EU Set to Unveil Nearly €2 Trillion Budget, Reopening Eurobond Debate – Breaking News
Brussels is bracing for a significant financial shift. The European Commission is reportedly planning a massive expansion of its multi-year budget, soaring to almost €2 trillion for the period 2028-2034. This move, revealed by reports in WORLD on Sunday and Business Insider Germany based on a previously unpublished study by the German Economic Institute (IW), is already sending ripples through European capitals and reigniting the contentious debate over Eurobonds – a concept many nations, including Germany, have historically resisted.
New Borrowing Power: ‘Catalyst Europe’ and the Crisis Mechanism
At the heart of the proposed budget are two new credit instruments designed to give Brussels unprecedented borrowing power. “Catalyst Europe,” a €150 billion fund, and a €395 billion “crisis mechanism” would allow the Commission to tap capital markets and extend loans to member states. This effectively means a return to common EU debt issuance, a practice largely avoided since the response to the COVID-19 pandemic. The scale of these instruments is substantial, representing a significant departure from previous budgetary constraints.
A Budget Boost of €800 Billion: Where Will the Money Come From?
The proposed budget represents an increase of approximately €800 billion compared to the current financial framework. Funding will continue to support traditional areas like agriculture, regional development, and economic competitiveness. Crucially, it will also include provisions for repaying the loans issued under the Corona reconstruction fund – the NextGenerationEU initiative. But simply allocating existing funds isn’t enough. The Commission is also looking at innovative ways to generate new revenue.
New Revenue Streams: Tobacco, Emissions, and a Levy on Big Tech
To bolster its financial resources, the Commission is eyeing a trio of new income sources. These include a portion of national tobacco taxes, proceeds from the EU’s emissions trading system (ETS), and a levy targeting large companies with annual revenues exceeding €100 million. This last measure, aimed at tech giants and other large corporations, is likely to face significant lobbying efforts. The shift towards these new revenue streams reflects a broader trend of seeking more sustainable and equitable funding models for the EU.
“Eurobonds Through the Back Door?” Concerns Mount
The proposal isn’t without its critics. IW economist Björn Kauder argues that the Commission is circumventing previous commitments. “Ursula von der Leyen’s proposals introduce Eurobonds through the back door,” Kauder is quoted as saying. The Commission had previously assured member states that the Corona reconstruction fund would be a one-time exception. Eurobonds, in essence, represent a collective responsibility for debt, where EU member states jointly issue bonds and are mutually liable for repayment. This concept has long been a sticking point, with fiscally conservative nations fearing they’ll be forced to shoulder the debt of others.
The History of Eurobonds and the Future of EU Finance
The idea of Eurobonds isn’t new. It’s been debated for decades, gaining traction during the Eurozone crisis as a potential solution to sovereign debt problems. However, resistance from countries like Germany, fearing moral hazard and a loss of fiscal sovereignty, has consistently blocked their implementation. The current proposal, while framed as a crisis mechanism and a catalyst for investment, effectively achieves a similar outcome. The coming months will be crucial as the Commission navigates negotiations with member states and the European Parliament. The outcome will not only shape the EU’s financial future but also its ability to respond to future economic shocks and invest in long-term priorities like the green transition and digital transformation.
This ambitious budget plan signals a pivotal moment for the European Union. As negotiations unfold, archyde.com will continue to provide in-depth coverage and analysis of this developing story, offering insights into the complex dynamics shaping the future of European finance. Stay tuned for further updates and expert commentary as we follow this crucial story.
