31. 12. 87 Official Journal of the European Communities No C 356/43 
Opinion on the financing of the Community 
(87/C 356/11) 
On 2 July 1987, the Economic and Social Committee, acting under the fourth paragraph of 
Article 20 of the Rules of Procedure, decided to draft an Opinion on the abovementioned 
subject. 
The Section for Economic, Financial and Monetary Questions, which was responsible for 
preparing the Committee's work on the subject, adopted its Opinion on 9 November 1987. 
The rapporteur was Mr Pardon. 
At its 250th plenary session (meeting of 19 November 1987) the Economic and Social 
Committee adopted the following Opinion by a majority with 4 votes against and 
8 abstentions. 
Preface The objectives 
1.1. This is an outline Opinion and the Committee 
reserves the right to return at a later date to the budget­
ary and tax mechanisms proposed by the Com­
mission (1). 
Two other Opinions are currently being drafted, one 
on the common agricultural policy (CAP), the other on 
the structural funds. These will round off the ESC's 
position on Community financing. 
1.2. First of all, the Committee would refer back to 
previous ESC Opinions (2) on the subject and to the 
Opinion of 13 May 1987 entitled 'Making a success 
of the Single Act'. The principles advocated in those 
Opinions remain valid. 
1.3. The Committee is alarmed by the possible reper­
cussions for the European enterprise of the Com­
munity's serious financial situation. 
The Committee consequently supports the Com­
mission's wish to put a stop to budgetary expedients 
and to provide the Community with the resources to 
implement its policy. This policy was laid down in the 
Treaties, supplemented by the Single Act and extended 
by enlargement. Since the Member States wanted such 
a policy to be followed, they cannot back down just 
when it is being implemented. Their own credibility 
and the stability of the Twelve are at stake. In the 
interests of Europe's economic and social development, 
the Committee refuses to see the Community as a 
mere conglomeration of interests, lacking either soul or 
objectives. 
(!) OJNoC241,8. 9. 1987. 
(2) OJ No C 358, 31. 12. 1983 and OJ No C 307, 17. 11. 1984. tee 2.1. The Community has set itself the objectives of 
;et- creating an internal European market by 1992 and of 
m- achieving economic and social cohesion. 
It should nevertheless be stated that the European ven-
>ne ture cannot be reduced to this sole objective, however 
on important it may be. The Committee would refer to its 
C's Opinion of 27 November 1985 (3) and emphasizes that 
the Community will not develop without a very strong 
political will backed by public opinion. 
tjie However, the Committee notes that progress to date in 
ess completing the internal market has been very slow and 
3se that the delays incurred have triggered scepticism in 
certain areas as to the feasibility of keeping to schedule. 
It is therefore imperative that the Member States make 
full use of the Single Act's provisions in order to step 
up the present rate of progress. 
2.2. Initially, one might think that creating the 
internal market would not require major financial out­
lay since it is essentially a matter of taking decisions to 
encourage freer circulation of goods, people and capital. 
The achievement of the internal market is however 
simply inconceivable without appropriate back-up poli­
cies (on transport, R&D the environment and con­
sumer protection), without economic, monetary and 
fiscal convergence, without a social dimension compris­
ing more meaningful dialogue between the two sides of 
industry and coordinated action to combat unemploy­
ment, without consideration for the specific problems of 
certain Member States, particularly regions in industrial 
decline and agricultural regions faced with the changes 
resulting from the reform of the CAP. 
(3) Opinion on the completion of the internal market—Com­
mission White Paper for submission to the European Council 
(OJNoC344, 31. 12. 1985). 
No C 356/44 Official Journal of the European Communities 31. 12. 87 
Additional resources will clearly be required to carry 
out programmes of this nature and they will have to 
be used appropriately. The bulk of the expenditure 
should be recouped via the wealth generated by 
increased economic activity. 
Obviously, the Community's objectives in all the above 
sectors will have to be defined within an overall me­
dium-term programme to be updated in line with future 
developments. While remaining realistic, the later stages 
of the programme should not be so detailed and inflex­
ible that they cannot be adapted. Once political agree­
ment has been reached on the programme, the requisite 
financial resources will have to be provided. This is 
implicit in the Single Act. 
The Commission has moreover mapped out a scenario 
indicating that because of the increase in the structural 
funds, the cost of clearing the debt of the past, i.e. 
mainly eliminating agricultural surpluses, and new poli­
cies, resources are inadequate under the current 
financing arrangements even leaving aside the impact 
of the Community's enlargement (1). 
2.3. An increase in the structural funds which was 
already necessary before enlargement and even more so 
since then, is now vital to ensure that the accession of 
Greece, Spain and Portugal does not provoke greater 
imbalance within the Community and further exacer­
bate discrepancies between the Member States. 
2.4. All these problems are linked and package deals 
are commonly accepted to be part and parcel of nego­
tiations. The political price of creating Europe also has 
to be paid. 
2.5. It follows from this that, the Community 
urgently needs more resources. Otherwise, it will be a 
chimera without the budgetary security which is crucial 
to its development. 
Own resources 
3.1. At present, the Community's own resources are 
drawn primarily from customs duties, agricultural lev­
ies and a maximum of 1,4% of the harmonized VAT 
basis of each Member State. Yet as a result of the 
Fontainebleau abatement mechanism, the average call-
up rate is in fact less than 1,25% of the Community's 
actual VAT basis. 
The Commission is proposing to adapt this system in 
order to wipe out the debt of the past, offset the 
structural erosion of existing resources and anticipate 
future needs. 
(*) In mid-July these figures were assessed at 7 billion, 8 billion 
and 2,8 billion ECU respectively. The farm surplus figure 
depends on market movements. On this point, it was felt that it was scarcely fair to ask 
the new Member States to shoulder the cost of wiping 
out the debt of the past which basically entailed elimin­
ating agricultural surpluses. 
Since Spain and Portugal have taken this issue to the 
Court of Justice, the Committee will refrain from any 
further comment at this stage. 
3.2. In terms of logic the Committee sees no major 
objection to the—possibly gradual—abolition of the 
10% refund of traditional own resources, i.e. levies, 
premiums, additional or compensatory amounts, fees 
and other CAP and the common customs tariff (CCT) 
duties to the Member States. Nor has the Committee 
any objection to allocating customs duties on the Euro­
pean Coal and Steel Community (ECSC) products to 
the Community, with the proviso that ECSC expendi­
ture must be covered if the levies were inadequate and 
there was a shortfall in Member States' contributions. 
3.3. The Commission is proposing that the VAT levy 
be reduced from 1,4% to 1% to be collected not on 
the basis of actual VAT (as initially proposed) but on 
a harmonized VAT assessment basis (6th Directive). 
The Committee notes this amendment and advises the 
Commission to endeavour at all events to concur with 
the realities of tax collection. 
3.4.1. Finally, the Commission proposes that a new 
resource be created: a 'supplementary' levy at a uniform 
rate yet to be determined, defined as the difference 
between the respective gross national product (GNP) 
of each Member State and the harmonized assessment 
basis for VAT. 
3.4.2. There are good reasons for employing 
the GNP concept. It is referred to in the Treaties 
(Article 203 (9) EEC Treaty). Within the Community, 
GNP has—with the assistance of the Statistical Office 
—been given a uniform definition which also corre­
sponds to the internationally-used concept. GNP 
reflects, furthermore, the relative prosperity of Member 
States most accurately and it is used world-wide, e.g. 
by the Organization for economic cooperation and 
development (OECD), the International labour organ­
ization (ILO) and the United Nations. 
VAT certainly provides a practical basis but this has 
its limits since investment, exports and most public 
expenditure fall outside the VAT net. Using VAT in 
fact puts the poorest Member States at a disadvantage. 
In addition, the VAT component of GNP varies con­
siderably from one Member State to another. 
3.4.3. Clearly, GNP does not encompass the entire 
economic activity of a Member State. The black econ­
omy or moonlighting (not to mention women working 
on family-owned farms) is excluded, although not com­
pletely, since these activities finally work through to 
GNP via consumer incomes. Although partially reflect-
31. 12. 87 Official Journal of the European Communities No C 356/45 
ed in GNP these forms of work are not, however, 
recorded in VAT figures. 
3.4.4. There is moreover no ideal basis and the Com­
mittee believes that, despite certain predictable difficult­
ies, using the GNP criterion will improve the Com­
munity's own resources system, since GNP adheres 
more closely to reality and also more accurately reflects 
Member States' ability to contribute. In the long term 
the system will be fairer. 
3.4.5. The Committee in fact wondered if the VAT 
basis should continue to be used and after due consider­
ation, decided in favour for three reasons: (a) VAT has 
become a feature of everyday life and a familiar tax is 
more readily accepted, (b) diversifying the sources of 
Community funding is probably a good thing; the VAT 
criterion entails no undue complications, thus making 
for greater flexibility, and (c) VAT is levied on individ­
ual citizens and is, in this sense, more of a Community 
tax. 
3.5. The Committee merely records the Com­
mission's intention to provide for an additional resource 
by 1992. Since the Commission is not yet in a position 
to disclose the nature or magnitude of this resource, 
the Committee would simply note that it will have to 
be submitted for parliamentary approval by the twelve 
Member States and will at all events lie within the 
maximum overall package of 1,4% of GNP. 
For the moment therefore, the Committee can only 
express its understanding for this concern for flexibility 
and caution. If, however, the new resource is adopted, 
the Committee trusts that it will not take the form of 
a contribution by Member States but will be collected 
as a genuine own resource. 
3.6. As regards the proposed overall ceiling of 1,4% 
of GNP, the Committee approves the principle of a 
ceiling but must point out that the figure in question is 
not absolutely binding. 
The 1,4% ceiling is based on calculations and projec­
tions which, however coherent they might be, are not 
absolutely reliable. Unexpected developments such as 
the recent disturbances on the financial markets are 
always possible. 
3.7. On the whole, the Committee welcomes the 
Commission's proposal. It courageously recognizes past 
mistakes (for which the Commission is by no means 
solely responsible), it should guarantee the Community 
increased and relatively stable resources and—most 
importantly—it should allow the Community at last to 
fulfil the functions it was created for—inter alia to meet the objectives of the Single Act. And this in a spirit of 
fairness and solidarity. 
3.8. Budgetary reform is thus the cornerstone of any 
future action. The objection might of course be raised 
that the main priority should be to reform the CAP and 
administer the Community's current resources more 
effectively. The CAP reform must certainly be con­
tinued but cannot be used as an alibi for doing nothing 
else—firstly, because the resources which might poss­
ibly be clawed back from agriculture would not be 
sufficient to cover expenditure in other sectors; sec­
ondly, because the CAP reform can only be gradual, 
while some needs have to be met immediately. 
Since the CAP is an extremely important common pol­
icy, it would be extremely serious if failure to solve the 
budgetary problems raised the spectre of ^national­
ization. The Committee would also refer to its Opinion 
on this subject. 
3.9. Finally, the Committee insists—as in the past 
—that the principle of a 'fair return' cannot be rec­
onciled with the essential solidarity between Member 
States on which the Community is based. It is clear that 
advantages and drawbacks which Community member­
ship entails cannot be assessed in purely budgetary or 
financial terms. Too many unknown factors, political 
aspects and indirect or non-quantifiable consequences 
are involved for a simple mathematical calculation to 
be adequate. 
Compensatory mechanisms are essential in an organ­
ization such as the Community, the better-off help the 
less privileged in the common interest. 
Discipline and budgetary rigour 
4.1. The reform of Community financing must go 
hand in hand with stricter budgetary discipline. The 
Commission has, moreover, made detailed proposals 
to this end. The ESC will be expressing its views later. 
4.2. The Committee would, however, emphasize that 
this is a crucial point which is fundamental to the 
acceptance of an increase in own resources. Even if 
certain factors such as currency fluctuations are beyond 
the Community's control, every effort must be made to 
prevent the errors of the past, in particular as regards 
multi-annual commitments geared to long-term objec­
tives. 
Budgetary control is the crux of the Community's 
financial problem. Better management and tighter plan-
No C 356/46 Official Journal of the European Communities 31. 12. 87 
ning are therefore essential. Efficiency must of course 
take precedence and the impact of certain cut-backs 
Done at Brussels, 19 November 1987. 
1. Importance of the telecommunications sector 
Telecommunications play a fundamental and growing 
role at both Community and world level. The sector is 
important: 
1.1. In economic terms: according to the Com­
mission in 1985 world revenue from telecommuni­
cations services was almost ECU 300 billion, Com­
munity enterprises accounting for 62,5 billion. By 1986 
the world market for telecommunications equipment 
had reached ECU 90 billion, of which 17,5 billion was 
accounted for by the Community. Furthermore, the 
telecommunications sector has maintained its momen­
tum despite the unfavourable economic situation and 
spectacular growth is expected over the coming years: 
its present share of about 2% of Community gross 
domestic product (GDP) could rise to 7% by the end 
of the century. 
1.2. In social terms: the telecommunications sector 
provides several hundred thousand jobs in the Com­
munity and the Commission estimates that, via infor­
mation technology, more than 60% of Community 
employment may depend directly or indirectly on this 
sector by the end of the century. must be carefully assessed. Discipline is essential in 
both drafting and implementing the budget. 
The Chairman 
of the Economic and Social Committee 
Alfons MARGOT 
1.3. As a service which enables people to contact 
each other: here it should be borne in mind that telecom­
munications are a public service and play an important 
role in society. Any Community telecommunications 
policy should safeguard this public service role; its 
principal objective should be to ensure that all Com­
munity citizens have access to good, modern communi­
cations services at reasonable prices wherever they live 
and whatever their income (e.g. farming zones, remote 
areas, small islands). 
1.4. Over recent years the telecommunications sector 
has been in a state of constant change due to: 
— the fusion of telecommunications technology with 
information and audio-visual technology, 
— the speed of technological diversification, 
— the expanding range of new forms of access to 
sources of information, 
— the explosive growth in communications require­
ments, 
— the major importance of scale effects on the pro­
duction of equipment. Opinion on the communication by the Commission entitled 'Towards a dynamic European 
economy — Green Paper on the development of the common market for telecommunications 
services and equipment' 
(87/C 356/12) 
On 22 July 1987 the Commission decided to consult the Economic and Social Committee on 
the abovementioned communication. 
The Section for Transport and Communications, which was responsible for preparing the 
Committee's work on the subject, adopted its Opinion on 11 November 1987. The rapporteur 
was Mr Rouzier. 
At its 250th plenary session (meeting of 18 November 1987) the Economic and Social 
Committee adopted the following Opinion by a large majority, with 2 votes against and one 
abstention: