Blog Post

How to read the EU budget deal? I

Now that the European Council has approved the MFF 2014-2020 commentators are indulging on an evaluation of “who wins, who losses”, whether at stake are policy objectives or countries. The variety of opinions is disorienting at best.

By: Date: February 15, 2013 Topic: European Macroeconomics & Governance

How to read the EU budget deal?

How to read the EU budget deal? II

Now that the European Council has approved the MFF 2014-2020 commentators are indulging on an evaluation of “who wins, who loses”, whether at stake are policy objectives or countries. The variety of opinions is disorienting at best.

The new figures are typically juxtaposed to those of the MFF 2007-2013. Any comparison that uses billions of Euro should be done in constant prices and be adjusted for latest economic forecasts. However, even when all the technicalities are being sorted, the comparison of updated 2007-2013 figures with those contained in the deal of 8 February is misleading because the figures initially agreed at the beginning of the current financial perspective have been successively inflated by unexpected expenditures and a disappointing evolution in the EU GNI. 

For a comparative assessment of the political deal underpinning the MFF 2014-2020 one should NOT look at how the 2007-2013 EU budget looks now but at how it looked at the time it was agreed during the European Council of December 2005, with a focus on what each heading represented then as a share of total EU expenditures and in proportion to what the EU was able to pay. Table 1 shows figures in i) billions euros (constant prices), ii) as a percentage of the total size of the EU budget, and iii) as a share of EU GNI (data available at the time of the deal). The following is worth noting.

First, the composition of the EU budget has not been dramatically altered: one can hardly talk of a new EU budget! Still, it is noteworthy that spending for agriculture fell to 34 from 43 percent of total expenditures, whilst the growth-related chapters, competitiveness and cohesion, have gone from 44 up to 47 percent of the total budget, an improvement, yet not really a revolution.

Second, when looking at the EU’s availability to pay as a proportion of her means, less is spent now on agriculture, more on security and citizenship, and the same amount on Europe’s relations with third countries and on administration. The resources dedicated to what are being portrayed as the most growth-enhancing chapters are roughly the same as in 2007-2013, up to 0.47 from 0.46 percent of EU GNI.

True, the so-called competitiveness chapter has being brought up to 0.13 from 0.9 percent of EU GNI, mostly as a result of the new money added through the Connecting Europe Facility, but this is only a qualified success. It is difficult to argue that the competitiveness heading is by definition more growth-enhancing than the cohesion chapter. The latter has been rebranded “investment for growth and jobs” and a minimum share of the received funds must be used to support EU2020 objectives. It would be artificial to treat the two chapters as separate entities. Moreover, some of the expenditures under the competitiveness heading may not ever materialize. In 2011, for example, of all unused funds, the EU de-committed 2.3% belonging to the competitiveness chapter and just 0.6% from the cohesion chapter.

The political interpretation of the deal is that national governments are just as (un)willing to invest in economic growth as they were in 2005 in spite of the fact that the growth challenge is much more pressing now than it was back then.

Table 1: The MFF 2014-2020 versus MFF 2007-2013

Source: Bruegel based on official European Council conclusions


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.


Warning: Invalid argument supplied for foreach() in /home/bruegelo/public_html/wp-content/themes/bruegel/content.php on line 449
View comments
Read about event

Upcoming Event

Jan
24
12:30

Corporate taxation in the digital era

How can we address digital taxation in the EU? Is the proposed "equalisation tax" on turnover the best policy to tackle the challeges posed by digital taxation?

Speakers: Johannes Becker, Dmitri Jegorov, Maria Demertzis, Stephen Quest and Stef van Weeghel Topic: European Macroeconomics & Governance, Innovation & Competition Policy Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic More by this author

Podcast

Podcast

Remaking Europe

This instalment of the Sound of Economics features Bruegel fellows Reinhilde Veugelers, Simone Tagliapietra and J. Scott Marcus explain how European industries are adapting to new manufacturing, and what more can be done to help EU countries and companies keep pace with the burgeoning 'Industry 4.0'

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: January 19, 2018
Read about event More on this topic

Upcoming Event

Feb
2
10:30

Europe’s immigration and integration challenges: Financial and labour market dimensions

The event, organised by Bruegel in cooperation with the Institute for International Affairs will discuss these and related questions and will also feature the launch in Rome of the study authored by Zsolt Darvas on the impact and integration of migrants in the European Union.

Speakers: Roberto Ciciani, Zsolt Darvas, Marcela Escobari, Tatiana Esposito, Manjula M. Luthria, Carlo Monticelli, James Politi and Nathalie Tocci Topic: European Macroeconomics & Governance Location: Rome, Italy
Read article More on this topic More by this author

Blog Post

Macroprudential policy: The Maginot line of financial stability

The ability of macroprudential policies to assure financial stability and thus leave central banks free to assign the interest rate tool exclusively to price stability is unproven. As the Maginot line did not protect France from a German invasion in WWII, so macroprudential policy may not be sufficient to counter financial instability. Central banks should prepare to deal with dilemmas in the use of the interest rate.

By: Francesco Papadia Topic: European Macroeconomics & Governance Date: January 17, 2018
Read article Download PDF More on this topic

External Publication

Reconciling risk sharing with market discipline: A constructive approach to euro area reform

This publication, written by a group of independent French and German economists, proposes six reforms which, if delivered as a package, would improve the Eurozone’s financial stability, political cohesion, and potential for delivering prosperity to its citizens, all while addressing the priorities and concerns of participating countries.

By: Agnès Bénassy-Quéré, Markus K. Brunnermeier, Henrik Enderlein, Emmanuel Farhi, Marcel Fratzscher, Clemens Fuest, Pierre-Olivier Gourinchas, Philippe Martin, Jean Pisani-Ferry, Hélène Rey, Isabel Schnabel, Nicolas Véron, Beatrice Weder di Mauro and Jeromin Zettelmeyer Topic: European Macroeconomics & Governance Date: January 17, 2018
Read about event More on this topic

Upcoming Event

Jan
29
09:30

Integration of migrants in the EU

This event will discuss the integration of migrants in the EU as well as the EU's response to the recent refugee crisis

Speakers: Herbert Brücker, Jutta Cordt, Zsolt Darvas, Naika Foroutan, Marcel Fratzscher, Manjula M. Luthria, Walt Macnee and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Mohrenstraße 58, 10117 Berlin, Germany
Read about event More on this topic

Upcoming Event

Jan
30
12:30

Why think tanks matter in the era of digital and political disruptions

Bruegel is pleased to host this panel discussion as part of the global launch of the 2018 Global Go To Think Tank Index, published by the University of Pennsylvania’s Think Tanks and Civil Societies Program.

Speakers: Matt Dann, Shada Islam, Blanche Leridon and Hlib Vyshlinsky Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic

Blog Post

Does the European Parliament miss an opportunity to reform after Brexit?

While Brexit negotiations are beginning to progress, the European Parliament is preparing to vote on the possible reallocation of seats following the UK's departure. With many of the current proposals reflecting Member States' concerns about losing seats, this paper advocates for options that could better achieve equality of representation even within the constraints of the EU treaties.

By: Robert Kalcik, Nicolas Moës and Guntram B. Wolff Topic: European Macroeconomics & Governance Date: January 10, 2018
Read article Download PDF More by this author

Policy Contribution

European Parliament

Bank liquidation in the European Union: clarification needed

Critical functions and public interest. What role do they play in Member States’ decision to grant liquidation aid? The author of this paper looks at how resolution and liquidation differ substantially when it comes to the scope of legislation applicable to the use of public funds and how the diversity in national insolvency regimes is a source of uncertainty about the outcome of liquidation procedures.

By: Silvia Merler Topic: European Macroeconomics & Governance, European Parliament, Finance & Financial Regulation, Testimonies Date: January 10, 2018
Read about event More on this topic

Upcoming Event

Feb
27
12:30

Bruegel - Financial Times Forum: The future of euro-area governance

The third event in the Bruegel - Financial Times Forum series will look into the future of euro-area governance.

Speakers: Maria Demertzis, Gideon Rachman, Manfred Weber and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic More by this author

Podcast

Podcast

Multispeed Europe

In this episode of the Sound of Economics, Maria Demertzis, and Italy's State Secretary for European Affairs Sandro Gozi, discussed about the issue of member-state integration in two or more speeds, one of the recurring questions in the debate about the European project.

By: The Sound of Economics Topic: European Macroeconomics & Governance Date: January 3, 2018
Read article More on this topic More by this author

Opinion

Opportunities and risks in Europe in 2018

The new year could very well see the positive story of 2017 continue in Europe – but a number of looming policy and political problems cannot be ignored.

By: Guntram B. Wolff Topic: European Macroeconomics & Governance Date: December 30, 2017
Load more posts