Friday

22nd Mar 2019

Opinion

Europe's budget stasis

  • The seven-year 'multi-annual framework' budget is the product of behind-closed-doors thinking in the Commission's HQ in the Berlaymont - it still has to get past national governments and the European Parliament (Photo: European Commission)

Contrary to what the bloc's critics say, the European Union is no colossus suffocating Europe's member states.

On an annual basis, its proposed budget for years 2021-2027 remains trivial: it will account for a little over 1.1 percent of the EU's overall national income. If there is a problem, it lies in how that money is going to be spent.

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The Brexit referendum of 2016, the protracted economic crisis in the eurozone, and the refugee wave of 2015 supposedly opened a period of deep reflection among European leaders about the bloc's future reforms.

But if the proposed multi-annual financial framework (MFF) unveiled on Wednesday is any indication, European institutions are committed first and foremost to the preservation of status quo.

For one, a solid two thirds of the budget are dedicated to "cohesion policy" and agricultural subsidies.

Although they are "moderately reduced" as the European Commission statement put it "to reflect the new reality" the two areas which have historically formed the bulk of the EU's spending are not going anywhere in the upcoming decade.

To be sure, the framework reflects the changing environment the EU finds itself in: strengthening the EU's digital capability, supporting economic reforms in member states, coping with migration challenges, and investing in common foreign and security policy.

But compared to the legacy spending areas, the new priorities are miniscule in size.

Less than three percent of the overall budget is going to be spent on migration and border control – and less than eight percent on research and innovation. Tackling climate change – touted as one of the bloc's key areas of focus – is being given 0.4 percent of the budget's overall resources.

Of course, the commission's proposal is now going to debated and scrutinised by member states, which need to agree on it unanimously, and by the European Parliament.

Many states treat the budget as a common-pool resource and like with past MFFs this exercise will likely strengthen those spending areas that yield political benefits to national governments.

The commission proposed that the "cohesion" spending – used predominantly used to fund public investment in poorer EU member states – is to be tied to a tighter scrutiny of rule of law.

"The new proposed tools would allow the Union to suspend, reduce or restrict access to EU funding in a manner proportionate to the nature, gravity and scope of the rule of law deficiencies," says the commission.

To be sure, the Polish and Hungarian governments already see this as a thinly veiled attack and can be expected to argue that the move is meant as revenge for the two countries' rejection of the commission's refugee relocation mechanism.

Whether or not they are right, the new rule is unlikely to bring dramatic change.

Although the proposed mechanism gives significant leeway to the commission to act, identifying a breach of the EU's founding values by a member state still requires unanimity of all other member states according to the treaties.

With more than just one potential troublemaker in the EU, the European Council is unlikely to ever reach such a decision.

But here's the worst part: the antiquated nature of the EU's budgeting.

Soviet-style central planning?

If Soviet-bloc countries followed five year plans, the EU abides by a seven-year MFF.

Of course, the bloc has its annual budgets but the framework sets the ceilings for large spending areas – agriculture, cohesion policy, research and innovation, and so forth.

So even if the commission is to be lauded for the focus on areas critical to Europe right now – migration, security, and the single market – it is worth bearing in mind that the proposed budget is one for the next decade which will surely bring about challenges no one can foresee.

The EU is not on the verge of collapse.

But the current respite from internal and external troubles is increasingly becoming a missed opportunity.

The proposed budgetary framework will do little to build resilience in the face of its future crises – and even less to turn Europe into a dynamic, formidable global power.

And that is something Europeans might come to regret in the not too distant future.

Dalibor Rohac is a research fellow at the American Enterprise Institute in Washington DC

Analysis

Hogan's carrot: reform to soften CAP cuts

The European Commission is dangling the prospect to farmers of being able to dodge financial cuts in the upcoming EU budget – but only if national governments agree to a mandatory redistribution of subsidies.

Commission launches seven-year budget 'bargaining'

While the European Commission's post-Brexit EU budget proposal for 2021-2027 calls for a less-than-expected increase in spending, prime ministers of net payer countries have already called the starting proposal "unacceptable".

Macron is confusing rigidity with strength

Jan Zahradil, EU Commission president Spitzenkandidat for the European Conservatives and Reformists Group, responds to Emmaneul Macron's European vision ahead of the May elections.

A compromise proposal for the Article 50 extension

At this week's summit, EU leaders should extend Article 50 until the May European elections. But they should postpone the effective date of the UK's withdrawal from EU rights, rules, and regulations for another year - to May 2020.

Catalan independence trial is widening Spain's divides

What is really needed is not the theatre of a rebellion trial, but a forensic examination of whether public funds were misused, and a process of dialogue and negotiation on how the Catalan peoples' right to self-determination can be satisfied.

Italy should capitalise on Brexit

Now that the UK is leaving, Italy can, and should, step up. It is the third largest country and economy in the EU. Spain and Poland follow, but they are significantly smaller economically and population-wise.

The Magnitsky Act - and its name

It is disappointing that so many MEPs in the Socialist and Green group caved in to Russian interests, in fear of challenging a plutocratic regime, by saying 'no' to naming the Magnitsky legislation by its rightful name: Magnitsky.

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