Commissioner Grybauskaitė Talks Up Budget Reform
Updated: 11th November 2008
By Dalia Grybauskaitė EU Commissioner for Financial Programming and Budget
The extraordinary financial crisis gripping Europe and the world continues to captivate headlines with dramatic events unfolding and cracks in the real economy appearing.
As Europe takes up its role in the reform of the global financial system, one thing is plain: survival and success means redoubling efforts to tackle long-term strategic issues in all areas. This includes the way Europe spends its own resources.
Clearly, the European budget of around €130 billion won’t provide a fast answer to today’s problems on its own – the sum seems paltry compared to the trillions mobilised to relieve the current upheaval. But it can help to ensure European money is invested in the right place, on the right things in the right way. The European budget has an important role to play in responding to immediate needs and stimulating solutions to medium-term challenges - like through the European Globalisation Adjustment Fund for workers that have been made redundant, or the proposal for food aid for the most deprived. But it could and should do this better. In today's constantly evolving economic situation an effective, flexible, modern budget is more important than ever before.
One of the first steps in reform will be to overcome the obsession with "juste retour", or each country's desire simply to "get its money back" from the EU budget. A budget designed simply to give countries their cash back on contributions cannot deliver its policy objectives effectively. This means rebates and corrections have to change as well. When the UK obtained its rebate in 1984, the budget was different and Europe was too. A Union of nine countries in the eighties has seen expansion to today's 27. Britain has gone from a country in economic decline in 1984 to one of the Union's richest Members. All of these massive changes, coupled with today's crises, are reasons why a fundamental reform of all aspects of European spending, including thorny issues like the rebate and the common agricultural policy, is so important.
The good news is that reform is already underway. Over the past year the European Commission has run a public consultation calling for a no-taboos debate on where EU cash should go and how Europe's budget should be modernised. Participation was wide and the single biggest message was the definite desire for change.
Nearly 80% of EU money goes at present to two main areas: agriculture and cohesion. This leaves only leftovers for more future-looking policies such as innovation, R&D, technology, the fight against climate change – the precise areas that will help Europe be more competitive in a rapidly changing economy. Many of the contributions to the consultation called for Europe to invest more in policies geared towards growth, putting competitiveness at the top of the list. Many also stressed the need for additional spending on the environment, research efforts on energy efficiency and investment in new technologies.
The hottest topic has been predictably on agricultural policy. Taking over 40% of the budget there is a consensus that reform needs to happen but opinions differ on how. Many feel that funding in this area is still skewed to favour richer Member States. Calls to phase out direct aid gradually or to look at co-financing were frequent. A desire to align the CAP with new common goals and shift much of rural development to cohesion policy featured high on the list too.
Overall, what the public seems to want is to eliminate all exceptions, showing the wish for a simpler, more transparent budget. One of the biggest challenges for a genuine reform of EU spending will be to make sure we don't let short-term interests stand in the way of long-term European goals. The world may still be in crisis-management mode, but this doesn't have to be the case for the future of the EU budget. The reform exercise is our strategic opportunity to prepare for life after the turmoil. A crisis often forces the questioning of past practices and policies of old. Maybe the current financial chaos will be the opportunity that makes way for courageous, fresh thinking on Europe's priorities for the future? I hope so. That is exactly what this budget reform is all about.
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