeger 
 
spotlight europe # 2007/06 
A Time to Take Action:  
Europe’s Responsibility in the Middle East 
Almut Möller  
 
spotlight europe # 2007/05 
Testcase Energy 
Stefani Weiss 
 
 
 
 
 
 
 
 
 
All editions of the spotlight europe can be 
downloaded from: www.bertelsmann-
stiftung.de/spotlight 


http://aei.pitt.edu/7650/1/spotlight_EuropesFinances.pdf

spotlight europe 2007/08, November 2007: Europe's Finances - The old system at its limits

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