Italy, net contributor and great beneficiary of the EU

Italy gives more than what the Republic receives from Europe. This is the mantra of the two major leading political parties in Italy right now, the League and the Five Stars Movement (M5S). They keep repeating this statement in order to stress how Italy should be given respect by the other European partners. The leaders of the League and from the Movement believe that, because of this “deficit”, Italy should be allowed to freely promote all the economic policies the government would like putting on the table.

The European Commission is ready to open an infringement procedure against Italy because “Italy is prima facie not forecast to comply with the debt rule in 2019 and 2020″. It means public debt wont’ be reduced. On the opposite, it will further increase. The decision of declaring Italy “non compliant” fed once again the debate (and the struggle) on fiscal policy.

Let’s put aside the political debate on flexibility, stability and growth pact and so forth. Let’s focus instead on how true public declarations Italian politicians made are. Is it true that Italy gives more than what it receives? A first preliminary answer to this question is affirmative. Yes, in terms of money the Italian contribution to the functioning of the EU is bigger than the amount of resources the European Union makes available for the Italian Republic.

Italy is a “net contributor”

The European Union works thanks to the contribution of the Member States. All the 28 countries pay money for the EU budget and receive money back in the form of EU spending. In some cases this difference is positive, in other cases it is negative. In the first situation we have the so-called “net beneficiaries”, in the second situation we have the so-called “net contributors”. Italy is among the ten countries that belong to the second category, the one of “net contributors”.

Italy gives more than it gets back from the European Union, there is no doubt about that. After all, by definition, being a net contributor means to be “in deficit” member of the European Union. So, there is no scoop in the mantra used by the Italians leaders. Why Italy is net contributor? Because the principle behind this mechanism is based on the assumption that richest countries, because of their better condition, have to make more for the European integration.

Italy has nevertheless a privileged position in the share of the EU budget, since among the major Eurozone economies the Italian Peninsula is in pole position for EU money grants.

Structural funds, Italy a good client of the EU

For the current multi-annual financial framework (MFF 2014-2020) the European Union committed €461,117,013,415 in structural funds. With a total of €44,656,103,770 Italy is the second EU Member State for European contributions in the financing of policies and measures needed to boost competitiveness and reduce the gap between the north and the south of the country. Only Poland has received more.

It has to be underlined that in the 2007-2013 budget the EU allocations for Italy have been €27,957,849,976, the third biggest European overall disbursement after Poland and Spain. It means that for the current financial cycle Italy got €16,698,253,794 more than the previous seven years. In percentage, the Italian authorities have seen an increase of 59% in EU money. Nobody else experienced such a “boom”. Italy thus received a treatment of favor from Europe.

In this financial exercise the European Parliament played a role, of course. As already mentioned in this blog, among the powers of European Parliament there is the one of approving EU budget.

Single market = zero taxes on export

The national contribution to the EU budget is not the only index to measure costs and benefits of the EU membership. Being part of the European Union means to operate in a single market. All the 28 Member States can exchange goods and services without paying any tax. Import and export are duty free, and it helps economy and enterprises of all size, from the smallest to the biggest corporations.

According to the official data from the Italian Ministry of Economic Development, 15 out of the first 30 major trading partners of Italy are EU countries. That means that Italy doesn’t pay any tax to sell goods
abroad. It saves billions of euro every year, thanks to the single market and the freedom of movement on which the latter is lying. This is something Europe gives to Italy in return of being a member of the EU.

Assuming the non-existence of the EU and imagining an hypothetical tariff of 5% on export, in 2018 Italy should pay 11,9 billion euro in taxes order to sell its own “made in” to the 15 European countries today in the single market. Is it not a benefit?

Furthermore, among the non-EU member States there is Canada. Thanks to the free trade agreement stipulated between the European Union and the aforementioned North American state (CETA), 99% of custom duties have been eliminated. No bad for made in Italy, despite both the League and M5S consider CETA as a threat.

They see the risk of falsification of Italian food products, a risk for the national economy due to higher competition, and they see problems for customers’ health because of the alleged presence of GMOs and hormone meat coming from Canada. That’s why both M5S and the League voted against CETA. The majority of the Plenary voted in favor.

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