EU budget and recovery fund fail to reflect gravity of global crisis

Published: 21st July 2020

Today, the European Council agreed on the next EU long-term budget (Multiannual Financial Framework, MFF) and a recovery fund to help countries overcome the effects of the coronavirus crisis. EU leaders cut the amount foreseen in the budget for development cooperation by EUR 4 billion, while aid is completely absent from the recovery fund. In a positive move, heads of state and government agreed to introduce new taxes to fund the recovery.

Marissa Ryan, Head of Oxfam’s EU office, said:

“The recovery fund and long-term EU budget do not match the urgency of our current situation and the challenges ahead. Inequality within and beyond the EU is growing, and the recovery plan lacks ambition in addressing the socioeconomic impact of the pandemic and the looming food crisis.

“The cuts to the development aid budget will come at a real human cost. The pandemic is already pushing millions of people to the brink of starvation and increasing extreme poverty. Meanwhile in developing countries, health systems are ill equipped to respond.

“The twin crises of COVID-19 and the climate emergency demonstrate the critical importance of international aid to save lives and build a greener, fairer and more resilient society. Despite the disappointing outcome of the EU summit negotiations, the EU must move swiftly to tackle the food crisis and support health systems.

“We welcome the inclusion of a digital levy, environmental taxes and, possibly, a Financial Transaction Tax to fund the recovery. These taxes should be introduced without delay in order to bolster funds for essential services such as healthcare.

“However, the Council’s failure to include a tax on big multinationals is a missed opportunity to introduce effective taxation which works for ordinary people. For a fair and equitable economic recovery from COVID-19, it’s crucial that long-undertaxed companies are required to contribute their share.”

Notes to editors

  • The Council agreed on the Commission’s proposal to fund the recovery fund by capital market borrowing and to make resources available to member states through both grants and loans. Member states also agreed to repay the capital market borrowing by new EU own resources, in particular a tax on non-recycled plastic waste a carbon border adjustment mechanism and a digital levy. They also leave the door open for new own resources such as a Financial Transaction Tax. They did not include for the moment a tax on operations of large enterprises, that was proposed by the European Commission.
  • The EU’s budget for external action is summarised under heading 6 – “Neighbourhood and the World.” The Council have proposed to spend EUR 98.4 billion under this budget line, roughly a 4 billion euro cut compared to the previous proposal. Funds for development aid foreseen in previous drafts of the recovery fund have been removed completely.
  • A recent Oxfam report, ‘Hunger Virus: How the coronavirus is fuelling hunger in the world’, identified ten hunger hotspots where the food crisis is most severe, and getting worse because of the pandemic. The recovery fund and the MFF are an opportunity for the EU initiate lasting change to the food system.

Contact information

Marissa Ryan | Deputy Director of Advocacy & Campaigns, Head of Oxfam EU | | mobile +353 86 078 1296 | Skype Marissa.Ryan1 | Twitter Marissa_C_Ryan

For updates, please follow @Oxfam and @OxfamEU