EconomyTop EU lawmaker calls for ‘hard look’ at budgeting...

Top EU lawmaker calls for ‘hard look’ at budgeting cycle as crises test bloc

A top EU lawmaker has questioned whether the bloc’s seven-year budgeting cycle is sustainable as emerging crises such as the Ukraine war and soaring inflation increase the need for rapid financial responses.

Roberta Metsola, the Maltese MEP who was elected president of the European parliament this year, said she wanted to take a “long, hard look” at the EU’s financing model, including the lengthy seven-year timespan of the Multiannual Financial Framework, as she seeks to ensure the union can respond flexibly to budgetary challenges.

“From a broader perspective we should seriously consider whether the seven-year idea remains something we as a European Union can continue to rely on in terms of economic dependability,” said Metsola in an interview. “It has to be seen whether it can continue to be a sustainable model of financing the union’s budget.”

The EU finalised its latest €1tn, seven-year budgetary framework in late 2020, twinning it with an €800bn pandemic recovery programme backed by common borrowing. Brussels officials are already worried about the competing demands on the budget amid soaring costs, however, sparking discussions in the European Commission over whether member states may need to chip in extra cash to boost the union’s firepower.

The current MFF runs from 2021 to 2027, but the EU faces several tests of its budgetary capacity, including the arrival of millions of refugees from Ukraine, soaring energy costs, the threat of a global food crisis and the costs of rebuilding Ukraine after the war.

Surging inflation is putting the budgets of the EU and its member states under increasing strain, with prices in the euro area rising 8.1 per cent in May from the same time last year.

Metsola was speaking ahead of today’s European Summit in Brussels, which takes place amid fears of energy shortages as Russia curbs gas flows to Europe and countries such as Germany launch emergency measures to manage supplies.

The parliament president warned that the EU was entering a highly uncertain period, both from the point of energy and economic stability, and that this was making people “justifiably nervous”. The EU, she added, needed to be prepared for “serious” gas cuts.

Metsola, of the centre-right European People’s party, said the EU was already operating beyond its traditional framework following the creation of the €800bn NextGenerationEU borrowing programme in response to the Covid-19 economic crisis.

Her colleagues would need to speak with the EU’s budget commissioner about “what kind of flexibility we can give ourselves” given the current pressures. “No debate should be off the table in this context,” she said.

The commission has in the past raised questions about the MFF cycle — which under the EU’s treaties needs to run for at least five years. A 2017 paper outlined the pros and cons of changing the budgeting process.

A shorter MFF duration would “bring more flexibility and make it easier to adjust to unforeseen developments”, while creating the possibility to align a five-year timeframe with the mandates of the European parliament and the commission, the commission paper said. But it would also introduce greater uncertainty into funding.

Wind turbines in Germany
Wind turbines in Germany. Member states have been warned not to renege on their carbon-cutting targets © Andreas Rentz/Getty Images

Concerns over energy security were something politicians including MEPs needed to explain clearly to electorates as the parliament prepared for elections in 2024, Metsola said.

“Where I am particularly worried is we could see further government instability across member states,” she added, citing the threat of “populist arguments” on the issue.

The turmoil has prompted questions about whether the EU’s green agenda, in particular, remains realistic, as fears of energy shortages prompt some countries including Germany and the Netherlands to fire up coal-fired power plants. Ursula von der Leyen, the commission president, this week warned member states not to renege on their carbon-reduction goals.

Metsola said the parliament remained ambitious on the climate agenda, arguing that “we cannot allow drastic backtracking by the European Council, which we have seen in other packages of legislation”. 

But she added: “I am very much aware of the impact of political decisions and economic pressures we have in some countries more than others — either due to geographic proximity to Russia and systemic dependence on Russia, but also others that were not prepared for such high inflation.” 

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