The EU budget review: challenges and opportunities

17 October 2007

Dalia Grybauskaitė, European Commissioner for Financial Programming and Budget, said budget reform was sorely needed in today’s changing world to face up to new challenges, such as the pressures of globalisation and competition. The EU is substantially reforming its political and institutional “shape”, and the lessons of previous enlargements also need to be taken into account.

Between 2007 and 2013, almost 80% of the EU budget is earmarked for agriculture (42.9%) and cohesion for growth and employment (35.6%). Of the rest, 8.6% is to be spent on competitiveness, 5.7 % on external relations and 5.8% on administration. But the budget must reflect new challenges such as research, innovation, the environment and immigration to a greater extent.

Budget reform has already started, said Dr Grybauskaitė, with the Common Agricultural Policy (CAP) ‘health check’ and decisions on increased funding for research and innovation. Consultations have been opened on all portfolios, and studies have been commissioned to prepare proposals on EU spending and resources.

An “historic” opportunity

The Commission has also already launched an “historic consultation” on the revision of the EU budget, with European citizens, think tanks, the European Parliament and national parliaments, among others, invited to submit their comments and ideas.

These reforms are about Europe and its policies, not just about money, the Commissioner insisted. They are about the quality as well as the quantity of spending, and using funds transparently and accountably. The budget review will investigate how to give “value-added in EU spending to tackle challenges”, and draw up a long-term strategic view of EU finances.

The proposals will be “visionary” and ambitious, the Commissioner assured the audience: people will be invited to reflect on Europe’s policy priorities, such as energy, the environment, immigration and terrorism. After these have been agreed, matching spending priorities will be drawn up, plus measures to ensure that EU policies are delivered as efficiently as possible, since it is not only important to know what to do, but also how to achieve it.

Accountability, efficiency and simplicity will be the watchwords in spending. Member States have agreed to publish the details of all national beneficiaries of EU financial resources, particularly from cohesion and agriculture funding. This will increase the pressure for policy reform if, for example, it is shown that 80% of all direct payments in agriculture go to 15% of recipients, or if the only beneficiaries are large landowners and industry.

Another question in the budget review is whether a percentage of the Member States’ gross national income (GNI) is the best source of funding for the EU, or whether a European tax would be better, said the Commissioner. She added that this partly depended on how one viewed European integration.

The Commission’s Consultation Paper is aimed at launching a “frank debate” on future policy challenges and EU finances, “without any pre-conditions or taboos”, said Dr Grybauskaitė. Discussion must be innovative and free of political pressures.

Challenges for the EU in the 21st century

Issues to be discussed include the challenges and risks for the EU and the world in the 21st century; the EU’s ability to respond to, and proactively shape, change; the long-term policy agenda for the next decade and beyond; optimising spending to ensure maximum added-value for the common European interest, as well as on a national level; and the role and potential of the EU and Member States to manage agreed priorities.

The Commissioner also pointed out that 80% of the EU’s budget is managed ‘on the ground’, and the system for doing this differs between countries, with smaller member States more centralised than larger ones in this respect.

Resources are needed to match Europe’s political ambition, said Dr Grybauskaitė. It is important to identify both stable and sufficient budgetary sources, while ensuring that contributions are fair. The process also needs to be more transparent, as European citizens are very sceptical when they learn that agreements have been reached overnight which give rich countries a greater share of resources.

The next steps in the budget reform are:

· October 2007-April 2008 - public consultation;

· November 2007 - EU Presidency initiatives: debate in the Budgetary Committees of the European and national parliaments;

· Spring 2008 - Political conference in association with the European Parliament on the initial analysis of the results of the debate;

· Spring 2008 - Commission prepares its Reform proposals;

· 2008/9 - Commission present the Budget Reform proposals;

· 2009/10 - discussion and endorsement by EU Institutions;

· 2010/11 - proposal for the next Financial Framework.

Dr Grybauskaitė believed the process would move quickly during the French EU Presidency, as the Elysée Palace had declared its intention to make this a priority. She concluded by saying that Europe was facing a “once-in a generation” chance to “choose its way” and make a difference, so she invited people to participate with suggestions and ideas, rather than simply complain and criticise the EU budget.