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EU virus response paves way for new centralised taxes – study

10 Jun 2021 / eU Print

EU virus response paves way for new taxes – study

DCU law’s Professor Federico Fabbrini has said that EU pandemic measures mark a huge turning point in the process of European integration.

His report, ‘Europe's Economic and Monetary Union Beyond COVID-19, studies the consequences of COVID-19, and the responses to it by Europe’s Economic and Monetary Union.

The report, commissioned by the Department of Finance and the Presidency of the Eurogroup, highlights the establishment of the Next-Generation European Union (NGEU), a €750 million recovery fund, and its long-term impact on the structures and governance processes of the EU and the Eurozone.

‘Unprecedented actions’

Fabbrini, a full professor of European law at DCU’s School of Law and Government, and founding director of the DCU Brexit Institute, argues that the actions undertaken by the EU are unprecedented.

He stresses that there are significant implications for the European Economic and Monetary Union (EMU). In particular, NGEU balances the EU centralised monetary policy with a centralised fiscal capacity – and paves the way for the introduction of new EU taxes, which will be used to repay the funds that the commission is borrowing on the capital markets, Dr Fabbrini says.

Deployed

The report examines the number of policies deployed by the EU institutions and the member states to contain the socio-economic damages of the pandemic – in particular the EU recovery fund and the NGEU, connected to the EU 2021-2027 Multiannual Financial Framework (MFF), which are designed to kick-start the EU economy after the pandemic. 
 
In contrast to past funding programmes, the NGEU is to be resourced by resorting to the financial markets, and to be disbursed to the member states primarily in the forms of grants, rather than just loans.

Moreover, NGEU money will be funded through new EU taxes, rather than member states’ budgetary transfers.
 
The research paper considers the mid- to long-term consequences of the measures adopted for the future of EMU, and whether a return to normal post-COVID-19 would be feasible.

The question also arises as to whether recent developments could facilitate further ‘deepening’ of the EMU, and whether new EU constitution reforms might be needed to support the recent centralisation of fiscal powers.

As such, Dr Fabbrini’s report provides guidance, also, for the incoming Conference on the Future of Europe.

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