EU Budget: a victory for the Council

The passing of the EU budget last week by the European Parliament was definitely a win for the Council and the fiscal hawks amongst the Member States. For the first time the EU budget will be cut, and cut by €35 billion (3.5%) over the next 7 year period (this "Multi-annual Financial Framework" allocates the budgets for 2014-2020).

While the European Parliament was able to wring a few concessions from the Council, given that it supported an increase, it's hardly a sign of parliamentary muscle. The centrist alliance of the European People's Party, the Liberals and the Socialists and Democrats bloc were key to passing the budget (537 to 126 votes), with the Greens, United Left and the Eurosceptic Europe of Freedom and Democracy group being the main opponents. The centrist alliance made a few demands that were mostly reflected in the concessions.

In return for its support, the Parliament got:

- Protection of EU funds for research, humanitarian aid and border controls from cuts;
- Retention of unspent funds by the EU, so that these can be used elsewhere (instead of returning to Member States);
- Agreement to ensure the payment of existing commitments under the 2013 budget;*
- Review of the EU's own resources (money directly received by the EU rather than given by the Member States).

The cut in the budget was also reduced from the level demanded by countries such as the UK.

The rationale behind the cuts is that the EU budget needs to reflect the austerity of the Member States - a bizarre idea if the austerity currently practised is supposed to be a policy of necessity rather than ideology, since the EU as an organisation has no debt or deficit. This is because the EU cannot borrow money. The "need" for the EU to reduce spending for the same reason as the Member States is therefore an ideological position rather than an actual attempt to balance a budget or EU public finances. The end result is a reduction in the already low fiscal transfers from the EU in investing in the poorer regions of the EU - taking away an important, if small, support at a time when money is being sucked out of vulnerable economies. So much for solidarity.

It is even more perplexing when a supposedly centre-left party takes this approach.


* The EU budget in 2013 seems to be in a similar position as in 2012, with Member States ironically happy to sign up to spending commitments and then not budget properly for it...