Budget Bazaar

EU budgets are prepared for seven years ahead; a new one is due for the period 2021-2027 and a first draft has been issued by the European Commission as their proposed multi-annual financial framework (MFF).

EU budget futureEU budgets are prepared for seven years ahead; a new one is due for the period 2021-2027 and a first draft has been issued by the European Commission as their proposed multi-annual financial framework (MFF).

Two issues arise as budget negotiations get underway. First the budget, both the draft proposal and what will become the final version, are over-loaded with historical baggage, which the EU has no idea – and perhaps no will – to shed. A seven-year budget period is extraordinary; economics is not so refined that anyone can predict accurately, in 2018 or even 2021, how economic conditions will look as 2027 approaches.With the UK leaving the bloc the budget demands should reduce but the Commission’s proposals expect the 27 remaining member states to cough up more, to increase the total.

Brexit budget gap

The largest components of the EU budget are the Common Agricultural Policy (CAP) and the ‘cohesion funds’, which are subsidies for poorer regions. The Commission proposes to reduce these amounts, a little (we’ll see below how France and eastern EU countries have reacted). We note that with its usual talent for deception the EU includes CAP spending under “Sustainable growth: natural resources” and the cohesion funds under “Smart and inclusive growth” or sometimes “Economic, social and territorial cohesion” and even “Humanitarian aid”. The terms used vary with the propaganda purpose.

EU budget 2018

The CAP is clearly a sore spot, not to be mentioned in polite company.

Although much has changed (as surely should be expected) during the present budget period, proposed new priorities receive tiny allocations compared to legacy expenditure. For example, tackling climate change is a policy area that brings out the worst in EU self-promotion, yet the allocation to this area amounts to 0.4 percent of the overall budget proposal.

Budgets are political as well as economic structures and this proposal is no exception. The Commission intends to use the budget to punish states that flout its ‘values’, for example Poland and Hungary:

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.”

Hungary responseThis will come up against the requirement of EU treaties that such decisions must be unanimous; does even the Commission believe that any member will vote in favour of having its allocation reduced in this way? This is why, to increase its power over national governments, the EU wants to spread qualified majority voting (QMV) more widely, and so rule out self-interested national vetoes.

When it comes to important single market questions, I want decisions in the Council to be taken more often and more easily by qualified majority…” Jean-Claude Juncker.

EurozoneMuch more could be said about the opening shot in the forthcoming budget battle but we want to review a few of the responses made so far. We’ll leave the last word on this first part to the ever-supportive but not entirely uncritical EUObserver:

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.”

Digging inIn the second part of this post we’ll take a quick look at some unsurprising responses to the Commission’s proposal, which between them lay out the ground on which the battle will be fought, as usual.

Germany has made clear on many occasions its opposition to increasing the support that the better-off (i.e. northern) member states provide, in various forms, to the less-well-off (i.e. southern) economies. In a joint statement reacting to the Commission’s budget proposals Germany’s finance and foreign ministers, Heiko Mass and Olaf Scholz, said, “We are ready to take responsibility for strengthening the European Union – but this requires a fair burden-sharing of all member states.” Which is a polite way of saying, stuff your proposal.

Kristian JensenDanish finance minister, Kristian Jensen, takes a different line: “It is completely wrong that you want to increase the budget even though the number of member states falls from 28 to 27 … We’ll fight really hard to reduce the bill.”

Magdalena AnderssonThe Commission proposes that Sweden should increase its annual contribution. Their finance minister, Magdalena Andersson responded thus: “This is an unreasonable proposal. We cannot accept this.”

France was quite firm. Said its agriculture minister, Stephane Travert, “Such a drastic, massive and blind cut is simply unthinkable. It poses an unprecedented risk to farms’ viability by seriously impacting farmers’ incomes, for whom direct aid is an essential safety net. France cannot accept any decline in direct income for farmers.”

EU budget valuesAnd so on. Of course, all this can be dismissed as initial posturing and few doubt that a budget will emerge in the end, and will not be vetoed (or loved) by any party.

In the EU this is promoted as ‘multi-national solidarity’, although Jean-Claude Juncker expressed his reservations in a state of the Union speech:

I have witnessed several decades of EU integration … But never before have I seen such little common ground between our Member States. So few areas where they agree to work together.

Perhaps the main point of this post is to point up, again, the fragility of the Union and the extraordinary tension between the federal ambitions of the EU and its institutions and the national demands of its members. National governments have to take into account the expectations of their constituents; the EU has no such constituents to worry about. It is impossible to believe that such a project can survive for long, let alone become a super-power, as the dreamers wish.



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