Economics / Federalism / Politics

Another budget for another Europe

European integration supporters and opponents agree at least on one thing: political Europe is not able to face today’s challenges anymore. 

The EU is trapped in three paradoxes: too heterogeneous from an economic perspective, the Union is bogged down in a triangle of incompatibilities symbolized by the pursuit of objectives both necessary and contradictory: reducing public spending, boosting growth and fighting effectively against mass unemployment. Too much rooted in the intergovernmental tradition, the Union is disunited on both EU internal issues and international ones. Too distant to deliver its message beyond the group of convinced pro-Europeans, the Union is powerless to face the revival of nationalistic ideologies while it was designed as a political answer to nationalism.

The European general interest cannot be reached by subtracting national interests

On 7 and 8 February 2013, the European Council reached an agreement on the 2014-2020 Multiannual Financial Framework (MFF) that is the latest symptom of a Europe lacking project(s). (National) media are looking for giving good and bad marks to leaders who were able to be inflexible or negotiate one more billion in exchange of their approval to the first EU budget reduction in the history of the European integration. This trick game maybe enabled some political victories, but it is, first and foremost, a defeat of the 500 million European citizens.

Until 2020, the EU budget will be limited to €260 per year and per inhabitant. As a comparison, France’s budget is equivalent to €5,690 per year and per inhabitant, i.e. around 22 times higher. A technical comparison is difficult, since the European and national public policy missions diverge, but the symbol remains: the EU has not anymore the means of its ambitions.

The distribution of this budget reduced to 1% of the total EU wealth (significantly below the 1.24% of the EU GDP ceiling set in the Treaties) is even more highlighting the inconsistency between what the EU concretely finances and what should be expected from it, considering e.g. the 50% increase in youth unemployment during these last four years. In a Union more and more divided by territorial inequalities, the cohesion funds fell by 10% in comparison with the 2007-2013 MFF. Although increasing from €91 to €125 billion, the credits for the stimulation of growth, innovation and competitiveness continue to represent less than 15% of the EU budget. Finally, what can be said about the ever renewal of the UK rebate obtained by Margaret Thatcher in 1984 and of many other exceptions given to the ones and the others, if not that it marks the failure of the EU institutions to face Member States’ demands?

Three (r)evolutions to get Europe out the current crisis

1. The European Parliament should reject the budget and demand the budgetary agenda be adapted to the EU political agenda.

Just after the publishing of the European Council’s deal, the leaders of the four main groups in the EP (conservatives, socialists, liberals and ecologists) declared they would reject the agreement during the EP vote on the budget in July. Let us hope that this transpartisan agreement will resist to future pressures, when the reluctant MEPs will be threatened not to appear on the (national) lists for the 2014 European elections…

The calendar also creates another important issue: the 2009 elected European Parliament is deciding the 2014-2020 MFF. Would it not be more coherent that the Parliament elected in 2014 votes on the MFF that will set the priorities of its legislature? Of the same order of idea, is it not more logical that the definition of these priorities become a stake of the next European elections, in order to demonstrate to the voters that they can change Europe thanks to their vote? Revising the Lisbon Treaty would not even be necessary, since the financial framework “is established for a period of at least five years” (Article 312 TFEU).

2. The EU should increase its budget with new own resources to boost big project policies.

A European-wide debate could also discuss the means of financing the EU budget. Currently, there are four resources. Two of these are relying on an economic activity of the Union: the custom duties on trade with third countries, and the tariffs on agricultural imports and exports, which were very important in the past but are nearly irrelevant nowadays. The two other resources are direct contributions of Member-States: the VAT resource, which applies a harmonised rate on the added value received by the Member States but presents behind this apparent equality lots of biases, and the Gross National Income (GNI) resource, introduced by the “Delors 1 Package” in 1988, which enables to balance the EU budget by applying an identical rate to the gross national incomes of Member States. 85% of the EU budget is financed by the VAT and GNI resources and consequently, the “own resources” expression – meaning they belong to the EU and not the Member States – is excessive.

However, the Member States are nearly all feeling the weight of a heavy debt burden and they have to implement drastic reductions in their public spending. Even if they really wished it, they would not be anymore able to finance the EU budget with national contributions in an unlimited way. Consequently, the single possibility to increase the budget without indebting the EU is to think about new own resources independent of the national public finances. Many alternatives exist – a financial transactions tax, green taxes at the borders of the Union, a tax on telecommunications or on the Internet access suppliers, etc. – and the returns of an EU tax are potentially massive. Another advantage is that this perspective could enable getting out of the opposition between the net contributors to the EU Budget and the States whose contributions are financed without real counterpart.

3. The next treaty should continue the democratisation of EU institutions and reduce the inter-governmental mechanisms’ influence.

The creation of a European tax system voted by the European Parliament would be a determinant step in the European political integration and the reinforcement of the EU citizenship, because the vote of the budget is narrowly linked to the advent of the Western representative democracy. Other advisable progress include the pursuit of the rebalancing of powers in favour of the European Parliament, the only institution directly elected by the EU citizens, the creation of a second legislative chamber that would represent the Member States and reduce the European Council’s influence, an intergovernmental body often taken in hostage by the Member States – especially the UK – that does not want deeper political Union, and the affirmation of transnational political parties choosing their candidate for the Presidency of the European Commission, before s/he eventually gets directly elected by the European citizens.

The current generation in power is thinking too much in the short term. If it had the political courage to realise these reforms, it would resolve the three paradoxes in which the Union is trapped. By creating one (or several) new resources, Europe may get out of the spiral of austerity and finance new adjustment policies for its most fragile populations and regions without weakening the grand projects in the framework of industrial policy, support to innovation and completion of important networks which will make it a competitive economy based on knowledge in the near future. By reinforcing the European Parliament and pursuing institutional reforms, Europe would go forward towards harmonising its fiscal, social and diplomatic policies without clashing permanently with national interests. Finally, by fixing a new goal, Europe would create more interest within its population and would show it is up to the challenges it has to face.

Valentin CHAPUT

Translated by Gilles JOHNSON & Pierre-Antoine KLETHI

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2 thoughts on “Another budget for another Europe

  1. Pingback: Another budget for another Europe | My Europe | Scoop.it

  2. I think as you say there is a chance that the next EP elections are actually European elections, rather than ones fought out on a national agenda. That could increase the turnout and in turn give the EP more legitimicacy and citizens a real feel of participation!

    Good article!

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