Why the EU needs to increase its resources

Climate change, Eurozone and refugees crisis.

These are only a few of the challenges our Union and it is honest to say that the EU has not the necessary resources to face them effectively and timely.

The annual EU budget is €145 bn (2015 figures). This seems very large, but it actually only about 1% of the wealth generated by EU economies every year. In other words, each states gives ONLY 1% of what they “earn” to the EU. For example, if Italy earns 10 and Germany 30, both will give 1% of those sums. Not only this is very low, but it clearly depends on each states growth. For example, if Italy earns 10 in 2017 and 7 in 2018, it will still have to give the EU 1% of it, but in the second case the amount of money will be lower.

This table explains where these resources are spent:

It is evident that it does not possess enough resources to act timely, also because most of its budget is financed by member states and therefore national interests play a big role.

Therefore the EU needs its own taxing powers to be able to gain certain and enough resources as well as independent action.

There are various proposals to increase EU own resources such as carbon tax and financial corporation tax.

These are clearly connected with the great challenges the EU faces.

Putting a tax on the carbon sector and coal intensive energy will firstly help modify people’s behaviour and incentivise its countries to move towards more sustainable form of energy production.

Also, to fight transnational corporation which do not pay taxes, such as Apple, a common corporation income tax can be introduced, but also tax on financial transactions could be used .

This will help increase EU revenues and therefore, in other words, it will have more money to react quickly to unexpected events such as the refugee crisis and shocks such as the Eurozone crisis.

The resources could then be used:

To intervene in the European economy funding projects that are of pan-European interest and that foster the further development of the single market and long-term competitiveness of the European economy. With regards to climate change more resources could be used to adapt to it through the construction of infrastructure.

It must also provide financial assistance to member states at times of economic difficulties (particularly in case of asymmetric financial or economic shocks affecting only certain member states) and when member states are seeking to implement structural measures to reform their economies.

These expenditures have precise economic rationale. We should think about EU intervention such as the one outlined in terms of ‘added value’. Economically, the ‘added value” of EU public spending is defined as the capacity of EU-level public spending to reach policy objectives in a more efficient way than national-level spending

Precisely, when it come to climate change/environmental policies, there are clearly spillover effects/externalities exist at the Union level, namely that a country activities affect another one. Secondly, in the case of transport networks and telecommunication helps maximise and enlarge the benefits of economies of scale and therefore, from an economic perspective, EU intervention can be justified.

A well-functioning Eurozone and these projects will not only empower citizens domestically, but also Europe competitiveness internationally.

It will make Europe attractive and most importantly, credible

This quote from Sec-Gen of the Union of European @federalists is instructive:

“Reality is that nationalists and anti-Europeans prosper because of the weaknesses of today’s Europe and a weaker Europe will only magnify their appeal. The fears and disappointment of European citizens, who suffer from the economic crisis, feel the pressure of migration flows and feel threatened at their borders, mist be answered. The solutions proposed by old and new nationalists and defenders of national sovereignty are just an illusion, but they resonate emotionally with many people. Should they prevail, the result would be a Europe of small states, divided by borders and competing currencies, in permanent economic stagnation, fighting each other instead of standing united on the world stage, weak vassals of one or the other of the world’s economic and political super-powers. A Europe of narrow national interests played out in a zero-sum game. A Europe of hate and divisions, racism and xenophobia. Ultimately, a Europe of war.”

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