Wednesday, 24 October 2007

Reforming the EU budget?

In September the Commission of the European Communities launched a public consultation on reforming the EU budget. This review was a part of the decision on the financial framework (long term budget) 2007 to 2013. The Commission’s approach is one of openness and no taboos, says the Communication.

During this seven year period the yearly budget of the European Union is roughly one per cent of the combined gross national income of the member states: agreed payments 1.03 per cent and executed payments 0.98 per cent. In 2008, for a Union with more than 490 people, the commitment appropriations are 131,487 million euros and the payment appropriations 129,481 million euros.

If the advice of independent experts or enlightened citizens of the Union had been followed, three areas of activities would have received significantly more resources a long time ago:

1) EU as a global player, including external action and pre-accession support; presently 5.7 per cent of expenditure.
2) Internal affairs (area of freedom, security and justice as well as citizenship); 1.3 per cent of expenses.
3) Competitiveness (growth and employment); 8.6 per cent of expenditure.

The main part of the resources are allocated to agriculture (natural resources) to the tune of 43 per cent and cohesion (structural funds) with 35.6 per cent. Costs for administration are 5.8 per cent.


Expenditure and revenue of the European Union is based on the multiannual financial framework (presently for seven years). This long term budget was the result of acrimonious negotiations, including the threats of veto power, between the member states governments. National, not common, interests were the driving force.

Once again we witness that structural defects in decision making lead to suboptimal results. In this case, including the 2002 Council decision to safeguard agricultural spending, there is scant hope of significant reform before 2014.

Therefore, the annual budget exercises of the European Union (TEC 268-280) offer very little in the way of new priorities, even if the European Parliament may choose to amend the more marginal outlays defined as not compulsory.

In principle, the following long term budget offers an opportunity to reform, but is the European Union going to be able to seize its chance even then?

If the rules for decision making are not improved, there is little cause for optimism.

Ralf Grahn


Communication from the Commission: Reforming the Budget, Changing Europe; A public consultation paper in view of the 2008/2009 budget review; Brussels, 12.9.2007, SEC(2007) 1188 final

EU Budget – facts and myths; MEMO/07/350

A new Financial Framework for the enlarged Union (2007-2013);

Documents: Multiannual framework;

Mojmir Mrak & Vasja Rant: Financial Perspective 2007-2013: Domination of national interests; EU-Consent EU-Budget Working Paper No. 1; July 2007;

Interinstitutional agreement between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management; OJ 2006/C 139/01;

Deciding the budget;

Improving the budgetary procedure;

Filipa Figueira: The EU Budget – Is this the moment for reform? CEPS Commentary, 15 October 2007;

Europe’s political Economy: The EU budget review: challenges and opportunities; EPC 17 October 2007;