Next Generation Eu: income and expenses. What changes for Italy
Giuseppe Liturri's in-depth analysis on Next Generation Eu
We must not lose sight of the whole perspective of our financial relations with the EU, and here the part of the master is played by the Multiannual Financial Framework 2021-2027 ( MFF ) of 1074 billion, reduced from the initial 1100.
NextGenEu expects to assume 70% of financial commitments, something very different from actual payments, in the two-year period 2021-2022, leaving the residual 30% to 2023, to be shared with different criteria that take into account the fall in GDP in 2020-2021 . The MFF, on the other hand, will commit its appropriations over the seven-year period, with financial effects even beyond 2027, as all those who work with community projects and who see payments arrive even 2 years after the end of the programming cycle know well.
The two pillars of the maneuver are deeply intertwined: as many as 77.5 billion subsidies, divided into six different programs, of the NextGenEu are additional to specific pre-existing and autonomously financed expenditure items in the MFF.
Then it becomes essential to understand the functioning mechanisms of the MFF, to which it is no coincidence that the final document of the European Council dedicates 58 pages out of 67 total. It will never be possible to make an overall balance of the effects of the recent agreement, if the starting point is not taken into account and, from there, make the difference with respect to the point of arrival.
Also in this case, the devil is hiding in the details: according to the Court of Auditors, which takes up the Commission's data, in 2018 our country was a net contributor for about 7 billion, with collections of 10 billion and payments of 17 billion. Instead, according to the Commission, the balance was only 5 billion. The 2 billion difference is customs duties that the Commission considers its own resources and not national contributions, as if – if Italy were outside the EU – our country could give up those revenues. This alone must make us reflect on the difficulty of determining the net financial balance of our relations with the EU. We know for sure that that negative balance will only get worse as a result of the UK exit and the consequent increase in our share of the EU27's Gross National Income, which will rise from 11% to about 13%. But not only does the percentage of contribution to the pie increase, the pie also increases and, for those who are net contributors like us, the balance necessarily worsens.
It is now reasonable to assume that with an MFF that provides for an average annual expenditure of approximately 153 billion, a sharp increase compared to the average 120/130 of the previous seven years (therefore 30 billion more annually), Italy must pay an additional contribution for approximately 27 billion in 7 years (13% of 210) and receive 16 billion (considering the same payment / contribution ratio of 2018). We would therefore have a worsening of the negative balance of around 11 billion, to be added to the foreseeable 36 that we would have paid anyway if the same balance of the previous seven years had been confirmed.
The other aspect to note is the financial effect on 2021, the year in which our country needs funds to support the recovery. NextGenEU provides pre-financing for 10% of the amount of the Recovery Resilience Fund (Rrf). For Italy it is therefore a question of receiving approximately 7 billion, in addition to a non-estimable portion of any loans. In fact, it is not possible to estimate how much of the 69 billion of the RFF will be translated into actual financial commitments and disbursements by the EU. It will also be possible to receive pre-financing on all MFF programs, but to an insignificant extent.
The penultimate addendum of this complex operation is the EIB (European Investment Bank) which is ready to raise cash. In fact, in President Michel's proposal of 10 July a capital increase was envisaged. In the Council conclusions, the figures have disappeared and replaced by a generic commitment for 2020.
Finally, the taxes. The EU budget plans to increase its own resources up to 1.4% of the Gni, which, to repay the loans of 750 billion, becomes exceptionally 2%. It will be enough for the Commissioners to decide what to tax (and non-recyclable plastic has already been on the track since January 2021 with € 0.80 / kg) and they will only have to pay.
(Extract from an article published in the newspaper La Verità)
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/next-generation-eu-entrate-e-uscite-cosa-cambia-per-litalia/ on Sat, 15 Aug 2020 04:45:11 +0000.