A budget for the Eurozone?

On 16 February 2017 the European Parliament adopted three resolutions about the future of Europe.

Bresso and Brok

The report by Mercedes Bresso and Elmar Brok for the Committee on Constitutional Affairs (AFCO), procedure 2014/2249(INI), about exploiting the possibilities within the existing treaties, led to the European Parliament resolution of 16 February 2017 on improving the functioning of the European Union building on the potential of the Lisbon Treaty P8_TA-PROV(2017)0049, which I presented in Finnish here.   

Verhofstadt

The AFCO report buy Guy Verhofstadt, procedure 2014/2248(INI), about treaty reform for a democratic and capable European Union, led to the European Parliament resolution of 16 February 2017 on possible evolutions of and adjustments to the current institutional set-up of the European Union P8_TA-PROV(2017)0048, which I presented in Swedish here, with a follow-up blog entry here.  

Böge and Berès

Reimer Böge and Pervenche Berès prepared the report for the Committee on Budgets (BUDG) and the Committee on Economic Affairs (ECON). Under the procedure file number 2015/2344(INI) you can follow the hectic pace.

The joint report A8-0038/2017 was voted in committee and tabled for the plenary on Monday, debated in plenary Tuesday and adopted by the European Parliament Thursday (16 February).

 

The report contains an informative explanatory statement about background and recent positions (pages 8-18) and a second working document about academic contributions to the debate on budgetary capacity for the Eurozone, highlighting five aspects: (1) reasons for creating a common capacity, (2) functions of the fiscal capacity, (3) possible resources for financing the capacity, (4) challenges, conditions and obstacles, (5) governance (pages 19-29).

The Committee on Constitutional Affairs delivered an opinion on legal aspects (pages  34-36) and the Committee on Budgetary Control an opinion on the necessity to establish a budgetary and fiscal capacity within the eurozone as necessary to complete the Economic and Monetary Union (EMU)(pages 38-39).  

The minority opinion by three ECR members rejected the aim totally (page 33), but the proposal was not uncontested more widely: the committee vote being 54 for, 28 against, with 6 abstentions (pages 41-42).

Plenary debate

The three reports about the future of the EU were discussed in a joint plenary debate, where the rapporteur Reimer Böge argued for adoption:

Es geht darum, wegzukommen von einem Flickwerk, das wir in der Vergangenheit immer wieder erlebt haben, wenn eine Krise über uns hereinschwappte. Nach der Krise ist vor der Krise. Deswegen die Idee, ergänzend eine Fiskalkapazität zu entwickeln, für die Eurozone, aber genauso offen für die Nicht-Euroländer, mit klaren Vorgaben, was die Konditionen angeht, die Konditionalität. Mit klaren Vereinbarungen zur Finanzierung, auch im Hinblick auf die Frage, wie man Ländern, die durch Schocksituationen in Not gekommen sind, helfen kann, damit sie möglichst schnell aus diesem Strudel wieder herauskommen.

Ich glaube, das ist ein fairer und vernünftiger Ansatz, der das Instrumentarium, das wir heute haben, vernünftig ergänzen kann. Dazu gehört natürlich auch, dass der ESM in Richtung eines europäischen Währungsfonds weiterentwickelt wird. Die Berichterstatter der verschiedenen Berichte sind sich auch darüber einig, wie die Governance-Struktur in Zukunft dort auszusehen hat.

The co-rapporteur Perveche Berés added a few main points:

On ne peut pas à la fois critiquer la politique monétaire de la Banque centrale en disant qu’elle outrepasse ses pouvoirs et laisser les gouvernements sans moyens d’intervenir. On ne peut pas déplorer le bas niveau d’investissement, y compris dans des pays qui ne sont pas dits «de la périphérie», qui sont au cœur de la zone euro et penser que le plan Juncker peut suffire.

La question de l’investissement n’est pas suffisamment traitée au cœur de notre Union économique et monétaire. Alors, après beaucoup d’autres travaux, ce Parlement, pour la première fois, va se prononcer clairement pour un budget de la zone euro, autour de trois fonctions majeures. D’abord, le retour de la convergence. A-t-on assez en tête cette réalité que, au sein de la zone euro, les divergences depuis le déclenchement de la crise ont été plus importantes qu’en dehors de la zone euro? Ne serait-ce que parce que les mécanismes du pacte de stabilité ont miné les stabilisateurs automatiques au sein des pays de la zone euro. Sait-on qu’on a mis en place un mécanisme intergouvernemental – à améliorer – pour faire face aux chocs asymétriques, avec le mécanisme européen de stabilité qui est aujourd’hui totalement sous-employé et qui représente potentiellement un budget de 5 % du PIB des pays membres de la zone euro? Sait-on que nous ne disposons d’aucun outil au sein de la zone euro pour faire face à un choc asymétrique, une hausse brutale du prix du pétrole, une chute brutale du niveau d’investissement?

Nous sommes le seul espace monétaire intégré qui ne dispose pas d’outils. J’entends ici ou là beaucoup nous dire: «Mais il y a le pacte, et le pacte devrait être l’alpha et l’oméga de la gouvernance économique».

Mes chers collègues, soyons honnêtes entre nous. Cela fait 20 ans que le pacte de stabilité est là et cela fait 20 ans que nous voyons bien ses limites.

Ce que nous proposons avec ce budget de la zone euro, c’est simplement d’équiper les pays membres de la zone pour faire de leur monnaie ce qui leur a été promis au premier jour en permettant une convergence entre ces économies, en permettant de remettre en place des mécanismes d’ajustement aux chocs asymétriques.

 

Resolution P8_TA-PROV(2017)0050

European Parliament resolution of 16 February 2017 on budgetary capacity for the euro area P8_TA-PROV(2017)0050 was adopted after massive defeats for the alternative motions for resolutions by the ENF (Marine Le Pen et al) and EFDD  (Nigel Farage et al) groups and a few votes on details, by 304 votes against 255 (68 abstentions) (point 8).

The resolution recalls that various crises and global challenges require the euro area to make, as soon as possible, a qualitative leap in integration. At the level of principles the resolution reminds us that:

The transfer of sovereignty over monetary policy requires alternative adjustment mechanisms such as the implementation of growth-enhancing structural reforms, the single market, the Banking Union, the Capital Markets Union, to create a safer financial sector, and a fiscal capacity to cope with macroeconomic shocks and increase the competitiveness and stability of Member States’ economies, in order to make the euro area an optimal currency area.

Convergence, good governance and conditionality enforced through institutions being held democratically accountable at euro-area and/or national level are key, notably in preventing permanent transfers, moral hazard and unsustainable public risk sharing.

It lays down the aims of the Eurozone budget:

The fiscal capacity should fulfil three different functions:

– first, economic and social convergence within the euro area should be incentivised to foster structural reforms, modernise economies and improve the competitiveness of each Member State and the resilience of the euro area, thereby also contributing to Member States’ capacity to absorb asymmetric and symmetric shocks;

– second, differences in the business cycles of euro-area Member States stemming from structural differences or a general economic vulnerability create a need to address asymmetric shocks (situations whereby an economic event affects one economy more than another, for instance when demand collapses in one specific Member State and not in the others following an external shock beyond the influence of a Member State);

– third, symmetric shocks (situations whereby an economic event affects all the economies in the same way, for example variation in oil prices for euro-area countries) should be addressed to increase the resilience of the euro area as a whole.

After discussing these functions (pillars), as well as governance, democratic accountability and control, the European Parliament called on the European Council and the EU Commission to act swiftly and decisively in order to establish a budget for the Eurozone:

• the European Council to set guidelines, as described above, by no later than the EU meeting in Rome (March 2017), including a framework for the long-term sustainable stabilisation of the euro area;

• the Commission to come forward with a White Paper with an ambitious core chapter on the euro area and the respective legislative proposals in 2017 by using all means within the existing Treaties, including the convergence code, the euro-area budget and automatic stabilisers, and to set a precise timeframe for the implementation of these measures.  

The euro currency needs robust structures at the European level.

Ralf Grahn

Sharpening the axes: EU Council long term budget discussion

What did the discussion about the EU's long term budget offer the public?

Yesterday the General Affairs Council (GAC) publicly debated the long term budget (officially, the multiannual financial framework MFF), which is going to determine the EU's annual budgets 2014-2020.

The MFF is how the EU member states control income and expenditure, despite the much touted new powers of the European Parliament regarding the annual budgets. The EP can only accept or reject the MFF.

Yesterday, the ministers did not discuss the long term budget, but a ”negotiating box” covering four categories of expenditure (known as "headings"): heading 1 “Smart and inclusive growth” (except for cohesion policy and the Connecting Europe Facility), heading 3 “Security and citizenship”, heading 4 “Global Europe” (EU's external action) and heading 5 (administration).

In other words, it was not like the discussion of a house, but of an important section of the blueprint of the building.


Openness

The Council press people have written an article about the GAC meeting and tried to make the MFF negotiating process comprehensible. There are helpful links to web pages concerning the Multiannual Financial Framwork 2014-2020 (and further news, proposals and videos) and the outline of the negotiating box.

The discussion was webcast directly, and those who are interested can watch the recording as an example of Council debate. The recording also serves, if you want to know the main negotiating aims of one or more countries. You can also see the emerging front lines.

When the interventions of the chairman and Commissioners are added to each of the 27 EU member states (plus Croatia) making its main points in three minutes, this ”tour de table” or series of monologues took about two hours and a quarter.

There is also the 30 min video recording of the press conference with the Danish minister Nicolai Wammen, who chaired the meeting, and the commissioners Maroš Šefčovič (inter-institutional relations and administration) and Janusz Lewandowski (financial programming and budget).

Even if this was an 'early stages' discussion, the press conference offers some distilled information and intelligent questions from journalists.

It is not easy to summarise the diverging opinions of the member states, but perhaps for the first time the GAC conclusions look as if someone had made an effort (without naming and shaming individual countries):

3158th Council meeting General Affairs; Brussels, 26 March 2012 (document 8129/12)

Read the conclusions, if you want to know the bones of contention at a general level.


Improvements

The General Affairs Council has been been a real disappointment with regard to openness, governance standards and effectiveness during the first two years of the Lisbon Treaty.

It is therefore worth noting that the quality of advance information (although very late) and the conclusions has improved during the Danish presidency.

As in the case of the eurozone (Eurogroup, Euro Summit), the Council press service has enhanced the quality of presentation lately, although the opaque nature of these coteries remains.


Media

About ten countries want to squeeze the Commission proposals by some EUR100 billion. Here are some media reports.

Eight countries want to scrap the European Globalisation Adjustment Fund (EGF), which spends about EUR500 million annually, according to the Swedish EU minister Birgitta Ohlsson (Europaportalen.se). No financial transaction tax (FTT) for the EU coffers to reduce the national contributions, according to Ohlsson.

Ten countries asked for macroeconomic conditionality to be extended to all forms of EU expenditure, Europolitics reported in a good summary of the contents of the GAC discussion.

Ahead of the annual budget for 2013, the Commission tells the institutions to limit expenditure (EUobserver). While member states want to cut expenses for administration, the Commission counters with problems to recruit officials from the rich member states or from fields where the private sector offers more for top talent (EUobserver).



Ralf Grahn
speaker and lecturer on EU affairs

P.S. The multilingual Bloggingportal.eu already aggregates the posts from 948 Euroblogs. They represent an integral part of the emerging European online public sphere, discussion across national and linguistic borders. Regards-citoyens is a highly productive French blog, which mixes own articles and analysis with selected writings from other media and news from the EU institutions.

Among the Euroblogs on Bloggingportal.eu you find my current blog trio, Grahnlaw (recently ranked fourth among political blogs in Finland), the Nordic Grahnblawg (written in Swedish) and Eurooppaoikeus (meaning European Law, in Finnish). I write and speak about democracy and openness in the European Union, but increasingly about the crucial challenges of the global era for Europe: growth (EU2020) and the (digital) single market in the making.

The other social media where I am active: Twitter, Facebook ja Google+

Stingy EU 2012 budget: 0.98% of GNI

The Autumn 2011 European Economic Forecast from the Commission offers sobering reading about dashed hopes and danger zone entry, but let me pick just a detail. The predicted inflation rate is 3.0 per cent this year and 2.0 per cent in 2012 (against the background of GDP growth for EU-27 of 1.6 and 0.6 per cent respectively).

As we saw, for the German chancellor Angela Merkel and the UK prime minister David Cameron the inflation rate was the limit of the growth of the budget of the European Union for 2012. Both Germany and Britain are off target with regard to the EU stability and growth pact.

The inflation rate was also the focus of the press release from the Council ahead of the Conciliation Committee with the European Parliament.

Since the early hours of Saturday morning we have the outline of the 2012 budget after conciliation, where the member states and especially the net payers railroaded the more active ambitions of the European Commission and the European Parliament:

3126th Council meeting Economic and Financial Affairs (BUDGET) and Conciliation Committee; Brussels, 18 November 2011 (provisional vision, 17016/11)

The end result in a nutshell focuses on concrete expenditure (actual payments):

The Council and the European Parliament, meeting within the Conciliation Committee, agreed to limit the total amount of payments for the 2012 EU budget to EUR 129.088 billion. This corresponds to 0.98% of the EU's Gross National Income (GNI) and represents an increase of 1.86% compared to the EU budget 2011 as amended by amending budget Nos 1-6. The agreed payments increase remains below the latest Commission inflation forecast of 2% for the EU in 2012, meaning that in real terms the agreement is tantamount to a reduction of the EU budget. The EU herewith rally to the important member states' efforts to consolidate national public finances.

The Commission and the EP had requested more on grounds of fighting the economic crisis by active means:

In its position adopted on 26 October the European Parliament requested an amount of EUR 133.139 billion in payments (+5.23% compared to the budget 2011 as amended by amending budget No 1). The Commission proposed for 2012 an amount of EUR 132.739 billion in payments, leading to an increase of 4.9%.

The Council is expected to formally adopt the 2012 budget on 30 November and the European Parliament to vote on 1 December 2011.

You find details of different budget posts in the conclusions and you can watch the video recording (25:38) of the press conference with Jacek Dominik (Polish presidency), budget commissioner Janusz Lewandowski, Alain Lamassoure (EP) and Francesca Balzani (EP).

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Accounting for less than one per cent of total production, hardly the budget of a super state, with total government spending at more than 50 per cent of GDP in the European Union.



Ralf Grahn

Finland: budget disciplinarian seeing red

In the world of intergovernmental EU economic and eurozone politics, Finland is seen as one of the disciplinarian hawks alongside Germany, Austria and the Netherlands.

However, the return path to sustainable public finances is slow and difficult.

Yesterday evening, the Finnish ”six-pack” government agreed on its budget proposal for next year, after only a day of cross-party talks.

The 2012 budget of Finland promises to be EUR 7.1 billion in the red, which is 13.6 per cent of total central government expenditure amounting to EUR 52.3 billion.

The government points out that the projected 2011 central government deficit is EUR 8.2 billion, so the deficit decreases by more than a billion in absolute terms in 2012. The improved balance is based on expenditure cuts as well as increased revenue through economic growth and higher taxes.

The government plans to shrink the deficit at a measured pace until the end of the electoral period, both in absolute terms and relative to GDP.

Next year the government debt of AAA-rated Finland will grow to EUR 89 billion, but about 44 per cent of GDP is still unusually low in the European Union and the eurozone.

Source:

Ministry of Finance (Finland), press release 14 September 2011: Government budget proposal for 2012, key figures in the spending limits decision and Finland's economic outlook



Ralf Grahn

EU: Convergence programme and budget cuts United Kingdom

Britain’s prime minister David Cameron is a busy man. He met Herman Van Rompuy, a man the politically illiterate crew in Downing Street brand as the “EU President”, when in fact he is the president of the European Council (without a vote). They also refer to the “EU Council”, when they clearly mean the upcoming meeting of the European Council 17 June 2010, where Cameron sits together with the other heads of state or government from the EU member states. (Luckily, the press release was short; only two obvious misnomers.)



Today, Cameron also spoke on the economy, preparing the ground for budget cuts:

This year – at least according to the previous government’s forecasts – [the budget deficit] is set to be over 11 per cent of GDP. Today, our national debt stands at £770 billion.

Within just five years it is set to nearly double, to £1.4 trillion.

The cuts will be specified in an emergency budget in two weeks.

Cameron referred to the G20 meeting as an endorsement for the UK plans, but references to the European Union were mostly confined to the terrifying example of Greece.



Convergence report

Despite the UK’s soloist streak, it is a member of the European Union. The Commission monitors Britain’s economy and the Council issues opinions, as for other member states. The latest opinion of the Council of the European Union has been published in the Official Journal of the European Union (OJEU):



COUNCIL OPINION on the updated convergence programme of the United Kingdom, 2009/2010-2014/2015: published OJEU 4.6.2010 C 146/18



Economic situation


On 26 April 2010 the EU Council examined the updated convergence programme of the United Kingdom, which covers the period 2009/2010 to 2014/2015. The Council began its assessment with a brief description of the economic situation:

The economic and financial crisis, which began in 2007 after several years of strong growth, saw UK economic output fall cumulatively by around 6 %, with modest recovery starting to appear in the final quarter of 2009. The crisis was preceded and partly aggravated by a period of progressive increases in leverage of the household and financial sectors, such that a dependence on net capital inflows was large and persistent. In response to the unfolding crisis, the Bank of England responded with an aggressive programme of interest rate reductions, liquidity support for the banking sector and, from March 2009, quantitative easing. The government also intervened extensively to stabilise the financial system, including by major equity injections, deposit guarantees and the provision of liability insurance. In line with the EERP [European Economic Recovery Plan], the government implemented a sizeable fiscal stimulus, which in combination with the operation of automatic stabilisers and the effects on revenue of falls in asset prices contributed to a major deterioration in public finances. The weakening of the sustainability of UK public finances was aggravated by the fact that the primary balance was already in substantial structural deficit in the period leading up to the crisis, leading to the general government headline deficit soon going well above the 3 % of GDP reference value as the crisis unfolded. Accordingly, the United Kingdom was made subject to an excessive deficit procedure on 8 July 2008 and on 2 December 2009 the Council issued the latest recommendations in accordance with Article 126(7) of the Treaty on the Functioning of the European Union (TFEU) to correct the deficit by 2014/2015. The main challenges for the UK economy over the next years are to stabilise the public finances in the context of ongoing efforts by the household sector to reduce outstanding gearing; to achieve adequate levels of credit provision from a still fragile financial system, with many credit providers having reduced their lending capacity; and to underpin a shift of production towards greater tradeable output so as to permanently improve its external balance.

Council recommendation

After a detailed discussion, and in the light of the recommendation under Article 126(7) TFEU of 2 December 2009, the Council of the European Union invited the United Kingdom to:

(i) avoid any further measures contributing to the deterioration of public finances in 2010/2011 and in the event of weaker economic growth than foreseen in the programme contain the government deficit in 2010/2011 to at most that forecast in the January 2010 programme in case risks related to the fact that the macroeconomic scenario of the programme is more favourable than the scenario underpinning the Article 126(7) recommendation materialise;

(ii) target a more ambitious reduction of the government deficit to less than the 3 % of GDP Treaty reference value by 2014/2015 at the latest, including by strengthening the planned pace of fiscal effort from 2011/2012 onwards in line with the Council recommendation under Article 126(7), and seize any further opportunities, including from better-than-expected economic and market conditions, to accelerate the reduction of the gross debt ratio towards the 60 % of GDP reference value, thereby also improving the long-term sustainability of public finances;

(iii) publish in 2010 the detailed departmental spending limits underlying the overall expenditure projections for at least the three-year period beyond 2010/2011;

(iv) implement the expenditure efficiency savings identified in the Operational Efficiency Programme (OEP) and in other value for money initiatives.

The United Kingdom is also invited to improve compliance with the data requirements of the code of conduct.

The United Kingdom is also invited to submit in time for the assessment of the effective action under the Excessive Deficit Procedure an addendum to the programme to report on progress made in the implementation of the Council recommendation under Article 126(7) of 2 December 2009 and to outline in some detail the consolidation strategy that will be necessary to progress towards the correction of the excessive deficit. The Council reiterates its invitation that all subsequent updates should also provide a chapter with this information as long as a Member State remains subject to an excessive deficit procedure.

The gloomy prospects prime minister David Cameron referred to today can hardly have come as a surprise, after the new coalition government took office. The 26 April 2010 assessments by the Council and its recommendations to the member states were public knowledge, although it took the EU more than a month to publish them in the OJEU.

Until the promised budget cuts take effect, the UK’s government borrowing pace is breath-taking. Luckily, the sky-rocketing debt level was fairly low before the financial and economic crisis.



The latest UK House of Commons Library research paper (10/39) Economic Indicators June 2010 contains valuable information about the real economy, finance and UK public finances.



Convergence reports 2010


Because of their opt-outs, Denmark and the United Kingdom are the two loners among the EU’s non-euro member states. Therefore, they are not examined in the convergence reports 2010.

Still, for a European perspective and comparison with the nine other EU member states still outside the euro area, you can study the convergence reports published by the European Central Bank and the European Commission:



European Central Bank: Convergence Report May 2010 (273 pages)



European Commission: Convergence Report 2010 (Prepared in accordance with Article 140(1) of the Treaty); Brussels, 12.5.2010 COM(2010) 238 final (30 pages)



Commission staff working document accompanying the Convergence Report 2010; Brussels, 12.5.2010 SEC(2010) 598 final (197 pages)



Naturally, Britain takes part in the Ecofin Council (and other Council configurations), but it does not participate in the unofficial Euro Group, which met today in Luxembourg.




Ralf Grahn

Expensive President of the European Council?

Dignitaries are expensive, as we all know. Open Europe quotes the Belgian daily De Netto with regard to the president of the European Council.




Open Europe press summary 19 November 2009: New EU President to cost taxpayers €6 million a year

Belgian daily De Netto reports that, according to a document from the European Council, the new EU President will earn €350,000 a year, taxed at 25 percent, and will have a staff of 22 press officers, assistants and administrators, in addition to 10 security agents. The paper notes that this is double the current salary of the Belgian Prime Minister Herman Van Rompuy, who is the current frontrunner for the post. It also notes that it is significantly more than US President Barack Obama’s salary, which is around $400,000 a year or €269,000. The total cost of the President and his team will be €6 million a year.

Compare €6m



BBC News: Cost of Royal Family rises £1.5m (29 June 2009):

The total cost to the public of keeping the monarchy increased by £1.5m to £41.5m in the 2008/9 financial year.

-----

The £41m total does not include security provided by the police and Army or the ceremonial duties performed by the Armed Forces.

The cost of Royal travel, which is also paid by the taxpayer, increased by £300,000 from £6.2m to £6.5m.

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Who elected them?



Ralf Grahn



P.S. Do you find EUSSR myths fascinating? Are we EU citizens worth a better European Union? Read the Euroblogs aggregated on multilingual Bloggingportal.eu, and discuss our common European future.

European Parliament: Financial report 2008

The European Parliament has published its report on its budgetary and financial management during financial year 2008. It outlines the financial situation and the events which have had a significant influence on activities during the year (in parts I and II)and gives a synthetic account of the achievement of the objectivesfor the year (in part III).


Source:

European Parliament: Report on budgetary and financial management Section I of the EU budget, Financial year 2008, published in the Official Journal of the European Union (OJEU) 5.6.2009 C 127/1.



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Parliamentary scrutiny is fine, but even parliaments need watching.

The Report contains a lot of factual information about an important but expensive institution, which is about to start a new five year term, hopefully reform-minded with regard to its internal affairs and active in its work for EU citizens and businesses in legislative and budgetary matters.


Ralf Grahn

European elections: Libertas saving our money?

Someone might see an ironic contradiction in the two announcements we see today on the web pages of Libertas.eu:



1) The European elections begin in some 28 days.
2) Policies: The Libertas programme for a better Europe will be published on this site in the coming weeks.

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Waiting for Godot, we turn to what Libertas has on offer regarding the future of Europe and the next five years of legislative work in the European Parliament.

The third core principle of Libertas is:

“Save money: €10 billion in savings to be identified by the Commission in the next financial year.”

Sounds great, doesn’t it? At least until you take a closer look. Let’s do that.


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Long term budget

The European Union lives by the multiannual financial framework essentially set by the heads of state or government of the member states, currently from 2007 to 2013, although formalised by an agreement between the institutions.

Income and expenditure hover around 1 per cent of gross national income (GNI) annually, far from a federal budget of proportions.


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Annual budget

The framework is the basis for the expectations of the EU member states and for recipients of EU funds until the end of 2013.

The annual budgets are prepared within this framework by the Commission, and approved by the Council and the Euroepan Parliament.

Based on the existing framework and legitimate expectations, the Commission presented its preliminary draft budget for 2010 on 29 April 2009.

Mainly within the framework constraints, but with new measures towards an economic recovery, the proposed sum total of expenditure grows to € 139 billion. This translates into about 284 euros per EU resident.

How does a radical proposal for savings fit the economic circumstances and the timetable?

Even if the final vote on the budget takes place in December, the financial framework is in place until the end of 2013, and the European Council has given green light to certain recovery measures.

The budget exercise for 2010 is well under way. The Commission will take the opinions of the Council and the European Parliament into account before its final proposal. The Council and the EP will then fix their positions, before having to reconcile their views before final approval.

Nothing tells me that any of these institutions is going to veer off course to heed calls for unspecified budget cuts.

Libertas’ “core principle” is a figment of their imagination, meant to be swallowed by uninformed voters.


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Who is responsible?

We have to admit that calls for profound change, including budget reform, can be justified even if they have no immediate chance of success. Every reform starts from modest beginnings until it gains acceptance.

What makes Libertas’ call hypocritical and cowardly is that they don’t even try to tell us where to cut. The savings should be identified by the Commission, without Libertas taking any responsibility.

In the realm of sanctimonious bluster, this is worth an Oscar.

The draft budget contains € 59 billion spending on agriculture and € 49.4 billion on structural funds. This is about 78 per cent of the total budget, and it is mainly spent in the member states.

Does Lisbertas want to cut back our dependence on subsidy-driven farming? Do they want to terminate “cohesion” funding in rich member states, or deprive the new member states of their structural funds?

Surely, a new political party with a “pan-European vision” knows where to save and has the guts to tell us(?)


The rest of the proposed budget (about 21.8 per cent) is shared between competitiveness, citizenship, freedom, security and justice, external action and administrative expenditure.

Even if the sums are minor in comparison, we need to be told about possible savings.


Ralf Grahn


P.S. A few observations outside the theme of this post: Libertas has introduced a certain professionalism and dynamic in its campaigning techniques during these last days. They contact people through e-mails and social media. Today there are several additional posts on their central web pages. Behind language barriers activists in different member states seem to be free to concoct wildly diverging messages without much outside notice.

In terms of (inter)active campaigning, the competition is still in the starting blocks. Despite the fact that the policies we have looked at this far have been shown to be populist rubbish, the established Europarties ignore Libertas at their peril.

European Parliament: Facilities and funding for political groups

The political groups of the European Parliament are provided with a secretariat and facilities and they receive money from the EP’s budget. Members outside the political groups (non-attached MEPs) are provided with a secretaritat and appropriations, according to the Rules of Procedure (16th edition, October 2008):

Rule 30 Activities and legal situation of the political groups

1. The political groups shall carry out their duties as part of the activities of the Union, including the tasks allocated to them by the Rules of Procedure. The political groups shall be provided with a secretariat on the basis of the establishment plan of the Secretariat, administrative facilities and the appropriations entered for that purpose in Parliament's budget.

2. The Bureau shall lay down the rules relating to the provision, implementation and monitoring of those facilities and appropriations, as well as to the related delegations of budget implementation powers.

3. Those rules shall determine the administrative and financial consequences in the event of the dissolution of a political group.


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Non-attached members

Non-attached members receive funding for a secretariat:


Rule 31 Non-attached Members

1. Members who do not belong to a political group shall be provided with a secretariat. The detailed arrangements shall be laid down by the Bureau on a proposal from the Secretary-General.

2. The Bureau shall also determine the status and parliamentary rights of such Members.

3. The Bureau shall also lay down the rules relating to the provision, implementation and auditing of appropriations entered in Parliament's budget to cover secretarial expenses and administrative facilities of non-attached Members.


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Expenditure

The direct funding to the political groups and non-attached MEPs for their secretariats is 52,690,000 euros in the EP’s 2009 budget. This is about 70,160 euros per MEP (using 751 MEPs as an average).

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Allocation of funds

Bureau’s rules and decisions

The rules are laid down and the implementing decisions taken by the Bureau, but the European Parliament does not provide accessible and systematic information about the decisions by the all-important Bureau (or other political bodies).

Since the information exists and is communicated in-house, this lack of information to the public is easy to remedy, if the will is there. Is it?


Ralf Grahn

European Parliament: Price tag 2009

At roughly two million euros per member, multilingual trans-national democracy does not come cheap.

The EU 2009 budget the appropriations for the European Parliament add up to 1,529,970,930 euros. A budget has to be forward-looking, so when doing your own calculations be gracious enough to divide the sum by the 751 MEPs who would be elected under the Treaty of Lisbon (instead of 736 under the modified Nice Treaty). On the other hand, during the first half of this year the number of MEPs is 785, so the Lisbon number is an average of sorts.

Details are presented in the 2009 budget of the European Union (Volume 2; Section 1 European Parliament), available here:

http://eur-lex.europa.eu/budget/data/LBL2009_VOL2/EN/Vol2.pdf

The following rounded figures give an indication of the different costs for the casual reader:

MEPs and staff 810 million

Buildings, furniture and equipment 294 million

General functions 133 million

Special functions 256 million

Other expenditure 37 million

***

The price tag of representative democracy is easy to fix; output or value for money much harder.


Ralf Grahn

EU Law: Political parties at European level

Europarties, officially political parties at European level, are seen as a means to forming a European awareness and to expressing the political will of the EU citizens.

The existing treaty offers a legal base for rules on the Europarties and their funding.

We describe what the Treaty of Lisbon proposes before looking at some of the secondary legislation concerning European political parties and the funding newcomers, the European political foundations.

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Current treaty

Article 191 of the Treaty establishing the European Community (TEC) lays down the basic principles governing political parties at European level.

According to the first subparagraph the Europarties are seen as a factor for EU integration.

Regulations concerning (the status of) European parties and their funding can be issued by co-decision (OJEU 29.12.2006 C 321 E/132): .


Article 191 TEC

Political parties at European level are important as a factor for integration within the Union. They contribute to forming a European awareness and to expressing the political will of the citizens of the Union.

The Council, acting in accordance with the procedure referred to in Article 251, shall lay down the regulations governing political parties at European level and in particular the rules regarding their funding.


***

Original Lisbon Treaty

Article 1, point 12 of the original Treaty of Lisbon replaced the existing Article 8 of the Treaty on European Union (TEU) by four Articles, 8 to 8c. Of these Article 8a(4) contained words on forming European political awareness and on the expression of the will of EU citizens (OJEU 17.12.2007 C 306/15):

4. Political parties at European level contribute to forming European political awareness and to expressing the will of citizens of the Union.


*

Article 2, point 180 ‘deleted’ the first paragraph of Article 191 TEC. As we saw, its slimmed resemblance had appeared in the new Article 8a(4) TEU (ToL). Then came some amendments to the wording of the second subparagraph (OJEU page 101):

180) In Article 191, the first paragraph shall be deleted. In the second paragraph, the words ‘, by
means of regulations,’ shall be inserted before ‘shall lay down’ and the words ‘referred to
in Article 8 A(4) of the Treaty on European Union’ shall be inserted after ‘at European level’.


***

Consolidated Lisbon Treaty

The basic provisions on representative democracy and the Europarties have been renumbered in the consolidated version of the Lisbon Treaty.

First Article 10 of the amended Treaty on European Union, in Title II Provisions on democratic principles (OJEU 9.5.2008 C 115/20), with the political parties mentioned in paragraph 4:


Article 10 TEU

1. The functioning of the Union shall be founded on representative democracy.

2. Citizens are directly represented at Union level in the European Parliament.

Member States are represented in the European Council by their Heads of State or Government and in the Council by their governments, themselves democratically accountable either to their national Parliaments, or to their citizens.

3. Every citizen shall have the right to participate in the democratic life of the Union. Decisions shall be taken as openly and as closely as possible to the citizen.

4. Political parties at European level contribute to forming European political awareness and to expressing the will of citizens of the Union.



*

Article 224 of the Treaty on the Functioning of the European Union (TFEU) took over the substance of the second subparagraph of Article 191 TEC, with the minor amendments seen above (OJEU page 149):


Article 224 TFEU
(ex Article 191, second subparagraph, TEC)

The European Parliament and the Council, acting in accordance with the ordinary legislative procedure, by means of regulations, shall lay down the regulations governing political parties at European level referred to in Article 10(4) of the Treaty on European Union and in particular the rules regarding their funding.


***

Secondary legislation


Statute for a European political party

There are existing statutes for European companies (SE) and European co-operatives as well as proposals for European associations and European mutuals, but there is no enactment on truly European political parties.


***

Funding for Europarties


It took a long time before the European Parliament and the Council were able to agree on European level political parties. The result was Regulation (EC) No 2004/2003 of the European Parliament and of the Council of 4 November 2003 on the regulations governing political parties at European level and the rules regarding their funding (OJEU 15.11.2003 L 297/1), since amended by Regulation No 1524/2007 (OJEU 27.12.2007 L 343/5).

The consolidated version (of 27 December 2007) of Regulation 2004/2003 is available here:

http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CONSLEG:2003R2004:20071227:EN:PDF



If no true category of European political party is created, the Regulation lays down certain criteria for the parties eligible for funding from the European Union. Cf. Article 1:

Article 1
Subject matter and scope

This Regulation establishes rules on the regulations governing political parties at European level and rules regarding their funding.


***

Europarty defined

Article 2 defines a political party at European level eligible for funding from the budget of the European Union:

Article 2
Definitions

For the purposes of this Regulation:

1. ‘political party’ means an association of citizens:

— which pursues political objectives, and

— which is either recognised by, or established in accordance with, the legal order of at least one Member State;

2. ‘alliance of political parties’ means structured cooperation between at least two political parties;

3. ‘political party at European level’ means a political party or an alliance of political parties which satisfies the conditions referred to in Article 3;
-----


***

As we see, both a political party and an alliance of political parties can fulfil the criteria.


***

Conditions for EU funding

Article 3(1) of Regulation 2004/2003 lays down the conditions for funding from the EU budget. Respect for the founding principles of the European Union is required and it must at least have the intention to participate in the European elections.

In addition the Europarty has to be represented by elected politicians in the EP or in national or regional parliaments in at least a quarter of the member states (meaning at least 7). Alternatively at least 3 % of the votes in the EP elections in seven member states qualify:


Article 3
Conditions

A political party at European level shall satisfy the following conditions:

(a) it must have legal personality in the Member State in which its seat is located;

(b) it must be represented, in at least one quarter of Member States, by Members of the European Parliament or in the national Parliaments or regional Parliaments or in the regional assemblies, or it must have received, in at least one quarter of the Member States, at least three per cent of the votes cast in each of those Member States at the most recent European Parliament elections;

(c) it must observe, in particular in its programme and in its activities, the principles on which the European Union is founded, namely the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law;

(d) it must have participated in elections to the European Parliament, or have expressed the intention to do so.
-----


***

There are more detailed provisions on applying for funds, verification of the conditions, obligations linked to funding etc.


***

Implementing decision

The implementing procedures have been laid down in a Decision by the EP Bureau. The first Decision (published OJEU 2004 C 155/1) seems to have been replaced by the Decision below.


The Decision of the Bureau of the European Parliament of 29 March 2004 laying down the procedures for implementing Regulation (EC) No 2004/2003 of the European Parliament and of the Council on the regulations governing political parties at European level and the rules regarding their funding, has been published as amended by the bureau Decision 1 February 2006 in OJEU 28.6.2006 C 150/9.

The Decision contains detailed provisions including application forms.

It is worth notice that the conditions have to be met prior to 15 November the preceding year.


***


Eurofoundations




The amended Article 2(4) of Regulation 2004/2003 introduced the definitions concerning a political foundation at European level. These show that only foundations affiliated to the Europarties are eligible:


4. ‘political foundation at European level’ means an entity or network of entities which has legal personality in a Member State, is affiliated with a political party at European level, and which through its activities, within the aims and fundamental values pursued by the European Union, underpins and complements the objectives of the political party at European level by performing, in particular, the following tasks:

— observing, analysing and contributing to the debate on European public policy issues and on the process of European integration,

— developing activities linked to European public policy issues, such as organising and supporting seminars, training, conferences and studies on such issues between relevant stakeholders, including youth organisations and other representatives of civil society,

— developing cooperation with entities of the same kind in order to promote democracy,

— serving as a framework for national political foundations, academics, and other relevant actors to work together at European level;

-----


***

Funding conditions for Eurofoundations

According to Article 3(2) of Regulation 2004/2003 the Eurofoundation has to fulfil the following criteria:

2. A political foundation at European level shall satisfy the following conditions:

(a) it must be affiliated with one of the political parties at European level recognised in accordance with paragraph 1, as certified by that party;

(b) it must have legal personality in the Member State in which its seat is located. This legal personality shall be separate from that of the political party at European level with which the foundation is affiliated;

(c) it must observe, in particular in its programme and in its activities, the principles on which the European Union is founded, namely the principles of liberty, democracy, respect for human rights and fundamental freedoms, and the rule of law;

(d) it shall not promote profit goals;

(e) its governing body shall have a geographically balanced composition.


***

Expenditure

Under the European Parliament in the European Union budget for 2009 there are the following appropriations:

Article 402 contains EUR 10.858 million for European political parties and Article 403 allows contributions to European political foundations worth 7.0 million.



Ralf Grahn

Challenges require EU reforms

When the British Foreign Secretary David Miliband spoke at the College of Europe, in Bruges, he mentioned challenges the nation-states are too small and global governance too weak to deal with. The defining challenges of the 21st century are global in scope, not national.

According to Miliband, the insecurities and threats of 2030 are clear. A Europe at war not within its borders, but struggling to cope with forces beyond its borders. Global capital, people and goods with whom it has not made peace. Religious extremism and division on its doorstep. Energy insecurity and climate change which threatens our security as well as our prosperity. Conflict and instability in regions where we have economic as well as moral interests.

***

In spite of Miliband’s repeated assurances that the European Union will never be a superstate or even a superpower, his vision of the challenges leads to the logical conclusion that there is a need for the EU to review its objectives and means completely: strategies, institutions, resources and policies.

James Rogers, on his blog Global Power Europe, commented on this lack of logical follow-through. Both soft and hard power is needed.

I am going to look at the challenges Miliband mentioned with a view to the future priorities of the European Union.

External security is the fundamental common good, but the individual member states of the European Union are not going to be able to achieve it on their own. The time is ripe for the EU member states to forge an effective foreign, security and defence policy, leading to a common defence. It is necessary that the EU and NATO put their turf wars behind them and reach a fruitful division of labour, encompassing a working Transatlantic relationship.

Soft power has great scope for further action concerning EU enlargement, neighbourhood policy, open and fair trade rules, development assistance and humanitarian action. European values such as democracy, human rights and the rule of law are among our best potential exports for a better world.

Climate change and energy security require both a coherent foreign policy and a functioning internal market.

Internal security includes the control of our external borders and action to prevent terrorism, organised crime and illegal immigration. We need common rules for legal immigration of qualified workers and the treatment of asylum seekers.

Economic growth and new jobs require action to enhance European competitiveness. Globalisation offers many possibilities for the willing and, despite temporary relief, many pitfalls for the protectionists unwilling to reform.

Solidarity towards the new member states has to find adequate expressions, which better create real European common goods than the present agricultural and cohesion spending, which should be phased out.

These strategic political priorities should lay the ground for continued institutional reforms: effective decision making and democratic accountability.

These strategic priorities should be the foundation for the necessary reforms of the next long term budgets of the European Union.


Ralf Grahn


Sources:

David Miliband: Europe 2030: Model power not superpower; Bruges, 15 November 2007; http://www.fco.gov.uk

James Rogers: David Miliband says ’no’ to a European superpower; Global Power Europe, 16 November 2007; http://www.globalpowereurope.eu

CAP reform camp

The vast majority of EU citizens, the consumers and taxpayers, have few friends among the member states’ governments. The UK House of Commons Environment, Food and Rural Affairs Committee spoke of a well-established core group of reform-minded countries (UK, Denmark, Netherlands and Sweden). The Committee welcomes the accord signed with Italy on the future of the Common Agricultural Policy (CAP). Not much to go on in a European Union of 27 member states.

Still, democracy should be about valid reasons and informed debate leading to accountable policies for acceptable results.

Some of the conclusions of the Committee bear repeating, because they challenge the governments in the anti-reformist camp to think through their stance and improve their justifications and, ultimately, their positions:

“Further reform of the CAP is both necessary and inevitable.”

“The only long-term justification for future expenditure of taxpayers’ money in the agricultural sector is for the provision of public goods. Payments should represent the most efficient means by which society can purchase the public goods – environmental, rural, social – it wishes to enjoy. For these payments to remain publicly acceptable, it is essential that they relate directly to the public goods provided and that, in turn, these public goods are measurable and capable of evaluation.”

“The objectives of the CAP have remained unchanged for the last 50 years and now seem dated. European agricultural policy has moved on since then, encompassing issues such as rural development, protection of the environment and animal welfare. The UK Government should begin negotiating, at the earliest opportunity, for a redrafting of the existing Article which lays out the objectives of the CAP – Article 33(1) – with the new text reflecting the wider context of modern rural policy.”

“Some of the key issues the UK Government must address in devising and pursuing such a rural policy for the EU should include:

· The prioritisation of objectives (for example, between environmental and rural development considerations)
· The degree of subsidiarity embodied in the new policy
· The relative advantages and disadvantages of financing such a policy – at least to some extent (i.e. co-financing) – at the Member State level
· How much of the current expenditure on the CAP would be required to fulfil the policy objectives chosen
· How best to manage the transition from the current CAP to this new ‘Rural Policy for the EU’
· The extent to which this new rural policy can contribute to the mitigation of, and adaptation to, climate change”

***

The Reform Treaty or Lisbon Treaty is going to be as unreformed, and anachronistic, as ever concerning the objectives of the Common Agricultural Policy (although fisheries are added under the same heading). The earliest opportunity seems to be in a distant future.

For an outsider the Committee made a puzzling choice in leaving out consumers’ interests from its discussion altogether and relating to taxpayers mostly indirectly, as the logically necessary payers for and receivers of the public goods mentioned. If the interests of the voters as a whole do not concern the governments of the status quo group inordinately, they could be seen as potential allies and beneficiaries of the pro reform camp’s agenda.

Since the Commission Green Paper for the CAP review 2008 promises to be little more than a health check without serious diagnosis or treatment, the importance of the overall budget review 2008/9 grows.

The December 2005 European Council and, formally, the inter-institutional agreement in May 2006 invited the Commission to undertake “a full, wide-ranging review covering all aspects of EU spending, including the Common Agricultural Policy, and of resources, including the United Kingdom rebate, and to report in 2008/9”.

This promise might have been a joke for Jacques Chirac, but it is extremely important for the citizens of Europe.


Ralf Grahn


Sources:

House of Commons, Environment, Food and Rural Affairs Committee: The UK Government’s “Vision for the Common Agricultural Policy”; Published on 23 May 2007

Interinstitutional agreement between the European Parliament, the Council and the Commission on budgetary discipline and sound financial management; Official Journal 14.6.2006, C 139/1

CAP basics

The Common Agricultural Policy (CAP) is still the biggest area of expenditure in the EU budget. The basic principles of the CAP were written 50 years ago into the Rome Treaty establishing the then EEC. In half a century the world has changed a lot, but not the structure of the CAP.

In 1957 the war was still a living memory, and food scarcity a concern. Today obesity is a greater problem in Europe.

***

According to article 33 of the Treaty Establishing the European Community, the objectives of the common agricultural policy shall be:

(a) to increase agricultural productivity by promoting technical progress and by ensuring the rational development of agricultural production and the optimum utilisation of the factors of production, in particular labour;
(b) thus to ensure a fair standard of living for the agricultural community, in particular by increasing the individual earnings of persons engaged in agriculture;
(c) to stabilise markets;
(d) to assure the availability of supplies;
(e) to ensure that supplies reach consumers at reasonable prices.

***

The living standards of farmers outweigh the interests of consumers and tax payers.

The Commission runs the CAP along the lines drawn up by the Member States (the Council). The Council makes regulations, directives and decisions; the European Parliament is only consulted.

The European Parliament can only present wishes concerning the agricultural budget, since these expenses are seen as mandatory. (The Reform Treaty or Lisbon Treaty would extend the powers of the EP by abolishing the difference between mandatory and non-compulsory spending.)

The Commission is soon going to present its views on the CAP review 2008, commonly called the health check.

Leaked information does not promise any radical policy shift. This has implications for the expectations that the 2008/9 review of the whole EU budget could lead to major improvements.

Despite much talk about CAP reform, the 2002 agreement between Jacques Chirac of France and Gerhard Schröder of Germany, later included in the present financial perspective (long term budget), guarantees CAP spending until the end of 2013.

France has been keen enough to defend the present CAP to forego the possibilities offered to European industry and services by a WTO agreement during the Doha development round.

Finland is an interesting case. On the one hand Finnish political leaders stress the opportunities offered by globalisation and the need to enhance European competitiveness by implementing Lisbon strategy reforms. On the other hand they have repeatedly sided with France to shield agriculture from reform and competition pressures.


Ralf Grahn

An EU budget for citizens

What if the budget of the European Union was made to serve the interest of the citizens? A radical change like that would require a major overhaul of both rules and practices.

According to Sebastian Dullien and Daniela Schwarzer the negotiations in the European Council leading up to the present long term budget (2007–2013) show that the present system has reached its end. The budget review clause for 2008-09 is an admission of this fact. The researchers summarise the situation:

”the EU budget is generally judged as being in a complete mismatch to the tasks the EU has assigned itself.”

When the citizens of the European Union are represented through their national governments, the results are not necessarily efficient, democratic or legitimate. The EU citizens cannot express their collective preferences and they cannot change the priorities through elections. The Council makes the crucial decisions (multiannual financial framework, revenue), so the authority of the European Parliament is restricted (although growing under the Lisbon Treaty concerning annual expenditure).

In the future the European Union needs a politically accountable executive, which is at liberty to propose a budget. The European Parliament, free to decide on income (taxes) and expenditure, would be the main budget authority, more important than the Council.

Instead of agricultural policy and regional policy, the resources of the European Union could be allocated to enhance sustainable growth. Hence, the Lisbon strategy for growth and jobs could be given new impetus, especially concerning great projects of common interest, for instance in research and development.

The EU budget could be given a new task: stabilization of the economy at the Union level.

Income and expenditure could be used to mitigate booms and busts.

In addition, at least the members of the Economic and Monetary Union (EMU) could introduce a new, stabilizing element. The new “stabilization pillar” proposed by the researchers could be a basic unemployment insurance at the European level, partly replacing the national schemes.

***

If the resources of the European Union are used for more beneficial purposes than today, the citizens reap the rewards through jobs that are maintained and created. The new system would fulfil the requirements of accountability and democratic legitimacy.


Ralf Grahn


Source:

Sebastian Dullien & Daniela Schwarzer: Integrating the macro-economic dimension into the EU budget: reasons, instruments and the question of democratic legitimacy; EU-Consent EU-Budget Working Paper No. 4; August 2007; http://www.eu-consent.net

EU reform camp building

The Swedish Institute for European Policy Studies Sieps is looking around for allies for budget reform within the European Union. The annual conference of the Institute, on 26 October 2007, was dedicated to The Purse of the European Union: Setting Priorities for the Future. On Tuesday, 6 November 2007, Sieps and the Centre for European Policy Studies (CEPS) jointly host a seminar The EU Budget Review: Possibilities and Challenges for the Future.

At the Sieps conference Sweden’s EU minister Cecilia Malmström recollected that the current financial perspective of the European Union was a step in the right direction, but it was not far-reaching enough. She stressed the importance of the built-in review mechanism.

According to Malmström, citizens rightly expect the EU to use common funds well and efficiently. The Reform Treaty will lead to major improvements in this respect. The second major tool is a modern budget. The Swedish government believes that substantial reforms of EU spending – including re-prioritisation between areas of expenditure – are needed in order to achieve a budget that can contribute to the EU meeting the challenges of the 21st century.

Subsidiarity, European added value, proportionality and sound financial management are fundamental principles for a reform. The Swedish government has drawn some preliminary conclusions on the direction of the future EU policies: competitiveness, justice and home affairs, migration and asylum as well as external action.

The future Common Agricultural Policy (CAP) should be guided by market orientation, consumer demand, environmental concern, deregulation and reduction of budget expenditure.

The European Union could contribute with strategic coordination of regional development in the wealthiest member states, whereas the actual European funding for cohesion policy should be reduced and allocated differently in the future.

An ideal income system based on member state wealth would probably be sustainable, transparent and legitimate, but as long as the EU budget is unreformed, it would lead to disproportionate net contributions. Fair burden-sharing between member states can only be achieved if a new income system is accompanied by spending reforms, Malmström concluded.

Malmström’s speech and presentations by Iain Begg, André Sapir and Göran Färm as well as a recording of the Sieps seminar can be found on the think-tank’s web pages.



Zero-based budgeting

Sieps has initiated a debate on the European Union’s budget review 2008/9 by publishing a discussion paper ”Agenda 2014: A Zero-Base Approach” by Daniel Tarschys.

According to Tarschys zero-based budgeting has been a heavy instrument in annual budget processes, but might suit the multiannual financial framework of the EU.


Research is needed well ahead of the closing stages, when quarrels on burden sharing between member states exclude all other considerations. The European Union has a multitude of aims, but the real high-level priorities of the Union should be sifted out. The efficiency and effectiveness of Union programmes should be analysed, not only historically, but with a view to the future. The starting positions and expectations of member states should be examined. Programmes with diminishing returns still have their beneficiaries and defenders; phasing-out mechanisms and compensation packages should be planned.


The Swedish Institute for European Policy Studies is showing its pro-active stance in putting the crucial questions for the future of the European on its agenda and by its efforts to build coalitions for a reform agenda. The next long term budget (financial perspective) for five or seven years from 2014 is certainly one of these crucial areas of the Union.



To get started

Here, in addition to my previous posts, are a few sources for those who want to know more about EU (budget) reform:

The present long term budget (from 2007 including 2013) of the European Union is a good starting point: ”New budget, old dilemmas” by Iain Begg and Friedrich Heinemann.

If you want to reflect on a better budget for the EU, there is no turning back from the Common Agricultural Pollicy (CAP), still the biggest area of outlay in 2007. ”Why Europe deserves a better farm policy” by Jack Thurston presents the fundamental problems.

Iain Begg sorts out the basic budget terms and looks at both the budget review of 2008/9 and the financial perspective starting in 2014 in ”The 2008/9 EU budget review”. Is it possible to find solutions better adapted to the common good?


Ralf Grahn


Sources:

Swedish Institute for European Policy Studies: The Purse of the European Union: Setting Priorities for the Future; 26 October 2007; presentations by Cecilia Malmström, Iain Begg, André Sapir and Göran Färm; web-tv recording; http://www.sieps.se

Daniel Tarschys: Agenda 2014: A Zero-Base Approach; Swedish Institute for European Policy Studies; October 2007; http://www.sieps.se

Iain Begg & Friedrich Heinemann: New budget, old dilemmas; Centre for European Reform; 22 February 2006; http://www.cer.org.uk

Jack Thurston: Why Europe deserves a better farm policy; Centre for European Reform; December 2005; http://www.cer.org.uk

Iain Begg: The 2008/9 EU budget review; EU-Consent EU-budget Working Paper No. 3; March 2007; http://www.eu-consent.net

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