European Commission President Ursula von der Leyen unveiled the plan last Wednesday along with details of its recovery fund package aimed at offsetting the impact of the coronavirus pandemic on eurozone economies. Gernot Blumel, Austria’s finance minister, has been highly critical of the proposals, and speaking afterwards, said: “The commission’s proposal, together with the European budget and the reconstruction fund, would mean that Austria would have to contribute nearly two of its GDP.
“That would be twice as much as in the past. For us, that’s unacceptable.”
German Thomas Mayer, who was chief economist with Deutschebank from January 2010 to May 2012, hit back, using an op-ed in Austrian newspaper The Standard to accuse Mr Blumel of “camouflaging and deceiving to gain advantages by using outdated figures from two years ago.
However, Ministry of Finance spokesman Felix Lamezan-Salins hit back in the same paper, saying: “If someone is camouflaging and deceiving, it is the EC.
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Gernot Blumel, Austria’s Finance Minister
Sebastian Kurz, Austria’s Chancellor
“It would cause extreme outrage if the ministry of finance would artificially calculate the budget too low and use numbers from 2018.
Explaining the methodology behind the ministry’s calculations, Mr Lamezan-Salins claimed the recovery fund was not worth 750 billion euros, but “actually 809 billion in current prices”.
Proposals outlined last week – which could still be blocked by member states – would see the European Commission borrow the funds from the market and then disburse two-thirds in grants and the rest in loans to cushion the damage, which much of the cash going to Spain and Italy, the two worst-hit countries.
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Emmanuel Macron, France’s President
Mr Blumel claimed the plan would push Austria’s contribution up from one to two percent of GDP.
Austria’s contribution to the regular budget would “increase by 50 percent”, he said, in addition to which there would be the eventual repayment of the recovery fund.
Taking everything into consideration, he put the total cost at an eye-popping 2.1trillion euros.
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Ursula von der Leyen, President of the European Commission
Italy has been badly hit by the coronavirus pandemic
The Commision had a vested interest in making the budget “look as small” as possible, Mr Lamezan-Salins said.
By contrast, the Ministry of Finance, had calculated “in current prices”, including inflation rates of two percent and economic growth which would have an impact on national contributions to the EU budget.
He asked: “The question is what is the impact on the Austrian budget? What does it cost us?”
As one of the so-called frugal four financially cautious EU nations, along with Denmark, Sweden and the Netherlands, Austria has consistently cautioned against high levels of EU spending.
EU budget factions
Chancellor Sebastian Kurz is vehemently opposed to any concept of debt mutualisation – or so-called coronabonds – which would spread costs of repairing the impact of the pandemic across the bloc, a system advocated by France’s President Emmanuel Macron.
He is also opposed to spending in the form of grants to Italy and Spain, believing instead the money should come in the form of loans.
Speaking to German newspaper Speigel earlier this week, Mr Kurz said: “Macron never made a secret of the fact that that is what he wants.
“That is his right, and it is also the right of Germany, Austria and the Netherlands to make it clear that they do not want that.
The pandemic has put the EU under enormous strain
“We understand that we are in an emergency situation. We are prepared to help. We are in solidarity.
“We are net contributors in the EU, and one of the countries that will shoulder the main burden of this effort
“But it must still be legitimate for those who are paying to have a say.”
(Additional reporting by Monika Pallenberg)