But before you break out the champagne, the bad news: they’re just voting themselves some more

Part of the EU’s funding comes from a share of VAT, and of duties levied on imports. It seems that this has come in a bit short. Of course national governments often find that revenues come in short of estimates, and they have an easy (but dangerous) solution. The just borrow a bit more. But fortunately, the EU under current rules is not allowed to borrow. So it has to go cap-in-hand to the member-states, and, like Oliver Twist, ask for more. You might have thought that within a €100 billion plus budget it might have found savings to cover a shortfall of “only” €2.7 billion, but that’s not how the European institutional mind-set works.

In fact part of the “reforms” currently being considered to rescue the €uro project is the possibility of the ECB being able to issue bonds – or in plain terms, to borrow on its own account. Tomorrow, Friday Oct 25th, I’ll be appearing in front of a House of Lords Committee alongside my former Conservative colleague Syed Kamall MEP to answer questions on the plans for what they’re now calling “Genuine Economic and Monetary Union” (presumably an admission that the first attempt at EMU wasn’t genuine). I’m looking forward to the experience.

There has been apocalyptic talk of the Commission simply failing to meet its contractual obligations some time in November. Of course this won’t actually happen – which is a shame. One of its contractual obligations is to pay MEPs, but it would have been worth losing a couple of months’ salary to see the project in disarray.

It’s a fast-moving situation and it can be difficult to know exactly where we stand. But MEPs have voted for the extra funding and the Council of Ministers seems to have agreed.

But this little drama is merely a symptom of an on-going battle between member-states and the institutions. Brussels sees itself as on a mission. It’s the carrier of the flame, the guardian of the project. So if it needs to do things (or thinks it does) then of course the member states must pay up. Alongside this, the Commission would dearly like to have its “own resources” – that is, taxes levied directly and centrally for the EU budget. It hates being primarily dependent on subventions and direct budget contributions from member-states. The wickedly dangerous proposal for a Financial Transaction Tax is driven in large part by the desire for “own resources”.

The member-states, on the other hand, are struggling with deficits and austerity, and are (rightly) not prepared to give the Commission a free ride. If National Treasuries are looking for savings, then Brussels should do so too.

This battle is clearly reflected in the remarks of the Polish EU Budget Commissioner Janusz Lewandowski, who blames Britain, Germany and other member-states for the crisis because they tried to cap EU spending, leading, he says, to “continuous under-budgeting”. He warns that there will continue to be shortages unless the constraints are relaxed. The alternative, of course, would be for the EU to cut some unnecessary expenditure. Scrapping the “European House of History” project might be a good start.

This issue came up in our EFD group meeting earlier this week. My good friend and colleague Stuart Agnew MEP raised his concerns about it, fearing that the British tax-payer could be in the hole for another half-billion pounds (although there are suggestions that because of the Byzantine complexity of the UK’s rebate structure, the extra spend may not impact on British contributions). Our Bulgarian colleague asked what was the point of the Commission asking for €2.7 billion from the member-states so that it could give the money back to the member-states. Was this not just moving money from one pocket to another? Our Italian VP (who happened to be in the Chair at the time) explained that the point was that if the money was processed through the Commission, it would of course not necessarily go back to the country it came from. And from a British euro-sceptic viewpoint, that is exactly the problem. And another reason why we should be Better Off Out.

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