It may sound technical but it is an eminently political exercise. The debate will start in earnest on the EU budget for the years 2014 through to 2020. Why so early? Because it takes time to get an agreement on such a major issue. Even if the debate starts next summer we might not be looking at an agreement before 2012. And it also takes time to put that agreement into law. All that, along with preparations to get new EU programmes up and running, must be in place in good time before January 1, 2014.
The exercise is big and complex and has huge financial implications both for the givers and the takers.
So one can understand why EU financial ministers will be on their guard during the big budget debate.
Every year the EU budget amounts to about €130 billion. On a seven-year period, that adds up to about €1 trillion – that’s €1,000 billion. That’s a lot of money even if it is just a fraction of the national budgets of the EU countries.
The EU budget is usually planned and agreed on a rolling seven-year period, known as a multi-annual financial perspective. This is done to ensure certainty and predictability in EU spending. It’s a good idea and we should emulate it too. You would know where the EU will be spending its money years in advance and this makes for more transparency and better planning. This framework also establishes maximum spending limits and annual budgets are then drawn up with more precision within these ceilings.
On the negative side, this type of planning becomes a bit too rigid when emergency situations requiring EU involvement occur, such as natural disasters, the hikes in food prices or, indeed, the economic crisis. So flexibility must not be lost.
Understandably, the planning for a new seven-year financial period is a time for debating the big questions on EU spending as well as on its revenue. EU countries, each with their own specific interest, are therefore gearing up to have their say. But this time round, fresh from its new powers in the Lisbon Treaty, the European Parliament too will be a major player.
At the end of October, the European Commission published a communication that set off the debate by putting some ideas on the table. Despite some obvious kite-flying, most of the proposals make sense and are a good basis for debate. The Commission will come up with official proposals by the end of June.
EU spending has traditionally been lopsided in favour of agriculture. Suffice it to say that, in 1988, as much as 65 per cent of the entire EU budget was devoted to agricultural spending. This has now gone down to 40 per cent of the total.
Another key spending item is cohesion funding – or the so-called EU regional funding – that supports poorer regions of the Union. This type of funding is widely popular not just because it helps address economic imbalances across the Union but also because, by helping the poorer areas with investment in capital infrastructure and human resources, the Union is strengthening its internal market, which also benefits the richer regions.
Now, in drawing up a new financial perspective, it is important first of all to lay down some ground rules. After all, it is legitimate to ask the question: Why should the EU have a budget at all and why should it spend money if this can be done at national level?
The answer is that the EU should indeed only use money in areas and for reasons that make sense for spending to be carried out on an EU level. Otherwise, there is no point in doing it at all. So the first essential principle must surely be that EU spending must provide value added in the sense that €1 spent at EU level must have more value and generate more wealth than if it were spent at national level.
And, of course, the EU must also have the financial means to deliver its policies, otherwise common EU policies will remain pious hopes. Not all EU policies require funding to be delivered. A good part of the EU’s role consists in making common laws that are then implemented at the national level.
However, it is clear EU policies need to be backed up by adequate financial means.
Moreover, the EU budget must also retain the principle of solidarity whereby funding flows, via the EU, from the richer to the poorer regions.
This type of EU funding has helped EU countries gel together and regional funding is said to account for a good part of the EU’s wealth generation – as much as 0.7 per cent of EU GDP growth in 2009 alone.
Next week, I will discuss the sectors where the EU should be spending its money and in the following week I will turn to EU revenue, that is, how – and from where – should the EU collect its money.
www.simonbusuttil.eu
Dr Busuttil is a Nationalist member of the European Parliament.