May 2, 2012 / 1:17 PM / 7 years ago

Analysis: When it comes to EU's budget, anger is easier than reform

BRUSSELS (Reuters) - European governments have expressed outrage at a request for a sharp increase in European Union spending next year, seeking to preempt an outcry by Eurosceptic rivals who have picked up support as austerity takes hold in much of the 27-nation bloc.

The European Commission, the EU’s executive, says the proposed 6.8 percent increase is due to long-term spending commitments agreed by members themselves before the economic downturn and accused the governments of being less than honest.

The Commission’s proposal to boost the 2013 budget comes as states are being urged to slash spending to win back market confidence. The Commission has forecast zero growth in the EU this year, and expects public spending as a share of GDP to fall in 11 out of 17 eurozone countries.

The French government described the budget increase as “impossible, unjustifiable and unacceptable”, while Germany, the EU’s biggest net contributor, called it “inappropriate” against the backdrop of the debt crisis.

The increase is likely to be whittled down to 2 to 3 percent but the request could fuel growing popular disaffection with EU policy due to perceptions that Brussels is out of touch and that the centralization of power has gone too far.

“It is a gift for anti-EU parties,” said Mats Persson, director of the London-based Eurosceptic think-tank Open Europe. “It reinforces the perception of Brussels as being a gravy train that is out of touch with ordinary people.”

Eurosceptic parties in many countries have seen a surge in support in recent months, driven by anger among voters over high unemployment rates, the cost of eurozone bailouts for Greece, Ireland and Portugal, and fears that the Schengen passport-free zone has encouraged illegal migration.

The risk is that growing anti-EU populism will undermine efforts to tackle the eurozone debt crisis and lead to a weakening of economic governance in the monetary bloc.


The EU budget is small compared to that of Germany or Britain. At a proposed 138 billion euros ($182.5 billion) for 2013, it is equivalent to about 1 percent of EU gross domestic product, compared with forecast public spending in Europe as a whole of almost 50 percent of GDP.

The Commission says the money is needed to pay for investments already under way. A chunk of EU money is spent on long-term infrastructure projects, such as road-building in Poland, which the Commission says cannot be halted midway.

Other major costs include agricultural subsidies, which are fixed in advance for a period of seven years and paid annually to farmers by national governments on the understanding that the EU will refund the cost.

As a result, economists say there is a logic to the budget plan, even if the figures look excessive on first glance.

“It seems to be true that already pledged commitments would require a significant budget increase,” said Carsten Brzeski, a senior economist at ING in Brussels. “This means that at second glance, the proposal is less out of touch than one might think.”

Only about 6 percent of the EU budget is spent on bureaucrats’ salaries and other administrative costs, including those of the European Parliament, and the Commission said most of the money will be reinvested in national economies to boost growth and competitiveness.

“This is not money for Brussels,” Commission President Jose Manuel Barroso told reporters last week. “It is money (that goes) back to the member states, and it makes sense in many areas to spend it at the European level, not for ideological reasons, but for efficiency reasons.”

“Let’s not put this as a question of a fight between the European institutions and the governments, because it is not true, and my appeal to all governments of Europe is to tell the truth.”

As in previous years, EU officials expect the spending rise for 2013 to be trimmed by governments to a level nearer 2 or 3 percent. Of the proposed 6.8-percent increase, a spokesman for the rotating EU presidency, held by Denmark, said: “It’s a negotiation. The Commission knows it will not get that.”


Critics say the EU budget should be subject to the same discipline as national spending, and that the Commission, which plays a leading role in enforcing the bloc’s budget rules on member states, is guilty of double standards.

Voters in many countries also resent what they see as wasteful spending on the European Parliament’s monthly move from Brussels to Strasbourg, which opponents say costs 200 million euros a year. Many also question the billions of euros in subsidies given annually to farmers and other landowners.

“The Commission keeps referring to this idea of having to pay the bills, but it strikes completely the wrong chord with people,” said Open Europe’s Persson. “Like any household, if you don’t have enough cash to pay the bills you have to find savings in other areas.”

But most of the demands for EU funding next year will come from public authorities in member states, who try to direct as much money as they can from the EU budget to their own areas of interest, such as farmers in France or fishermen in Spain.

“Germany, the Netherlands, France, they created the multi annual financial framework exactly so that nobody could complain about the amounts in the annual budget,” said Jorge Nunez, an analyst at the Centre for European Policy Studies, a think-tank.

“They are the architects of the system that now doesn’t allow the budget to go down.”

The current seven-year EU spending plan is worth 925 billion euros and runs until 2013. It was agreed at the height of credit-fuelled boom in 2006, with little scope for cutting spending aftershocks such as the 2008 financial crisis.

“The governments of Europe approved the budget,” Barroso said, referring to the current seven-year program.

While the Commission’s proposal to spend an extra 9 billion euros next year has stirred anger, the real budget battle centers on the bloc’s next multi-year spending program, which EU leaders will try to finalize in December.

In June, the Commission proposed a 5 percent increase in current spending under the next program, which runs from 2014 to 2020, taking the total to almost 1 trillion euros.

The biggest net contributors to the EU budget - including Germany, Britain and France - have said they want to slice 100 billion euros from the Commission’s proposed total.

Nearly three-quarters of the EU budget goes on farming and regional development spending. France, in particular, is keen to ring-fence farm subsidies, and central and eastern European countries will oppose any reductions in regional aid. That, warn EU officials, means cuts would mostly hit the main growth-enhancing areas such as research and technology spending.

“What are we doing paying for cows in a crisis?” said Nunez of the CEPS think-tank. “There is a moment when you have to ask which priorities we really have to keep.”

Editing by Sebastian Moffett and Philippa Fletcher

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