Experts seek to lift taboo on European budget

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While EU finance ministers squabble over European Commission demands that national governments must send their budgets to the EU executive for review before they are sent to national parliaments, MEPs and experts have drawn up strategic proposals to create the momentum for a political debate on the EU budget.

It is unthinkable not to discuss the European budget at a time when the European Council has commissioned a taskforce led by President Herman Van Rompuy to come up with a plan to strengthen economic governance in Europe, said Philippe Herzog, founding chairman of Paris-based think-tank Confrontations Europe, which hosted an event on the issue.

In 2007, the European Commission launched a budget review aimed at finding ways to better match financial resources to the strategic objectives of the Union. Despite a comprehensive consultation, the Commission has dragged its feet, postponing the publication of its proposal. The paper is now expected to come out before the end of the year.

The timing is unfortunate, however. With national budgets under pressure, there are powerful arguments against granting the Union the opportunity to raise its own resources, possibly through a European tax which could be drawn from VAT, emissions trading scheme revenue or a financial transactions tax.

"The European budget has a role to play in both structural and cyclical policymaking, but the Union needs its own resources through a tax for the EU," said Henrick Enderlein, director of Germany's Hertie School of Governance.

According to French centre-right MEP Alain Lamassoure, chairman of the European Parliament's budget committee, the creation of a new ad hoc tax – a European tax – will be necessary in the long run, but for the moment he categorically ruled it out. "No parliament is ready to accept it," he said.

Cutting spending the right way

Experts concur, however, that in a moment of economic crisis, spending cuts and consolidation of finances would be the right way to go.

It is inconceivable that in some areas, the EU's 27 national administrations are duplicating their activities when such action could be consolidated, carried out and financed by the European Union, argued centre-left MEP Göran Färm, a member of the Parliament's budget committee.

Färm complained about the waste of resources, for example in development aid, which sees huge administrations administer their own aid, when such funding could be channelled directly by the European Union.

Similar resource savings could be made with the European External Action Service, where member states could retain their diplomatic missions in key countries like the US and China, but resort to an EU embassy in less critical countries, like Botswana, he suggested.

Working more with national parliaments

To understand the implications of consolidating budgets and cutting spending, national parliaments need to be fully involved in the debate, said MEPs present at the event.

Lamassoure proposed holding a joint debate between the budget committees of all 27 national parliaments and the European Parliament on budgetary guidelines and the actual content of budgets (EURACTIV 02/06/10).

Currently, budgetary coordination is limited to reviewing balances and at meetings of ministers. According to a study commissioned by the European Parliament, the 10-year Lisbon Strategy – launched in 2000 – failed because its European targets relied on national funding and legislation, which did not refer to the achievement of EU objectives.

"We must link the national public debates with the European debate. That would involve the national parliaments, and require a systematic comparison of the contribution of each to the financing of common objectives," said Lamassoure, who is actively trying to set up a framework for parliamentary cooperation across Europe.

"Member states have their problems and want to reduce the European budget, but they keep giving the Union new tasks," added Färm, who stressed that the European Parliament should step up its game and demand that new tasks be matched with funding.

By involving more national parliaments, Brussels would be able to avoid running the risk of having to scrutinise national budgets in a top-down approach as proposed by the European Commission, pointed out the MEP.

In May, the EU executive proposed a set of rules to tighten the bloc's fiscal and economic policies and prevent future crises. Under the proposed system, EU countries would review each other's budgets before they are adopted at national level (EURACTIV 12/05/10).

No change to treaty

Granting the Union a system under which it gets its own finances would not require treaty change, said the MEPs.

"New own resources should be based on the present treaty," said Färm. "New taxes on financial transactions, for example, could be redirected to the EU by the member states and that does not require a change to the treaty."

During his confirmation hearing in the European Parliament, Budget Commissioner Janusz Lewandowski called for realism: "We cannot expect a significant increase in the European budget."

A lot of questions remain as to whether core EU spending should be renationalised, particularly the Common Agricultural Policy (CAP) and cohesion policy.

At the same time, finding the right resources to implement the 'Europe 2020' strategy may become an ordeal.

Jean-Paul Mingasson, a former director-general at the European Commission, said there should be a "Lisbonisation" of structural funds based on competitiveness critieria.

He also advocated for genuine discipline on co-financing, whereby projects would rely on both locked EU and national funding.

Arguing back, Professor Iain Begg from the London School of Economics said co-financing would be a desirable way forward as it was based on incentives and conditionality principles, but it would also risk national vetoes.

According to Begg, the EU needs a balanced mix between its own resources, based on citizens' direct contributions and funding from member states.

European Commission President José Manuel Barroso opened a 'no-taboos' debate on the EU's future spending priorities in a public consultation launched in 2007 (EURACTIV 13/09/07). 

The size, structure and priorities of the EU's annual spending - which amounted to €126.5 billion in 2007 - is governed by the Financial Perspectives (see EURACTIV LinksDossier), which were agreed after long and fierce discussions in 2006 and cover the period 2007-2013. 

At the same time, EU heads of state and government agreed to a review, to take place in 2008-2009, in order to evaluate the political priorities in the budget guidelines.

A draft was leaked last autumn and now it seems that a communication will come out by the end of the year (EURACTIV 26/10/09).

  • June 2010: European Parliament to set up special committee on post-2013 financial perspectives.
  • Autumn 2010: European Commission communication on budget review.

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