Maintaining EU budget crucial to growth objective
For many regions and member states, public investment would be minimised or impossible without the contribution of the EU budget.
ON Thursday and Friday, the European Council will test the EU’s will when it comes to an ambitious budget for 2014 to 2020.
The European Parliament, which must approve the proposed budget, is not prepared to accept a smaller EU multi-annual financial framework (MFF) than the current one.
Some would argue this is illogical or irresponsible given the austerity climate that pervades some parts of the bloc. In fact, the very opposite is true. Vociferous calls for cuts in the EU budget may be popular, but they are not economically sound. After all, cutting the EU budget means cutting the most powerful form of economic stimulus available in the EU. At a time of crisis, we need that stimulus more than ever to promote growth and jobs.
The budget is not large but it is important, it represents only about 2% of total government expenditure in the bloc, and is more than 45 times smaller than the sum of government expenditure in the member states. The EU budget is primarily for investment and 94% of its total returns are invested in EU states or go toward the bloc’s external priorities. For many regions and member states, public investment would be minimised or impossible without the contribution of the EU budget.
The budget is a part of the solution to enable Europe to emerge from the current crisis by promoting investment in growth and jobs and helping countries tackle structural challenges such as loss of competitiveness, rising unemployment, and poverty. If we are serious about a masterplan for growth, we need to provide the necessary means.
The budget is an investment vehicle that boosts growth and creates jobs. For example, it finances crucial pan-EU transport and energy links. It helps to foster innovation and boost research and development. It leverages investment, allows for economies of scale, and cannot run a deficit.
The strategy for re-launching the European economy, approved by all the EU states, requires that the EU does more at European level. The heads of government cannot keep giving the EU more and more tasks to perform while at the same time cutting its budget; that is simply asking the impossible.
Put simply, an ambitious EU needs an ambitious budget. All EU states and the European Parliament have committed to this common growth strategy, called Europe 2020 and is a comprehensive response to the challenges the EU is facing.
The MFF is one of the main tools for delivering the strategy. It is a budget for growth and investment. We cannot speak all the time about the need for growth and afterwards not be coherent when proposing the means for investment.
Part of the solution to growth is a strong EU cohesion policy. It should remain a key investment tool for our countries. Furthermore, cohesion policy benefits the entire union by strengthening the internal market and increasing economic convergence as well as channelling investments to areas of potential growth and supporting structural reforms in EU states.
What about the revenue side? The European Parliament strongly believes that the divide between opposing camps of EU states led by the net contributor countries to the EU budget, on the one hand, and by the net beneficiary countries of the EU budget, on the other, in a system which creates a purely accounting-based vision of “fair return” is incomprehensible and unattractive to European citizens.
Financing the budget should return to a genuine system of own resources. In the medium term, we must end existing rebates and other correction mechanisms.
The proposals on a financial transaction tax and a new EU VAT as own resources — which are aimed at reducing the share of member states’ gross national income-based contributions to the EU budget to 40% by 2020 — are welcome.
The negotiations on the MFF are a test of the EU’s ability to act in the interests of European citizens and are a test of whether the union can live up to is promises. EU government leaders in proposing an ambitious budget at the summit on Thursday and Friday, will not only be doing the right thing for Europe, they will also be showing to the wider world that Europe is capable of taking tough decisions.
* Martin Schulz is president of the European Parliament and Ramón Luis Valcárcel Siso is president of the committee of the regions
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