Coronavirus and its consequences – Europe at a crossroads!

In Europe, too, the consequences of the coronavirus pandemic have been devastating. The virus is wreaking havoc and threatening the livelihoods of countless people and businesses. Helping those in need and acting in a spirit of solidarity is a fundamental human duty – including for the EU and its Member States. Every individual is called upon to do their bit and take personal responsibility. The successful model of the social market economy and the EU is also based on these fundamental principles: subsidiarity and solidarity.

It is essential to minimise the damage to society as much as possible. Naturally, the individual Member States and the EU bear responsibility and must do everything in their power to protect the population and help the people and businesses affected by the crisis. This is particularly true given that the effects of the crisis will be felt for a long time to come. To cushion its impact, vast sums of taxpayers’ money are being deployed. Countries are taking on new debt and additional liabilities.

Particularly in times of crisis, it is important to keep a cool head and find sustainable solutions. Public funds and resources must be used as efficiently as possible. Even during the coronavirus pandemic, the use of taxpayers’ money must be monitored to ensure that aid actually reaches those who have suffered losses. Anyone seeking to exploit the pandemic to fraudulently obtain aid should be aware that this taxpayers’ money must be repaid.

Winston Churchill is credited with the following quote: ‘Never let a good crisis go to waste!’ Looking at the demands and decisions of the EU summit in July 2020, this quote unfortunately seems to apply perfectly. For years, the European Commission and large sections of the European Parliament have been calling for the EU to have its own sources of revenue to finance the EU budget and expand the existing one. In this context, there have been repeated discussions as to whether the EU should also be able to take on debt.   

Under the guise of tackling the economic crisis caused by the coronavirus, those in favour of EU debt and EU taxes appear to be moving closer to their long-awaited goal: the European Council has decided to take on 750 billion euros in shared debt. And this despite the fact that existing EU funds and programmes (e.g. EIB, ESM, SURE) have not yet been fully utilised and, given the extension of the ECB’s bond-buying programmes and the suspension of the Maastricht criteria, would offer EU countries sufficient opportunities for ‘zero-interest financing’. Furthermore, it is not clear what funds have so far been used in the individual EU countries to tackle the consequences of the coronavirus and what measures are planned using national funds.  

The ‘Next Generation’ programme, with a budget of 750 billion euros, provides for the allocation of 360 billion euros in loans and 390 billion euros in grants to tackle the economic consequences of the COVID-19 crisis.

Furthermore, the EU is to have its own source of revenue: its own taxes.

Under the pretext of tackling the coronavirus crisis, pressure is now being exerted to push through far-reaching changes to European financial and tax policy – changes which, in the past, could not be implemented for good reason. The crisis is being misused to cast fundamental EU principles aside. The European Taxpayers’ Association (TAE) strongly warns against the mutualisation of debt, Corona bonds, the introduction of additional taxes, tax harmonisation (minimum tax rates), the synchronisation of social security systems, and unchecked debt accumulation by both the EU and individual Member States. We also see a threat to the principle of unanimity in EU tax and financial matters. It cannot be emphasised enough: the right of veto protects individual EU Member States and their citizens from unwanted external control by the EU. In this context, we firmly reject the proposed introduction of majority voting.
From the TAE’s perspective, these far-reaching changes to key fundamental principles would, in the long term, be more likely to divide the EU than to unite it.

Instead of advocating for the mutualisation of debt, the EU Member States should first exhaust all available options and take measures within their own countries to guide people and businesses safely through the coronavirus crisis.

What is missing from the current debate are proposals for institutional reforms of the EU. Have we learnt nothing at all from Brexit? Now we are told that we need more money to overcome the difficulties. But more money alone will not solve the problems. On the contrary: some countries have to pay, whilst others benefit. If this situation persists and the recipient countries are unwilling to accept change, conflicts are inevitable.  

Instead of focusing solely on financial aid, taxes and charges should be reduced and red tape cut back, particularly at this time. Easing the burden on the public and businesses frees up purchasing power. At the same time, this improves the conditions for future growth. In the EU today, too much – not too little – money is already being redistributed. By international standards, citizens and businesses in most EU Member States are already burdened with extremely high taxes and charges, which hampers economic growth and significantly reduces the population’s per capita income. If we allow EU taxes and the incurring of shared debt, the situation for people and businesses in the EU will deteriorate further. After all, debt is ultimately nothing more than a tax burden passed on to future generations.

With this paper, the European Taxpayers’ Association aims to put forward approaches and proposals on how the impact of the coronavirus crisis can be mitigated quickly, efficiently and sustainably from the taxpayers’ perspective – without driving the EU into the debt trap or introducing EU taxes. 

Europe is at a crossroads! Do we want the EU to be able to take on debt and levy its own taxes? Do we want to abolish competition – including that between different tax systems and rates? Do we want to transform Europe into a transfer union, in which the EU institutions coordinate (i.e. harmonise) and regulate more and more areas – thereby causing the EU Member States, their citizens and businesses to lose ever more freedoms? Or shall we continue to rely on a liberal market economy and the social market economy, which have proven their worth in Europe over the last 75 years?

Download the TAE Paper: ‘Corona and Its Consequences – Europe at the Crossroads!’