Europaudvalget 2011-12, Beskæftigelsesudvalget 2011-12, Socialudvalget 2011-12, Finansudvalget 2011-12
EUU Alm.del Bilag 264, BEU Alm.del Bilag 88, SOU Alm.del Bilag 178, FIU Alm.del Bilag 108
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EUROPEAN PARLIAMENT
2009 - 2014
6.5.2010
WORKING DOCUMENT
on financing the 2020 Agenda despite the budgetary crisis
Alain Lamassoure
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United in diversity
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Some twenty European countries have been unable to adhere to the Stability and
Growth Pact criteria. Several of them have a budget deficit higher than 10% of GDP,
others a national debt that exceeds 100%. Throughout the Union, all public authorities
will have to launch austerity plans on a scale not seen since the last World War. How,
in this situation, will it be possible to finance the European policies that the Union
requires, the new powers that it has been given by the Lisbon Treaty and, looking
forward, the common ambitions in the 2020 Agenda?
This unprecedented situation should give us the opportunity to
tackle the question
that has never been debated regarding relations between national budgets and
the European budget.
The purpose of this note is to explain some of the facts.
I.
1.
The freezing of the Community budget and its consequences
The financing of European policies is at a dead end. Having failed to equip the
Union with genuine own resources, even though this is laid down in all the
European Treaties, the Member States have condemned themselves to being its
sole contributors as it is national budgets that finance 80% of the European
budget. This system, which is basically anti-Community, obviously encourages
each Finance Minister to demand a "fair return" on his or her contribution. The
result is that twenty-five years down the line, and despite four new treaties
which have substantially increased the competences of the Union and three
waves of enlargement which have doubled the number of "poor" Member
States, the Community budget remains stuck at 1% of GDP, 0.25% lower than
the ceiling set in 1988. The national parliaments, for their part, are finding it
increasingly difficult to understand why they should raise their taxes or
increase their country's debt to finance policies that are decided elsewhere
without their consent.
Yet this is the very moment when Europe can no longer keep tightening its
belt. In accordance with the Lisbon Treaty, a European diplomatic service, to
be placed under Lady Ashton's authority, is being set up to conduct a common
European policy, and this will need a minimum of administrative and operating
appropriations. The Treaty also increases the Union's responsibilities in the
fields of energy, research, space policy and immigration. If there is no money,
we might as well stop right now. Even more worryingly, there is a risk that key
large-scale industrial programmes that were decided upon years ago, such as
the Galileo satellite network (the European GPS system) and the world centre
for fusion energy research (ITER), might be disrupted if no further funding is
provided. The first draft of the 2020 Strategy makes provision for several other
programmes of this type, under the headings of green growth and the
knowledge economy.
Nevertheless, in order to combat the crisis, governments can find the means of
financing new policies decided at European level. The last European Council
decided to allocate no less than 2.4 billion a year, from 2010 onwards, to
helping developing countries combat the greenhouse effect. This sum will be
mustered through contributions from each Member State using an ad hoc
allocation formula that differs from the normal Community scale. Similarly,
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2.
3.
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the assistance to Greece will be financed by loans granted by certain Member
States without using either the Community budget or even a Community
financial institution such as the EIB.
4.
We have heard the argument: given that it is the national taxpayer anyway who
will have to pay, or act as guarantor, why bother going via the Union budget?
Well there is a very simple way to avoid calling on national budgets, and
that is for Europe to be given some new own resources.
The resolution
adopted by the European Parliament on 29 March 2007 gives an initial
assessment of this topic, which has long been considered taboo. Since then,
protection of the environment and the prevention of financial crises have led to
ever more fanciful ideas about taxation – with one limitation that is common to
all these deliberations: these resources are conceived as contributions either to
the national budget or to a hypothetical global fund, but never to the
Community budget which remains the black hole of European political debate.
The decision lies with the governments. If they prefer to rule out all new
expenditure or all new taxes in their crisis exit strategies, the Union has no
choice but to help apply these austerity measures. If, however, they consider it
necessary to launch new budgetary initiatives, then the Union should be
involved.
One key consideration that is ultimately overlooked is the fact that the budget
anywhere is the true instrument for measuring the spirit of solidarity. And the
European budget is also a measure of the trust placed by its stakeholders in this
joint venture, the societal bond or
affectio societatis
that unites the European
family.
To cap the EU budget is to cap faith in Europe, and to slam the
brakes on solidarity between Europeans.
The unedifying squabbles about the
very principle of helping Greece are, alas, a sad example of this.
The interest of a common European approach for national budgets: the
"European dividend"
The European dimension can help Member States emerge from the crisis better
equipped to balance and maximise the efficiency of their finances.
All that is basically required is simply to apply the principle of subsidiarity in
financial matters. Each time the Union exercises a power in the place of a
Member State, this should not only be done without imposing a new fiscal
burden on the taxpayer but, all things being equal, it should also help reduce
total expenditure. This is exactly what large industrial groups do:
they pool
common services to benefit from economies of scale.
8.
There are then two approaches to designing the Union's new external action
service, but a wide range of intermediate solutions exists between the options
of creating a 28th diplomatic network and merging the existing 27 national
networks within a unified European service. Whilst it is understandable that all
Member States want to be represented in Washington or Peking, the presence
of 4 EU Member State embassies, in addition to the EU embassy, in Botswana
is at least three too many. The same applies for consular services, as the
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5.
6.
II.
7.
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Schengen agreements and European Treaties establish the principle of
unlimited consular cooperation between Member States.
9.
Whilst the savings made may be relatively modest in the case of diplomatic
and consular services, they can be much more substantial in other areas, either
through the transfer of similar competences to Brussels, or quite simply
through the systematic comparison of actions by the different parties with a
view to avoiding the duplication of effort. In the field of research, for example,
the Union allocates substantial funding of around 8 billion euros each year to a
framework programme. On top of that, however, comes national expenditure,
the bulk of which is decided without knowing what neighbouring countries are
doing, leading to duplication and fruitless competition. The same applies to
development aid. When the national budgets are added up, the figure produced
is ten times that of the Community budget, which itself is duplicated by the
intergovernmental budget of the European Development Fund. Out in the field,
Member States' representatives and those from the various competent
Commission services are unaware of, and compete with, each other to the
detriment of sound management and, more importantly, good diplomacy.
When times are hard, this type of waste can no longer be tolerated.
The defence sector may be taboo, but it is an even more promising area for
making savings. The risk of overlap between the European Union and NATO
that our American friends constantly go on about should bring a wry smile to
the face compared to the scale of the redundancy that exists between our
national armed forces. Our 27 armies have a combined total of 2 million
personnel in uniform. Less than 5% of them are capable of carrying out a
"high-intensity action", as it is euphemistically known - i.e. fighting. How, in
2010, can we justify this piling up of disparate resources – which are
sometimes modern, often outdated and always redundant – the cost of which is
disproportionate to their potential effectiveness which, in any case, will never
be measured? The Afghan battlefield provides a cruel illustration of the true
scale of comparative military capacity of all NATO members.
It is now twenty years since the Cold War ended, and we have barely
benefitted from the "peace dividend". On this side of the Atlantic, the
"European dividend" has been lacking. The unprecedented crisis in all our
national budgets offers a unique opportunity to finally do what common sense
dictates, what public opinion expects (opinion polls show support throughout
the continent for the pooling of defence resources) and what our own military
staff advise, having been freed from the bonds of international cooperation for
twenty years, and that is for NATO and Europeans to share the role of
defending Europe in the world of today. True European cooperation is the only
way for us to make substantial savings in defence without jeopardising our
security.
The vast complexity of funding European policies
Contrary to what people might think, the Union budget is far from being the
only instrument for financing European policies and, by extension, actions
related to common European objectives.
In fact, there are no less than seven
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10.
11.
III.
12.
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categories of sources, each of which obeys different rules.
13.
The European budget
itself. Since the introduction of the Lisbon Treaty, this is
adopted by agreement between the Council and Parliament under a specific
codecision procedure. In 2010, it amounts to 123 billion euros. Since 1988, the
annual budget has been locked into a multiannual framework which places a
ceiling on expenditure in 5 categories. The current framework covers the years
2007-2013 and will be subject to a mid-term review in 2010.
The European Development Fund (EDF),
finances aid to ACP countries. This
is an inter-state fund but is managed under the fairly close political control of
the European Parliament. Everyone agrees that it should eventually come under
the Community budget, but each successive rotating Presidency quickly gives
up on the idea: the formula for allocating funding between the Member States
is different from the Community formula, and it can only be renegotiated as
part of a general overhaul of European finances.
Governments are tempted to replicate this type of formula: they made use of it,
almost surreptitiously, at the European Council of March 2010 to finance the
aid promised by the EU to developing countries to combat climate change.
Unlike the EDF, however, this is not currently a fund that has a statute,
operating rules and democratic control. The governments have quite simply
reached agreement on the principle, the amount involved and the contributions
by Member State – without making use of the Community budget.
Official contributions by the Member States to financing European policies or
institutions.
This is a fairly broad and diverse area encompassing:
-
the national co-financing of Community programmes requiring such
funding, such as the structural funds, cohesion policy, or the research
framework programme;
national funding that supplements Community programmes or is
supplemented by the latter: the financing of ESA space programmes,
and financing for the operation of most European agencies, for
example;
expenditure committed by the Member States to actions that parallel
Union actions are a variant of this category, as in the case of
peacekeeping operations where the civil expenses are borne by the
European budget, following the appropriate procedures, whilst each
Member State remains responsible for its expenditure on military
operations. It is worth noting that Member States that agree to take part
in such operations pay twice over (in their national budget and in their
contribution to the common budget), on top of the human losses
incurred: this is an area in which there is some room for improvement
in Community solidarity.
14.
15.
16.
-
-
17.
National expenditure contributing to the achievement of common European
objectives.
This is undoubtedly the largest category by size, but also the most difficult to
pin down accurately. "Common European objectives" should be interpreted as
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areas in which the legal and financial competence basically remains in national
hands, but in which the Member States agree to assign themselves the same
objectives: the Lisbon Strategy, the climate and energy package, and the
European Security Strategy are the best examples of this.
18.
Identifying and quantifying this expenditure is very important for two reasons.
On the one hand, faced with the extreme difficulties involved in increasing the
European budget, it is the only way of verifying that these major objectives can
be financed. Secondly, the proper use of these funds poses a problem in terms
of democratic control, and thus for coordination between the national
parliaments that use the funds and the European Parliament, which is
responsible for monitoring the achievement of the objectives set.
Expenditure committed by Member States for the benefit of EU citizens who
have come to their country to make use of their public services.
This radically new problem has not been the subject of any studies in a
Community context, even though it is already five years since the Watts
judgment by the Court of Justice triggered the situation. The Court obliged the
NHS in the United Kingdom to pay a French hospital the costs of an operation
for the treatment of a British national who had not been able to obtain
appropriate treatment in her own country. This validation by the Court of the
"right to health tourism" has had implications, with Spain, whose hospital
services are particularly valued by its neighbours, opposing the draft directive
intended to implement it. The problem cannot, however, be avoided for ever,
especially since it is not restricted to the field of health. With Community law
now doing away with means testing for a European citizen to live in another
Member State, sharing of the social welfare burden will need to be negotiated
between the Member States – bilaterally, multilaterally or at Community level.
Some form of clearing house will no doubt be needed. It would be better to
give thought to this matter and reach agreement before being submerged by the
number of cases.
EIB loans,
which finance Community projects, often alongside European
funds. The EIB is a unique institution which was created by the Treaty of
Rome, but whose sole shareholders are the Member States, and is a powerful
financer of investment decided in Brussels. Its role can only get stronger during
a period of very poor budgetary performance.
There is now
one other category of loans granted by some Member States to
others experiencing financial difficulties.
The Treaty made provision for a
Union mechanism to provide financial assistance to Member States
experiencing exceptional difficulties (Article 122). Since the Greek crisis, there
is also now the possibility for certain governments to grant public loans, even
to a eurozone country, using an allocation formula decided on a case-by-case
basis. The legal and political validation of this decision is a matter for the
national parliaments but, since it relates to a display of European solidarity and
the functioning of the eurozone, their actions should not exclude the European
Parliament, making this is another new area for interparliamentary cooperation.
An interparliamentary conference as the instrument of coordination
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19.
20.
21.
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22.
In the eurozone, the most widespread parliamentary practice on budgetary
matters is to separate the orientation debate, which is generally held in the
spring, from the vote itself, which takes place in the autumn.
Why not
ask the national Parliaments to hold a common debate before
their own individual orientation debates?
This could be held by video
conference: each party would feel more at ease in its own surroundings, and it
would also be easier to mobilise the national press.
There would be three significant advantages in such a debate even taking place.
-
It would obviously have to be based on common economic
assumptions: the forecasts on GDP, interest rates, the euro exchange
rate, oil prices, etc. should be identical. This would be a major step
forward from the current practice in which each Member State chooses
the forecasts that suit its choices.
The opening of a national debate on budget guidelines that takes
account of the European dimension and the outlook for each of its
partners would form a formidable bulwark against the allure of
isolationism.
Finally, this would obviously provide an opportunity to take stock and
draw mutual comparisons about the way in which each country is
honouring its European commitments with respect, for example, to the
Stability and Growth Pact or policies relating to the 2020 Strategy, the
main sanction and the main incentive being how that country is viewed
by its peers.
23.
-
-
24.
It is worth remembering that the idea of making these national comparisons
was at the very core of the Lisbon strategy, but that governments objected to
any publication – unless classified as confidential – of individual performances
that would not have flattered certain national egos. This benchmarking is,
however, an essential tool, and mobilising parliaments is one of the best ways
of ensuring that the media and public opinion get to hear about it.
A debate of this nature would be a first step towards restoring order in the way
that the financing of European policies is broken down between the
Community budget, the national budgets and EIB-style funding. At the same
time, it would offer an opportunity to reflect on the introduction of genuine
democratic control over co-financed actions.
Let us take a specific example. The Union is involved in a peacekeeping
operation. Armed with the powers conferred upon her by the Lisbon Treaty, the
High Representative coordinates the action by the military forces – paid for by
the Member States that were willing to take part –, the means of cooperation
provided by the Member States, and those of the different Commission services
involved. If necessary, she can suspend aid negotiations and even trade
negotiations conducted by the Commission with one of the parties involved in
the conflict. The Union can now take action on all fronts, and this action should
therefore be monitored and judged on that basis. As things stand, neither the
national parliaments nor the European Parliament are in a position to do so:
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26.
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each is restricted to looking at how its own appropriations are being used.
27.
Looking at another example, the increasing number of natural disasters has
prompted the Commission to look into setting up a European civil protection
force, and the Commission is working on this dossier. Here too, there will be a
combination of national and Community resources: who will control what?
And if some Member States embark on cooperation with each other, in
whatever field, some means will need to be found of combining control by the
national parliaments with a Community vision.
Towards a European financial conference
The urgency of the post-crisis period will obviously mean that a certain number
of pragmatic initiatives have to be taken without waiting for global
negotiations. These negotiations will, however, quickly become necessary if
we are to avoid becoming tangled up in a web of funds, mechanisms, partial
agreements and allocation formulae that slip out of the control of those who
devised them and, obviously, out of the reach of any form of political or media
supervision.
Long, complex and extremely delicate political negotiations will be required to
give the Union its financial status, but we know from experience that there is a
method for dealing with complex issues in the European context. That method
is the Convention formula: i.e. convening a meeting between representatives of
national governments and parliaments and those of the Community institutions.
The last Belgian Presidency took the initiative of calling the Convention on the
Future of Europe and got its mandate adopted. It took almost ten years, but the
Union now has its new institutions.
The upcoming Belgian Presidency could
convene a European financial conference that has a similar composition.
Its task would be to come up with a comprehensive political agreement on the
division of roles between the national and Community budgets regarding the
financing of Community policies, the arrangements relating to the Union's
budgetary resources, and democratic control over the whole apparatus.
28.
V.
29.
30.
31.
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