April 11, 2020 / By mobanmarket
The Commission will not meet its deadline for a review of the EU’s budget, but it should make debate on the subject a priority of Barroso II.Be bold on budget reform
By the end of 2009, the European Commission was supposed to present a review of the EU’s budget, both of its spending priorities and its sources of revenue. The deadline was set by the European Council as part of an agreement reached between national government leaders in 2005 on the EU’s budget for 2007-13. The pledge to hold a review was a compromise between, on the one hand, the UK and those countries that wanted deeper reform of the Common Agricultural Policy (CAP), and, on the other, France and countries that wanted to get rid of the UK’s budget rebate.
José Manuel Barroso, the Commission president, will not meet the deadline for the review, and the reasons are not hard to find.
Coming up with a budget review before the Lisbon treaty had been ratified would have further complicated an already problematic task. Raising the possibility of cutting back the CAP would not have been a clever way to get Ireland’s farmers to support the treaty.
Aside from the Lisbon treaty complications, a budget review would always be divisive – and just at the moment, as he puts together a new college of commissioners, Barroso needs the trust and co-operation of national leaders.
Despite his efforts to keep the imminent review out of the limelight, a draft paper on the budget review was leaked from the Commission to journalists and representatives of powerful regional authorities in Brussels at the end of October. The paper, “A reform agenda for a global Europe: reforming the budget, changing Europe”, contained some radical ideas for reform of the EU’s spending priorities, including a “significant reduction” in the share of the budget being spent on agriculture. It also suggested that the average of €40 billion that the EU spends each year on cohesion policy should be targeted at less well-off countries and regions, and concentrated where funds have been spent wisely in the past. Those countries that could show that they had spent money effectively would be entitled to a larger share. Other countries that have been receiving regional development aid for decades should lose their entitlement after a certain period, the paper suggested.
The paper also called for an end to all corrections in member states’ contributions to the EU budget, such as the UK’s rebate, and called for a “genuine EU own resource”, code for some kind of earmarked tax, to end the constant haggling over how much each country gets out from the EU budget compared to what it pays in.
Mariann Fischer Boel, the European commissioner for agriculture, quickly distanced herself from the paper, saying that it “should have been thrown in the bin” – an indication of how contentious the budget review is inside the Commission, let alone in the national capitals.
Barroso has been correct not to launch a budget debate before now. In France, President Nicolas Sarkozy is getting his worst opinion poll ratings since he took office in May 2007 so he is not best placed to stand up to those perennially irate farmers who would protest against Commission suggestions of cutting aid to the farm sector. Nor would Gordon Brown, the struggling UK prime minister, welcome a debate on the UK rebate.
But the issues that the leaked paper addressed are becoming more and more pressing. There are major question-marks about the effectiveness of large parts of the EU’s spending, as last week’s (10 November) report by the European Court of Auditors on the 2008 accounts showed. The auditors estimated that more than 11% of the €36.6bn paid out for cohesion policy, nearly €3bn, was affected by errors and irregularity. Vitor Caldeira, the court’s president, urged EU policymakers to simplify procedures and set clearer objectives for policies that command large budgets.
Every few years, when EU leaders haggle over a new medium-term budget, the net beneficiaries face off against the net contributors over the size of the overall budget. Yet the Commission’s analysis of spending in 2008 showed that half of all countries failed to use all the money they were entitled to because they did not meet eligibility criteria or simply because of a lack of worthwhile projects.
Barroso should make launching the debate over EU budget reform an urgent priority of his second term. In the wake of the economic crisis, with enormous pressure on public finances, there must be a focus on the cost-effectiveness of EU spending. Public funds should be targeted on those countries and regions that can use them most efficiently. EU funds should be used to ensure that the EU develops the industries, business and technologies of tomorrow rather than devoting a third of its budget to maintaining low-productivity farmers.
The debate will be tougher than ever because the economic model which the central and east European countries believed would help them close the prosperity gap with their richer neighbours – ie, importing foreign capital – has been found severely wanting. They will need a new growth model and so will be competing more directly with wealthy regions of the countries that were members of the EU before 2004.
Starting the debate quickly does not mean that the arguments will be any easier between net payers and net beneficiaries, and about the importance of certain policies at EU level. But the EU cannot afford further delay if it is to maintain its competitiveness and its ability to create and keep jobs in a global economy.
“Mr Gorbachev, tear down this wall.” Ronald Reagan’s stirring speech at the Berlin Wall on 12 June 1987 was not the death blow to communism, but it did highlight the West’s renewed confidence in demanding what had previously been impossible. Though the president’s advisers egged him on, US diplomats were horrified at what they felt was provocative behaviour: they saw their job as managing relations with communism, not trying to overturn it.
Those glory days were the subject of a day-long conference at the Ronald Reagan Presidential Library in Simi Valley California on 6 November. A motley collection of heroes from east and west (with your columnist tagging along as a moderator) gathered to discuss the great communicator’s role in the collapse of communism and what his approach could still offer today. Nancy Reagan, frail but immaculate, presided. Margaret Thatcher and Mikhail Gorbachev sent messages of congratulation. Freedom-fighters such as Mart Laar from Estonia, Leszek Balcerowicz from Poland and Václav Klaus of the Czech Republic recalled how Reagan’s approach had inspired them and demoralised their captors.
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Many of the surviving members of Reagan’s foreign policy team turned up too, including John Lehman (navy secretary), Dick Allen (chief foreign policy adviser) Richard Pipes (Russia expert) and the towering figure of George Shultz (secretary of state).
It is easy to forget what a daunting task these men had faced when they came to office in 1980. The United States was traumatised by Vietnam, intimidated by the Soviet invasion of Afghanistan, humiliated by the Iranian hostage crisis and near-bankrupted by the economic downturn (will an incoming administration in three years’ time face something similar, wondered some people gloomily). The best option in foreign policy seemed to be presiding over inexorable Western decline as peacefully as possible.
Admittedly, whatever was happening in the West, communism would have been in trouble. Discontent among the public, divisions in the elite and economic failure would have all been gnawing away at the regimes’ stability and legitimacy. The confidence that Reagan exuded and inspired made the Western star burn brightly, lifting captives’ spirits and dazzling their jailers. The US of Jimmy Carter or the Britain of the mid-1970s hardly provided a compelling alternative to communism.
In retrospect, the efficiency and decisiveness of the Reagan administration is striking. It arrived in office promptly and en masse, filling all important posts within weeks (nowadays getting the team straight within the first year is regarded as smart work). It knew exactly what it wanted to do and did it (not something that could be said so easily of the current administration). Lehman recounted with gusto how he sent a big naval force to the northern coast of Norway, against the howls of protest from officials who thought it would be provocative. Far from it: it put a direct stop to the de facto Soviet naval takeover of the region.
Communist propaganda depicted Reagan as a brainless gunslinger. In fact, he was well read and wrote reams. And as Shultz pointed out in his speech, he used US armed force sparingly, on only three occasions – in forestalling a Marxist coup in Grenada, in bombing a terrorist headquarters in Tripoli and in an operation against an Iranian ship that was planting mines. “Reality, strength, diplomacy” were his watchwords. “And no empty threats.”
Shultz also underlined Reagan’s desire to rid the world of nuclear weapons – something on which Shultz continues to work. The thousand-plus assorted Reaganites in the audience clapped that too. It was hard not to feel a bit nostalgic for the days when grown-ups were in charge.
The writer is central and eastern Europe correspondent of The Economist.
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