Thursday, 25 October 2007

EU multiannual financial framework

The finances of the European Union are mostly presented according to the relevant treaty provisions on budgetary procedure or give an overview of spending categories. However, the importance of present and future parliamentary features concerning annual budgets is relative, since both resources and expenditure are firmly lodged with the member state governments. The key to this is the multiannual financial framework, a compelling budget for the mid term.

The governments of the member states are driven by their divergent national interests and have to reach a unanimous decision (liberum veto). The substantial result is less than satisfactory for the citizens of the Union. Reaching an outcome more satisfying to the common interest would require a reform of the decision making for the financial framework.

The next financial framework should be in place at the beginning of 2014, so the Reform Treaty should have entered into force by then. The new treaty includes a new chapter “The multiannual finanancial framework” (Article 270a).

Until now, these multiannual budgets have grown in practice (inter-institutional agreements), without treaty basis, but now this practice would be codified. Since the annual budgets shall comply with the multiannual framework, this is the decisive financial document of the European Union (as it is today).

Member state governments retain decision making and veto power:

The Council, acting in accordance with a special legislative procedure, shall adopt a regulation laying down the multiannual financial framework for a period of at least five years. (Five years would coincide with the mandates of the Commission and the European Parliament. The present financial framework encompasses seven years.) The Council shall act unanimously after obtaining the consent of the European Parliament, which shall be given by a majority of its component members (Article 270a, paragraph 1 and 2).

What if the European Parliament wanted to force the member state governments (the Council) to reform the budgets for the coming years by rejecting their financial framework?

Where no Council regulation determining a new financial framework has been adopted by the end of the previous financial framework, the ceilings and other provisions corresponding to the last year of that framework shall be extended until such time as that act is adopted (Article 270a, paragraph 4).

In other words, if the European Parliament does not take what it is offered, the following budgets are going to be built on priorities and expenditure levels fixed five or seven years earlier. This rule opens up possibilities for a member state government bent on sabotage, too. Thus, if no new financial framework is in place at the beginning of 2014, the budget then (and later) would reflect the political and negotiating positions of 2005 and 2006.

The “Lisbon Treaty” opens the door to an improved decision making process, although it is hard to believe that the governments would actually be mature enough to make use of this provision:

The European Council may, unanimously, adopt a decision authorising the Council to act by a qualified majority when adopting the regulation laying down the financial framework (Article 270a, paragraph 2).

The member states would still be in charge, but the chances for a somewhat more rational outcome would increase.

How many citizens of the European Union actually believe that 27 governments, unanimously, are going to be mature enough to let go of their veto power before 2014?

Ralf Grahn