Parliaments debate closer budgetary coordination


The unprecedented crisis that has hit the euro zone calls for better budgetary coordination and national parliaments have a big role to play here, said MPs and MEPs meeting in Brussels to discuss greater synergies between European and national budgets.

Invited to an exchange of views with the European Parliament's budgets committee, members of national parliaments seemed open to working more closely with MEPs on budgetary discipline, as a way to prevent future crises and better match EU objectives with national budgets.

"The crisis has shown that countries participating in the same monetary zone must coordinate their monetary policies," said French MEP Alain Lamassoure, chairman of the European Parliament's budget committee.

But parliaments must be fully involved in these efforts, he added.

Last month, the European Commission proposed a new set of rules to tighten the bloc's fiscal and economic policies.

Under the proposal, presented on Wednesday (12 May), EU countries would review each others' draft annual budgets before they are adopted at national level. But the plan is seen by some member states as a breach of national sovereignty.

"We are all focused on our courtyard but if we want to use taxpayers' money effectively, we have much to gain by working together," said Lamassoure.

In an attempt to convince MPs, the budgets committee commissioned a study from Deloitte Consulting on creating greater synergies between the European and national budgets.

Different budgetary practices hamper coordination

Deloitte concludes that the overall synergy between strategic EU policy objectives and national budgetary policies is weak.

"Disconnections between budgetary procedures in the member states and those at EU level are put forward as a reason for the current lack of budget synergy," said Deloitte, stressing that issues such as the length and timing of budget cycles and the absence of an agreed Europe-wide standard budget complicate the search for synergies.

The accounting consultancy recommended aligning categories at national and EU budget levels. One idea would be to align current national and EU public expenditure with the so-called 'COFOG' standardisation code, so that the two become comparable.

Inappropriate tools caused Lisbon Strategy failure

According to Deloitte, another major structural problem is that only a modest proportion of recent EU budgets was allocated to activities that contributed to the realisation of EU overall goals, like the Lisbon Strategy.

At member state level, apart from some exceptions – mainly found in regional policy – national budgets also seldom refer to their contribution to achieving the objectives of the Lisbon or other EU strategies.

Although the report only focused on four member states (Belgium, France, Slovenia and Portugal), experts note that the same trends are likely to be found in other member states.

In theory, EU countries coordinate their policies through a wide range of mechanism such as networks, benchmarking practices, peer reviews, the Broad Economic Policy Guidelines and the so-called Open method of coordination.

But these are rarely put in practice because they depend on the willingness and goodwill of member states to cooperate, stresses the Deloitte report, adding that the lack of sanction mechanisms weakens the mechanism.

Europe 2020 vision faces budgetary hurdle

Both the Lisbon Treaty and the Europe 2020 strategy will be hampered by a lack of proper budgetary planning and discipline, said Sidonia J?drzejewska, the centre-right Polish MEP whose report on the budget for 2011 was adopted by the European Parliament on 25 March.

"Regrettably huge projects envisaged by the Treaty of Lisbon might be difficult to finance," she said, citing as an example the European External Action Service and the Europe 2020 strategy, especially the Youth on the Move project.

It is unclear, she noted, whether the long-tem strategy's flagship projects will be implemented in 2011 as the financial possibilities of the multi-annual budget (2007-2013) have been exhausted.

National parliaments ready to roll up their sleeves

"It is clear that we need to roll up our sleeves," said Klaus Hagemann of the German Bundestag's budget committee. But he failed to provide answers and just asked questions.

Lamassoure proposed to create a joint working method under which there would be a budget guidance debate, setting the same economic hypothesis on growth. That would oblige everyone to relate to common disciplinary rules, which would strengthen the Stability and Growth Pact.

"There will be no legal obligation," stressed Lamassoure, but the exchange of views will impact favourably on budgetary coordination and discipline, he said.

Massimo Garavagliavice-chair of the Italian Senate's budget committee, warned that the lack of synergy was due to lack of resources and different budgetary systems.

French MP Christophe Caresche stressed that to improve coordination, better communication would need to be put in place. He said that the Commission's proposal was not very well understood in France.

"I am not shocked by the proposal," he said, "but in my country it has been seen as an attack on national sovereignty".

Caresche said the French assembly would probably welcome a larger debate on budgetary coordination, which would help dissipate doubt in some countries.

EU finance ministers agreed on 9 May to establish a rescue mechanism worth around €750 billion to protect the euro from collapsing under the weight of debt accumulated in countries such as Greece, Spain or Portugal (EURACTIV 10/05/10).

The mechanism is to be complemented by proposals to reform the economic governance of the EU and the euro zone, in order to prevent similar crises in the future.

The European Commission presented the proposal on 12 May.

Meanwhile, the EU is still working on a major review of spending priorities. A draft leaked last October angered contributors like France, as spending shifted away from farm policy towards the EU's economic renewal, climate change and energy.

Subscribe to our newsletters