How to overcome the status quo?

Reforming the EU-budget will be the next mayor reform and negotiation process after having settled the modification of the Lisbon treaty and having implemented the new instruments for closer macroeconomic coordination.

Though the member states in December 2005 mandated the European Commission to review the budget in-depth, it seems that their impetus and the incentives to thoroughly overhaul the European budget faded away. Instead the member states prepare to negotiate the next financial framework as business as usual and stick to the status quo. The member states conduct the budget negotiations strictly according to the outcome for their national net balance. It is hence not the revenue or the spending side of the EU-budget which structure the negotiations and the national positions; it is instead their interplay and the effect on the net-payment-balance which the national governments calculate. Member states will assess the result of the negotiations according to changes of their net payments. This means the mean purpose of the negotiations will be the attempt to overcome the status quo and the net payments logic.

However, the next negotiation round will be different by two reasons:
1. The Commission started the midterm review of the financial framework in September 2007 with a broad public consultation. All member states submitted their position papers and also national parliaments, regional and local authorities, non-governmental organisations and interest groups took part and presented their expectations. This broad public discussion with close to 300 contributions showed the increasing awareness and interest in national parliaments, societies and NGOs for this rather difficult topic and complex negotiation process.
2. The Treaty of Lisbon provides a different arena for the budgetary negotiations with two new players the President of the European Council and the European Parliament. Especially the European Parliament showed that is prepared and willing to use its new rights and increased influence. This massive strengthening of the European Parliament means an upgrading of the parliamentarian dimension of European budgetary policy. And this means there is new player with its own interest and its own agenda and the member states will have to respect this and they will have and to include the new player into the game.
As a result of nearly each negotiation process, there will be potential winners and losers when changing the status quo. But is an unspoken principle of European negotiations that there should be and there will be no loser in the end. This means, if there is a need to change the multiannual financial framework and there is an additional need to develop a way to avoid or at least to hide losses. This is inevitable because the option of the Delors 1 and 2-packages is today impossible, i.e. to increase the volume of the budget. It also seems that the shifting of huge amounts from one expenditure headline to another is not real a convincing option.

There are only two ways to introduce and to implement changes into the European budget:
(1) Modifications should work very slowly, even unnoticeable and invisible.
(2) Modifications should be introduced in the framework of a policy resp. should not alter the volume of financial means visible in the headline of the financial framework.
The European Union already combined these two options for reform the Lisbonization of cohesion policy and the second pillar (esp. cross compliance) of agricultural policy are best examples.

The next negotiation process will also focus on the revenue side. For that reason, it is important that the overhaul of the financial framework explicitly links the revenue and spending sides as the two main components of reform. It will then be the task of the European Commission to develop options for slow and almost invisible changes of the current system of own resources, i.e. to use the time axis and to combine this approach with non-controversial elements, like the abolishment of the VAT-resources.
In a mid-term perspective this process could become the opportunity to agree on a shift in spending priorities of the EU, i.e. additional funds for allocative policies, and on the revenue side to give the EU greater autonomy. In a long-term perspective, the multi-annual financial framework could then develop into an integration policy planning instrument where political priorities are given concrete financial backing.

Peter Becker

About Peter Becker

Peter Becker, M.A., is a member of the research division “EU Integration” of the Stiftung Wissenschaft und Politik (SWP), a leading German think tank and the founding institution behind the German Institute for International and Security Affairs. His areas of expertise are the future of the European Union, German European policy, enlargement of the European Union, social and economic policies in the internal market. His current focus lies on the agenda 2007-2013 and the negotiations on the financial perspective, the future of the European structural policy, the Lisbon Strategy and the future of the European Social Model.