Lajos Bokros: Structural problems with the EU-Budget

Strasbourg, 15th December 2009

 

• 1. The EU-budget is too big

 

It has become systematically larger than 1% of the aggregated GNI of the European Union without a clear justification and rationale. 

 

• 2. The EU-budget keeps growing

 

According to the multi-year financial framework (MFF), there are built-in      automatic increases for many items, especially for operating costs of the bureaucracy without any apparent improvement of output perfomance. It is unacceptable and unjustifiable, especially at times of crisis.

 

• 3. The common budget lacks common values

 

All budgets are supposed to be mirror images of some economic policy considerations. The EU-budget is an exception, it does not reflect any consistent set of common values. Instead, it tries to justify an EU-wide policy of neo-keynesian demand management by spending more on the great majority of items without any underlying structural reforms.

 

• 4. Unnecessary, distortionary spending items are many

 

Take the example of the European Globalization Adjustment Fund. Half a billion euro is supposed to be spent on mitigating the negative impact of globalization. Instead, member states are having a hard time to put together rational proposals for a couple of tens of millions. On the one hand it is a tremendous waste of scarce resources. On the other it is a prime example of distorting the rules of creative destruction in capitalism.

 

• 5. Last minute items more important than politically correct ones

 

COBU was unhappy to see a new item, the cost of decommissioning the Kozloduy nuclear power plant coming up at the last minute. It was a sign of bad planning on the part of the European Commission. Nevertheless, not only the decommissioning of Kozloduy, but even support to the construction of a new nuclear power plant would be more important than  spending in the milk fund with its untimely and inefficient increase.

 

• 6. The EU-empire of bureaucracy shields itself from the crisis

 

As if it was part of a beneficial demand boost, the EU-bureaucracy gets undeserved and unnecessary wage increases. When the EU is struggling with a once-in-a-lifetime deep recession it is just not appropriate to shield ourselves and our own administration from the negative consequences. Would it not be more appropriate to accept even a nominal wage decline and, hence, boost employment in name of European solidarity ?

 

• 7. More commitments pushed to the future decrease flexibility

 

It is a worrying sign of inadequate planning that the disparity between commitment and payment appropriations is growing in case of a large number of items. Since we cannot incur a deficit, we push more and more commitments to the future. It is tantamount  to mortgaging the future of the EU and undermine prospective discretionary spending beyond repair.

 

• 8. Instead of the past, let us concentrate on the future

 

Many MEPs are concentrating on pet projects and pork barrel spending. The budget should not be a used as a backward looking tool preserving the status quo but a forward looking instrument sharpening the institutional and regulatory framework of the EU which, in turn, should aim at strengthening the single market. Less protection to vested interests is the key for the EU to avoid sinking into irrelevance at the world stage.

 

• 9. Instead of crisis management, improve competitiveness

 

It is a mistaken belief that the EU-budget is there to fight the global crisis. A fiscal tool of this size is completely inadequate for that and rightly so. It is the task of national fiscal policies to mitigate the negative impact of the crisis. Budgetary cuts introduced by the Council on structural and cohesion funds are, therefore, welcome, while it is important to make the rules of their utilization more flexible and less bureaucratic.

 

• 10. Socialist planning without much improvement in efficiency

 

Ask at least the impertinent question whether the programs we finance are efficient or not on the basis of clear-cut output performance criteria. No adequate assessment of many of our apparently forward looking programs is forthcoming. We spend a lot without knowing the real impact of our programs. It is just unacceptable on political and ethical grounds.

 

 

 

 

 

 

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