Trapped in its own past: the EU budget in economic governance

By Iain Begg, European Institute, LSE

15.06.2005 · EU-Reform-Spotlight 04/2005

By Iain Begg, European Institute, London School of Economics and Political Science

EU-Reform-Spotlight 04/2005 (Pdf download, 1,1 MB)

Key points

• If the negotiations on the next Financial Framework fail in spite of the neutral Luxembourg Presidency acting as an honest broker, the Union would be faced with an institutional crisis that would add to the problems in ratifying the Constitutional Treaty.
• The incompatibilities between the different Member States' positions make an only marginal shift from the status quo the most likely outcome.
• Given the pressures from a group of six net contributors who want to scale back the EU budget, the most probable scenario is that the overall budget will be lower than the Commission had proposed and that some of the increases for specific policies will be whittled down. The next Financial Framework for the EU would not differ much from the last one agreed in Berlin in 1999.
• As long as the Member States regard the Union as a club to which they pay subscriptions, they will expect a juste retour in the form of Community spending. Community policies then risk becoming vehicles for ensuring that club goods and services are distributed equitably, rather than being justified because it makes sense from an economic efficiency standpoint to assign these functions to the Community level.
• The historical determination of the EU budget with its focus on a narrow range of supply – side policies, precludes any real role in the Union's economic governance. On the contrary, the same issues will surface in six years time when the next circle starts.
• What is now needed is a full reappraisal of the purposes of an EU level budget and the setting in motion of procedures to bring about an extensive change in what ought to be a key instrument of EU economic policy-making.
• To break the cycle two ways forward are suggested: to build-in a mid-term review to the Financial Perspective, rather than locking-out change for seven years, and to establish a wide-ranging review of the EU budget beyond 2013 by the appointment of a groupe de reflexion with an unrestricted mandate to look into all aspects of the budget.

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