A Better EU Budget

Germany finances 20 of the EU budget but receives only 12 of EU spending.

The EU budget should facilitate such transfers in the eurozone, using structural funds.

To be sure, the EU budget contains flexible instruments, such as the EU Solidarity Fund, which provides emergency assistance after natural disasters.

The EU budget is an investment vehicle that boosts economic growth and creates jobs.

The EU budget leverages investment, allows for economies of scale, and cannot run a deficit.

This framework would reduce incentives for using annual EU budget negotiations to advance political agendas.

The net contributors to the EU budget were the ones who stood to lose the most.

Within days of the votes, they failed to agree on the EU budget for 2007 13.

But the EU budget has already enabled an indirect form of leveraging the European Commission s use of implicit budget guarantees to raise capital on financial markets.

For example, some leveraging of the budget could be allowed, although this would spark controversy, given that EU treaties require that the budget remains balanced at all times.

Ireland has benefited disproportionately from EU largesse during its 35 years of membership, and, in 2008, was still receiving a net sum of 500 million from the EU budget.

While all EU leaders have advocated using the budget to stimulate economic growth, little action is being taken.

Indeed, although European governments have agreed to encourage faster absorption of EU funds in crisis countries, they have refused to pay into the EU budget to enable the funds disbursement.

Ireland has been a major beneficiary of EU subvention since joining in 1973, and, in 2007, it was still receiving a net total of 500 million from the EU budget.

Not all member states contribute equally to the EU budget some are net contributors, while others are net beneficiaries.

The next major reform is expected for 2014, when a new long term EU budget is coming into effect.

For the first time, security related research figures prominently in the EU budget, with 1.4 billion earmarked for this purpose.

Once again, short term national interests are taking precedence over the need for a forward looking, flexible, and efficient EU budget.

Third, member states should not cut the EU budget indiscriminately during negotiations on the Union's long term spending plan for 2014 2020.

Such leveraging of the EU budget would complement the recently established European Stabilization Mechanism (the successor to the EFSM) and the MTFA.

Similarly, Greece will lose its sovereignty insofar as the EU will now directly control all budget relevant decisions of the Greek government.

And, at the most recent EU summit, leaders agreed to commit at least 20 of their entire common budget to climate related spending.

This contradiction signals that national interests continue to prevail in EU budget negotiations, which are often exploited for domestic political gain in member states.

Today, no official figure on the budget deficit in 1999, the year on which the EU based its decision about Greece s entry, is available.

Thus, only bilateral help seems possible, perhaps coordinated by the EU and coupled with strong supervision of the Greek budget and Greece s statistical office.

European leaders must therefore substantially increase research funding when the EU budget is next due for revision in 2008 and 2009. Although the core financial burden will be on the member states, the EU level can make an important contribution.

Greece is the second largest defense spender, relative to GDP, in the EU clearly, in today s economic climate, savings here could provide hugely welcome budget relief.

Willingness could be exhausted if the EU budget is further expanded without reducing Germany s net contribution and narrowing the gap between its financing and voting rights.

The region s debt crisis is undermining cooperation within the larger 27 member European Union, resulting in the spectacular failure of the recent summit on the EU budget.

At the end of EU financed investment projects payments for which are agreed and executed in the annual budget framework the money is transferred to the beneficiary.

This is not to suggest, of course, that just because the EU cannot agree on a budget or a constitution Europe is approaching yet another historical calamity.

If the current EU budget rules are too rigid and are ignored in the face of a shock, then the door is open for imprudent fiscal behavior.

After all, aside from political under representation, Germany s annual contribution to the EU budget (most recently 7.4 billion) makes the country by far the largest net contributor.

The capital would be repaid in annual installments as the funds become available through the EU budget, while the national co financing rate would apply to interest payments.

The budget deficit is now the largest in the EU, and public debt has ballooned, as the government has struggled to compensate for the steep drop in revenues.

The second alarming decision limited the Union s budget to a mere 1 of EU GDP, thus preventing any new common policy initiative for much of the past decade.

The European Union s crisis management missions face similar issues when military forces are involved. EU civilian crisis management is funded directly from the Common Foreign and Security Policy budget.

But it is not yet clear, whatever the Lisbon Treaty says, that Ashton has full control of either the EU external budget or of appointments to the new diplomatic service.

In a climate of budgetary restraint, it is unsurprising that the European Council agreed earlier this year to reduce the EU budget by 3.4 relative to the 2007 2013 MFF.

The 25 Member States of the EU collectively make an important contribution to the Agency's budget and provide a significant proportion of the voluntary contributions to its Technical Cooperation Fund.

Some argue that Europe needs to follow the example of its agricultural policy and introduce a CAP style defense budget so that free rider EU countries start to pay their way.

Unless a mechanism is introduced that facilitates the rapid disbursement of EU funds, thus insulating the budget from destructive politicization, these funds cannot be used to stimulate growth in times of crisis.

Many EU members fear that Sarkozy s government will again break French budget promises, as his demands for growth boosting tax cuts imply pushing back the deadline for eliminating France s deficit until 2012.

The EU would invite non EU states to do likewise