The EU budget’s value, not size, is what’s important

AppId is over the quota
AppId is over the quota
A farmer holds dry earth in his hand as a tractor is operated in a field in Blecourt The common agricultural policy constitutes the biggest proportion of the EU budget, but ‘it has been reformed like few other areas over the past decade’. Photograph: Pascal Rossignol/Reuters

There is at least one thing about the EU that everyone seems to agree on: when it comes to political communication, Brussels is hopeless. Perhaps that particular weakness isn’t currently among the union’s chief worries, but it doesn’t help either. So when the commission president, José Manuel Barroso, somewhat blithely proposed a 5% increase to the EU budget back in June, the reaction was only too predictable: at a time when most member states are struggling to make difficult decisions on spending cuts, transferring more money to Brussels looks like a non-starter. The idea was widely rebuffed, if not ridiculed, by mainstream parties, and lapped up by populists across Europe.

The biggest damage, however, was done to the issue itself: it invited politicians of all colours to stage yet another disproportionate skirmish about the exact size of the budget, exacerbated by calls for scrapping existing rebates or granting new ones. Some of this shadow boxing is excusable: politics is about money, no matter how big the pot. But it also deviates from the real challenge: the budget composition, its precise use and potential conditionality, and how exactly it can support growth, jobs and competitiveness in a difficult economic environment.

So far, this challenge is grossly underrated in the current political debate. Although calls for “reform” abound, little thought is given to where and how the EU can add value by spending money, where a European budget can realise serious financial leverage, or where it can support domestic reform processes. At 1% of EU gross national income, the budget itself is rather modest: in absolute terms it is smaller than that of medium-sized countries such as Austria. Its governance mechanism therefore matters a great deal.

Three components of the budget tend to receive attention at the expense of the “how to spend it” question. First, there is the common agricultural policy (CAP), often portrayed as France’s sacred cow. With nearly 40% of the EU budget, it constitutes the biggest proportion and, hence, the most obvious target for critique. Most would agree on the necessity to further reduce its share but significant obstacles remain: CAP is the only policy almost entirely funded by the EU budget, so any cuts would have a direct impact on some parts of society. Also, the newer member states have so far been excluded from full CAP benefits and will only receive them after 2013. In fact, CAP has been reformed like few other policy areas over the past decade. A discussion focusing narrowly on the size will undoubtedly meet fierce resistance.

Second, there is the cohesion fund, worth almost a third of the budget. Its laudable objective is to finance growth-enhancing projects in Europe’s weakest corners. The debate has now taken the obvious turn: why should rich countries mutually support underdeveloped regions if this could also be done through national allocation of funds? Criticism seems all too legitimate given that the EU has often failed to make sure the money is handed out to the right places. But of course this is only one side of the story: structural funds do not only enable large-scale investments, they often ensure a long-term focus that national governments are simply incapable of pursuing. Looking from this perspective, the EU added value goes far beyond the question of budget size.

Third, no EU controversy is without reference to its bureaucracy. It is no secret that most EU civil servants earn pretty well, in some cases maybe too much. But should it be an issue undermining negotiations on a new EU budget? Only 6% is allocated for Brussels’ administration, competing for some of the best brains across Europe. Fraud and misuse exist, but compare extremely favourably to most national systems. Not least, annual EU budgets are fixed for a longer period, preventing unpleasant surprises. They do not run deficits either.

On current trajectory, we are heading towards another missed opportunity in late November, when an EU summit is supposed to agree on the new multiannual financial framework for 2014 to 2020. The size of the EU’s budget is not the actual problem and its reform will require more than opportunistic lip service and national point-scoring. At the very least, it will need to involve governments and opposition parties alike entering a serious debate about where Europe can add value and what kind of financial governance can best provide for it. Both dimensions are somewhat found wanting in the British debate, on the right and the left. Yet failure to do this would only underline the saying, often attributed to Henry Kissinger and paraphrased here: the politics (around the EU budget) are vicious precisely because the stakes are so small.

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