Splitting Europe’s budget bill

Who are the misers and who are the gold-diggers among the EU’s 27 member states?

Some are Gold Diggers, happy to reap the benefits of integration and let others pick up the tab. Others are Misers – fans of budget discipline and a smaller CAP, but keen to claim compensation for their net balance deficits. Others still are Fence-Sitters: quick to pay lip service to the idea of budgetary discipline, they are still keen to maintain CAP spending levels.

That is the conclusion of a new paper analysing the EU member states’ responses to the “fundamental” review of the EU budget, which the European Commission launched in 2007.

We examined the responses of the member states, because their views, expressed through the European Council, are by far the most important consideration in determining the future of the budget. In particular, we examined their views on the Common Agricultural Policy. The CAP is the biggest single item in the EU budget (accounting for 45%) – and the biggest cause of politically contentious ‘budget imbalances’ among member states.

As a result, we devised a ‘rough guide’ to the position each member state is likely to take on the future of the EU budget. We put each state into a category that best describes its overall stance, based on its location along two axes. One measures its preference for simplifying the budget (for example, by scrapping all compensatory mechanisms), the other its thriftiness (such as its support for budget discipline or shrinking the CAP).

We called our first category the Modernisers – economic spendthrifts such as Denmark and Sweden who want not only to shrink the CAP and simplify the budget, but also to scrap all corrective mechanisms, including the UK’s notorious rebate.

Like the Modernisers, the Misers favour budget discipline, shrinking the CAP, and national co-financing. But they also want to keep getting compensation for net balance deficits, and support corrective mechanisms such as budget rebates. Notable Misers are Germany and the UK.

At the other extreme are the Big Spenders, including Bulgaria and Ireland. They see a major role for the EU budget and want to maintain current CAP funding. Even so, they pay lip service to the idea of gradual reform and budget discipline – and some, such as France, support co-financing as a way of minimising their own future net contribution.

Like the Big Spenders, the Gold-Diggers want to maintain CAP spending and oppose cutbacks. But they are happy to reap the benefits and let other states clear the tab. They also oppose co-financing and do not even pay lip service to budget discipline. Notable Gold Diggers include Greece, Hungary and Spain.

Finally, there are the Fence-Sitters – the likes of Austria, Italy and Portugal, who pay lip service to the idea of reform and budgetary discipline, but also want to maintain CAP spending.

These categories illuminate the fissures that are likely to influence the future of the EU budget. Of course, it is worth bearing in mind that what member states say in their official response to the Commission’s consultation does not necessarily correspond with what they really think. Doubtless many are keeping their cards close to their chest, ready to declare their hand at a later stage. Others may be talking out of both sides of their mouth, coming across as more accommodating to other states’ positions than their own domestic political interest in practice allows. For example, many member states say they oppose juste retour – the principle that member states should get out of the budget more or less what they put in – but how many really mean it?

When it comes to the budget, the EU is like a large group of diners enjoying a night out. First they quarrel about what to order, then they squabble over how to split the bill. But if the Commission’s consultation proves anything, it is that the majority of states support budget reform. In particular, they think Europe’s agricultural policy needs fixing. President José Manuel Barroso’s new Commission now has an opportunity to put the budget review at the top of its agenda. Europe’s citizens deserve nothing less.

James Clasper and Jack Thurston are the authors of “Does the CAP Fit? Budget reform, the common agricultural policy, and the conflicting views of EU member states”, produced by FarmSubsidy.org.

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