A Package Deal to Exit From Net Balances in the EU Budget

Reforming the EU budget so that it is more responsive to changing collective needs such as responding to pandemics or energy security while still securing minimum levels of solidarity to those sectors most in need depends on changing the means of financing the budget in the first place. This chapter evaluates the ingredients of a package to achieve such a reform. It does so by analysing what we know already about package deals in the EU in which the major actors are able to gain more than they lose. Next, it deconstructs the case for countries to use national net balances in calculating budgetary costs and benefits given that flows of funds at the EU level do not correspond to their distribution by country. High contribution burdens can be addressed by compensating for gross rather than net contributions, while new forms of revenue would avoid increasing the tax burden to finance the post-Covid-19 recovery plan and could deliver policy objectives in relation to combating challenges like climate change and transnational tax avoidance.