by Georg M. Busch
BRUSSELS/VIENNA, Feb. 12 (Xinhua) -- There was a brief sigh of relief across Europe as heads of state or government finally reached an agreement on the European Union(EU)'s expenditure framework from 2014-2020 last week.
After a marathon 28-hour session in Brussels, European leaders were more or less compelled to reach a compromise not to add to the impression of a complete standstill in European policy.
A novelty of the agreement was that for the first time in EU history, the financial endowment for the next seven years was lower than in the previous period, obliging the EU to financial restraint.
This should be seen as a positive element, despite the furious reaction by European Parliament President Martin Schulz, as well as by the European Commission, that saw its original proposal for total expenditure of 1.05 trillion euros cut down to 960 billion euros.
Yet, in times of global economic recession and severe crisis with mass unemployment in European periphery countries, it was next to impossible for member states to allow Brussels to carry on with business as usual -- and this was the message conveyed to their electorate at home.
Indeed, it is not entirely unjustified to expect from the European institutions to adjust to a slightly leaner financial regime. Over the years, they have steadily increased the territory of their responsibilities and an ever tighter network of regulations has progressively constrained the scope of member states' autonomy.
For the future course of European policy and its effectiveness, it will thus not necessarily be a loss if the EU is subjected to a tighter budget constraint, forcing political and administrative actors to review existing priorities and adjust them.
The bad news is that the negotiations have revealed an almost complete lack of concern for a truly European agenda. Instead, each leader has acted from the perspective of strict national interest and fought until the end for his or her national constituency and its prerogatives.
Like in the euro area crisis, the EU has once again shown its rifts between its North and South, East and West, as well as between its rich and poor members.
The rich countries' main interest was to pay less for Europe and its poorer members, although at the national level their policymakers regularly appeal for solidarity when advocating higher taxes. Conversely, the poorer countries fiercely clung to their subsidies from the budget, while expecting from their people at home to accept major cuts in earnings and social benefits.
Given these circumstances, it comes as no surprise that the new financial framework largely perpetuates existing structures and poorly responds to the challenges of the future. For the rest of the decade, over 70 percent of the EU budget will be spent on subsidies for agriculture and for poor regions.
Agricultural subsidies, the largest budget item claiming around 40 percent of total expenditure, are stubbornly defended by France and other large producers -- whereas the agricultural sector accounts for no more than 3 percent of the EU's GDP.
Likewise, over 30 percent of the budget will continue to be spent via the "structural funds" as assistance to poor regions. Major beneficiaries are countries like Greece, Portugal or Spain where such aid has proved poorly effective. However, it has done little to raise structural competitiveness and economic performance in the areas concerned.
Only a small 10 to 15 percent of the EU budget will be allocated to forward-looking items such as research, innovation, technology and investment in infrastructure like transport, energy and communication networks.
Yet, it is these very domains where spending priorities should be set with a view to raising Europe's technological advancements, encouraging private investment and job creation in order to invigorate the dynamism of the European economy.
While there is general agreement in principle on the crucial importance of these growth-enhancing expenditures, they nevertheless risk being most affected by the budgetary cuts, since they do not benefit from such powerful lobbies and vested interests as the big spending items.
Finally, to put things into perspective: the EU budget, accounting for 1 percent of EU GDP, is rather small in size compared with member states' national budgets, typically claiming over 40 percent of GDP.
It will thus depend all the more on EU member states to set the right policy priorities for competitiveness, growth and job creation. Stronger guidance from the European level would nevertheless have been helpful in this regard.
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