Italy’s funding threat will force the next European Commission to make fundamental choices

In a recent statement, Italy’s Deputy Prime Minister Luigi de Maio said that if the European Union cannot agree on a comprehensive redistribution system of migrants coming from Africa, the government could withhold funds to Brussels. This would be a first in the history of the EU, and presents some key questions about the federalism and the priorities of the next executive.

Switzerland or France?

Firstly, the reports claiming that Italy threatens to defund the European Union is not entirely accurate, as there is no provision in the treaties that would allow for such a thing. The member states are bound to pay their contributions–even though the European Union’s Court of Justice in Luxembourg has no power to actually implement a ruling condemning a country to pay its dues. What the Italian government actually threatens to do is to veto the EU’s 2021-2027 budget, which is currently being negotiated. Such a veto would overthrow the long-term ambitions of the current Commission and continue the existing budget. According to current plans, member states will contribute more to the union, with payments expected to rise from one percent of GDP to between 1.1 and 1.3 percent GDP.

In response to De Maio’s claims, EU budget Commissioner Günther Öttinger told journalists:

“So I think to block the negotiations is not fair, but it is mainly not smart, because it is damaging all member states, citizens, farmers, all researchers, and our common European competitiveness.”

Öttinger also corrected Rome on the statement that the country contributes €20 billion annually to Brussels, demonstrating that, after taking  returns in subsidies and investments into account, Italy is a net contributor of only between two and three billion euros. Öttinger did not comment on Di Maio’s other threat that Italy would break the EU’s 3 percent budget deficit rule in its next budget plan.

As of now, the member states’ contributions are the only way for the European Union to function, as long as it doesn’t levy its own taxes. This is similar to the Swiss model, where the executive serves mainly in a decorative function, as most of the power is still held by the cantons. This is due to the fact that it is the cantons that levy taxes and send them Berne, as opposed to the French model, which is centralised to the extent that regions need to demand resources from the central government if they intend to conduct major infrastructure projects. Ultimately, those controlling the resources are the ones holding the political power. This is why, currently, the Council remains the most powerful of the three EU institutions.

Strategic choices

The next EU Commission, which will convene after the European elections in May next year, will have to make choices in that regard: will the next Commission president choose to push for an EU tax, thereby giving its institutions more independence from the member states, potentially allowing the situation between Brussels-Rome, Brussels-Budapest, or Brussels-Warsaw to escalate to the point where it finds itself partially defunded? Or will it decide to give certain political powers back to the states?

Given the current political climate, the last option remains the least likely. European political parties will try to benefit from the electoral win that Emmanuel Macron’s “En Marche” is set to score in the European elections next May. A group that manages to incorporate Macron’s demands for more centralisation can easily dominate the European Parliament and set the agenda. And the French president’s attitude towards opposition from the south and the centre of Europe isn’t to talk and find diplomatic solutions, but rather to clash with and sanction those members that aren’t willing to pursue his political priorities for Europe.

This choice could be fatal for the EU. If member states that are already sceptical of centralisation will find themselves stripped of their political power through a direct EU tax, they will attempt to opt out of the organisation as soon as possible. In such an eventuality, Öttinger, Macron and Guy Verhofstadt may be congratulating themselves on having created a more centralised European Union.. with only half the number of its original members.

And maybe that’s not such a bad thing.

This article was first published by Values4Europe.

Pictures are Creative Commons.

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About Bill Wirtz

My name is Bill, I'm from Luxembourg and I write about the virtues of a free society. I favour individual and economic freedom and I believe in the capabilities people can develop when they have to take their own responsibilities.

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