By Martin Banks - 8th September 2010
Pooling money at the European level allows member states to cut their costs
Jose Manuel Barroso
MEPs have poured cold water on a proposal by commission president José Manuel Barroso for the EU to have increased fundraising powers.
In his first-ever 'state of the union' address to MEPs in Strasbourg, Barroso called for an EU budget that "leverages growth" by spending money "more intelligently".
His demand comes amid current heated negotiations with member states seeking to cut expenditures in Brussels.
Barroso told MEPs, "Energy interconnections, research, and development aid are obvious examples where a euro spent at European level gets you more than a euro spent at national level."
In his speech, he proposed the creation of a "European bond", a controversial idea which has been rejected by several members including Germany.
"Pooling money at the European level allows member states to cut their costs, avoid overlaps and get a better return on their investment," he said.
"We should explore new sources of financing for major European infrastructure projects. For instance, I will propose the establishment of EU project bonds, together with the European Investment Bank."
So-called "eurobonds" are favoured by EU federalists keen to give the bloc more state-like powers, including the ability to raise cash on the bond market, but are viewed with suspicion by those opposed to further EU integration.
Objections to a European-wide instrument to borrow money arise largely because a joint bond would raise issues concerning the principle of pooling risk and national credit ratings.
Critics hold that this might be an important step away from national sovereignty and responsibility in issuing debt towards a more federal arrangement or, transfer union.
A spokesperson for Barroso insisted, "This is not about power, this is about raising finance.
"Financing is needed for infrastructure projects that link up Europe and which are crucial to bring economic growth and jobs to people across Europe."
But opponents immediately poured scorn on the idea, with British Tory MEP Syed Kamall saying, "The EU should remain ultimately accountable to national governments through their contributions to its budget.
"If Barroso gets his way the EU will have the power to raise its own taxes and sell debt. It is hard to say how this is anything but a big step towards a federal Europe. Governments should have the power to raise taxes and sell debt, not the EU.
"If joint bonds were such a good idea, why are more member states not calling for them? There is nothing in principle to stop individual governments getting together to launch joint bonds."
Ukip MEP Nigel Farage, a former merchant banker in the City of London, said, "This is another EU power grab - a Trojan horse for an EU treasury, the start of a transfer union.
"This eurobond idea is an attack on national sovereignty, a recipe for resentment and a guarantee of economic trouble.
"It's an inducement to more national irresponsibility. Why should the Germans pay higher interest rates to cover Greek profligancy?
"The EU, through inappropriate euro interest rates has created a crisis, and Barroso now calls for more power for the EU.
"It should be national governments, voted in by their own people who should have the responsibility for issuing bonds and deciding when they should be sold.
"Eurobonds will not allow good economic governance to be rewarded by the financial markets. This is a bad thing and another EU attack on national sovereignty."
Polish MEP Michal Kaminski, who leads the European Conservatives and Reformists group, said, "We cannot agree with Barroso's enthusiasm for a new system of EU funding that would take taxation policy out of the hands of national governments.
"European institutions will do nothing to scale back on waste if he is pushing for yet more taxpayers' money.”
German finance minister Wolfgang Schaeuble told a Brussels news conference on Tuesday that the eurobond idea "had never been very popular in Germany and was unlikely to be so now".
He said Europe had "far more important and urgent" pressing issues to deal with.
An EU diplomat said there was currently "no provision" in the EU treaties for the creation of a Eurobond, adding that a new treaty would therefore, be required.
Such an instrument would, he said, "remove the incentive for member states to accept responsibility for their public finances".
"A country that is sensible with its public debt would not be rewarded and a country that is idiotic with its finances would not be punished," he said.
The proposal by Barroso comes after EU institutions recently agreed on the creation of three super-regulators covering banking markets and insurance.
Each has powers to impose decisions by majority vote and effectively deprives Britain of veto power over regulation in the City.
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