Despite strong public demand for increased involvement in the fields of education, research and infrastructure, these make up just one-third of Community spending as opposed to the more than 40% spent on agriculture - which is a declining sector, asserts the 3 April paper.
Furthermore, there are greater calls for more attention to be paid to the common foreign policy, defence, security, immigration and citizens' rights, yet budget allocations to these fields are 'negligible', says Gros.
Currently, the budget is a political game used by member states to redistribute money among themselves rather than to achieve common objectives, claims the author. As long as this 'perverse incentive' continues to be the case the budget structure will remain 'impervious to change', with no member state standing up for the general EU interest as the returns of doing so are minimal, he observes.
Gros believes one of the main stumbling blocks is the influence farmers unions have on their governments, adding it will take a brave politician to deny them favourable budgetary transfers received from the CAP. The current multi-year financial perspective (MYFP) is 'a repeat of the past', claims Gros - while any CAP reform is blocked until 2013 due to a 2002 Franco-German agreement.
Gros launches a scathing attack on the CAP, suggesting it does little to facilitate cohesion (as it is mainly rich farmers who benefit) and describing agricultural spending is a 'major distorting factor' for Europe's economy. Gros shows how three member states – Germany, Italy and France – receive approximately half of the CAP budget and thereby about a quarter of the overall EU budget.
If the CAP were to be seriously reformed it would also remove the UK rebate, which Gros argues introduced the principle of 'special treatment' for a member state. The rebate reinforces the view of the budget as a medium of inter-state transfers reflecting member states negotiating strength and not for the benefit of the Union as a whole, he argues.
The author suggests increasing the effectiveness of and spending more on research and development (R&D) in Europe, paricularly as this important growth factor was included in the Lisbon Agenda's emphasis on a 'knowledge society'.
The problems surrounding the latest MYFP show member states are more interested in ironing out net imbalances as they are less inclined to remain net contributors to the EU budget, believes Gros. Meanwhile, enlargement has created more problems as new members draw a greater share of funds from the budget at a time when net contributors want to decrease their input, says Gros - while beneficiaries of Structural Funds want to delay the reduction of funds received.
In comparing the CAP and Structural Funds' actual shares of the EU budget, Gros observes that CAP spending has been more above than below budget in the last 14 years, with Structural Funds receiving on average 8% less than the one-third earmarked for them. Gros therefore suggests a change to the tax regime: not necessarily creating a new tax, but rather "dedicating a share of VAT receipts to the EU budget".
Gros recommends synchronising the MYFP with European Parliamentary elections to make it a main theme in elections and increase voter interest.
He concludes that the re-branded Reform Treaty will only "impose legal clarity, but not much more," criticising the drafters of the treaty for not reforming the budget decision-making mechanism despite having the power to do so.
