OPINION

Back to growth: Reforming the EU budget

In 2003 the Sapir Report concluded ?the EU budget is a historical relic.? Eight years later, amid a sovereign debt crisis, EU leaders in the Council and the European Parliament continue to argue that the road to competitiveness consists of more of the same. More taxpayer money to landowners and food-processing giants. More market distortions in the agricultural sector. More subsidies to coal mines, pop concerts and fuel for fishing vessels. And we wonder why we are not competitive.

The EU has achieved great things over the past 20 years. We have the single market and the euro in place. The Lisbon Treaty gives us the constitutional stability we need and the agreement on the European Stability Mechanism provides a foundation for long-term financial stability. I am confident Europe will once again rise to the challenge. Defeatism is for euroskeptics and ?told you so? people. But if we want to boost growth in line with the Europe 2020 strategy, we need to undertake serious reforms. We need to start now, by reforming our own budget.

From this perspective, the Commission?s Communication on the EU budget review was disappointing, lacking a clear reform agenda. Ultimately, the EU budget is made up of scarce resources that could otherwise be used for private investment/consumption or public spending at the sub-federal level. The EU budget should therefore fund activities that provide real European added value through economies of scale or solutions to cross-border challenges. Today, a large part of the EU budget consists of items that do not meet these criteria.

The future EU budget must reflect a reality where many members are forced to make substantial cuts in their national budgets. The next Multiannual Financial Framework should therefore be sharper, slimmer and more focused on growth. A reasonable target is a budget ceiling well below 1 percent of EU GNI. Rather than preserving past priorities, the EU should redirect expenditure to areas such as R