FT premium subscribers can click here to receive Free Lunch every day by email
It really kicks off today: the EU’s top leaders gather in Brussels for a special summit on the bloc’s seven-year budget, known in the jargon as the multiannual financial framework. Charles Michel, president of the European Council, has taken a bit of a political gamble by trying to bang top heads together at an early stage to avoid the usual last-minute talks before the existing framework runs out at the end of this year.
As I have written before, European leaders should treat the EU budget as a vehicle for statecraft, not as a zero-sum game over who gets the best from financially small transfers. Predictably enough, that is not how it is playing out — at least not yet. The talks seem to be stalled on disagreements between (most of) the net contributors, who want to limit the budget’s size, and (most of) the net recipients, who are resisting any argument that the UK’s departure should lead to cuts in the funds that benefit them, and who together with the European Parliament are pushing for a larger budget.
For a flavour of the dispute, read Austrian chancellor Sebastian Kurz’s op-ed in the Financial Times, which sets out the position of the “frugal four” — his own country plus the Netherlands, Denmark and Sweden — as well as that of Mateusz Morawiecki, Poland’s prime minister, who argues that the richest states benefit the most from the single market and that it is therefore wrong to focus on net balances. (All the FT’s coverage of the budget talks can be found here.)
Net balances remain at the core of the disagreement, however. And so talks on the size and composition of the budget are likely to be deadlocked by irreconcilable positions on how much each country is willing to give up or receive on net — unless Mr Michel and the national leaders manage to find another approach to the talks.
What could such an approach consist of? Jean Pisani-Ferry, senior fellow at the Bruegel think-tank and a veteran of European economic and financial debates, has an intriguing idea. He proposes turning things round and grabbing the bull by the horns by first seeking agreement on the net transfers implied in the budget.
“There are three issues with the budget: net balances, size and content,” he pointed out to me. “At present the negotiation is on all three at the same time, which results in member states fighting over individual policies depending on whether they are benefiting from them or paying for them . . . start by having a phase 1 negotiation on net balances and to negotiate over content once it has been completed.”
In other words, get explicit about who contributes and receives how much at the very start, and only once you have managed to strike a deal over these transfers do you move on to discussing the size and content of the budget. You then add a settlement mechanism so that, at the end of the day, any “over/underpayments” relative to the agreed net transfers are refunded between the affected parties.
This approach has a number of advantages. One is that with the net transfer discussion out of the way, you could determine the size and composition of the budget on the merits. This would do more justice to the relevant arguments, which should be about what the budget is for and what role it plays in the EU’s policy agenda towards meeting mutually agreed goals (say on the EU’s “strategic autonomy” or the carbon transition).
“Ideally,” said Pisani-Ferry, “this should be a discussion over European public goods that can again be kept separate from the distributional one.” And here it is interesting to note that once distributional issues are out of the way, there could be meetings of minds across the contributor-recipient divide. Several of the frugal four, for example, have governing coalitions that include green parties, which may be positively inclined to more common spending if it is directed towards their priorities such as climate-related public goods and do not lead to bigger cross-country transfers.
Besides, this approach could make it easier to reform the established spending programmes in the budget to make them contribute more to the EU’s current priorities. As Pisani-Ferry said: “If you want France to reassess the Common Agricultural Policy or Poland to reassess the structural funds, you’d better give them assurances that they are not going to lose money in that game.”
Everyone knows that the outcome of the talks, if structured as in the past, will be somewhere close to the 1.07 per cent of EU gross domestic product currently on the table. But, in the process, a lot of energy and goodwill will be wasted on moving the needle a few hundredths of one percentage point and not on coming to a better shared understanding of how to use the budget as a political tool to achieve common goals, which for every member state outweigh the relatively trivial amounts of money at stake. The EU can do so much better. But for that it needs to get the process right.
Other readables
Numbers news
- The UK government has unveiled its plans for a new immigration system after it is no longer governed by EU rules.
Source: Economy - ft.com
