For the common people of Europe, the EU budget appears to be full of negative connotations. It is a threatening concept because it indirectly implies a possible loss of sovereignty, fiscal independence and eventually identity of the Member States. This negative perception is the result of the EU not being in the spotlight of domestic political debates or public discussions in the media.
A closer look at reality reveals the fact that the EU budget represents actually around 1% of Europe’s national GNIs. Somehow, this insignificant number lowers our guard in front of a financially weak supranational political system. Nevertheless, we should not take things so simplistically. One percent might appear marginal but there are socio-political forces that are practically in an informal war over how to spend that limited amount of resources. In this short paper, we will analyse the factors predetermining the creation of the EU expenditure policy. The focus will be on the actors of the game and their interests: the Member States, the private interest groups, the Commission. For more clarity, we will use the cases of the CAP , the cohesion policy, and scientific research policy.
The most important interaction in the area of budget creation is the one among Member States in the Council. It is the product of rational considerations of national costs and benefits. How does it work? States are ready to spend more for the budget, provided that they will gain more for the non-fiscal policy areas (the single market, monetary union). Thus, you will have on one hand an increase in the budget because the losers from the process of economic integration ( weaker Member States) demand compensation in the shape of funds or other projects. The perfect example here would be the creation of the CAP (Common Agricultural Policy). This project was set up to support France and its farmers as a compensation for Germany’s access to the French market in the field of industry as a result of the free market policy. On the other hand, cuts in the spending occur when a state that benefits mostly from the budget can be compensated by other policies.
The result of these negotiations lies in a situation of just redistribution of resources where the net exporters will end up being net contributors to the budget and net importers will be net recipients from the budget. The logic is quite simple. Considering that most of the developed EU countries are democratic systems, voters are aware that much of their economic well-being comes from the integration process. Therefore, they are ready to support a pro-European political platform even if it means contributing more to the budget.
This power struggle is present at sub-state level as well. To be more precise, the CAP produces antagonism at individual level between farmers and consumers. The cohesion policy enhances regional disputes inside the Member States . In the field of research, policy money goes to specific pan-European scientific communities at the expense of tax-payers. One of the underlying causes is obviously the private interests of each of these non-state actors. With regard to agriculture, the COPA (Confederation of Professional Agricultural Organizations) is trying to pull as many strings as possible against the reform of the CAP in its relation to the Commission or European Parliament. As far as regions are concerned, their aim is to receive as much as possible in the shape of structural funds by setting up offices in Brussels or by lobbying by the Commission.
We have seen that with regard to the nation states, the bargaining actually ends up in redistributing resources in a reasonably fair manner. In the case of sub-state level actors, the redistribution does not occur like that. In this case, the logic of collective action sets the scene: the louder an actor is able scream, the more it gets. The more common and uniting the interests of different groups are, the more those groups are able to influence the agenda. The more diffuse the interests are, the more the groups become irrelevant. It would be too costly for taxpayers to mobilize against lobby groups than to just follow the political stream.
The second cause for power struggles at sub-state level has to do with the interests and tactics of the Commission. This institution’s aims are gaining as much power as possible at the expense of the Member States and having its proposals approved. We will now talk a bit about how it uses the expenditure policy to achieve this. First of all, the Commission uses its agenda-setting powers to allocate funds at targeted key groups. In the case of getting a foot ahead of Member States, the Commission is trying to bypass them in the implementation of policy by appealing directly to the regions through the cohesion policy. The tactic here is to promote decentralization and federalization , a model of multi-level governance as opposed to state-centric government. Another tactic here is to weaken the concept of a state protected strong firm by creating ‘Euro-champions’. This is done by promoting projects inside the research policy framework that result in the creation of a transnational cooperation between different national firms. It is a sort of ‘divide and rule’.
With regard to having the proposals approved by the Council and the EP, the Commission buys-off key partners as for example anti-integration states or strong lobby groups. The reform of the CAP illustrates exactly how the Commission acts on behalf only of its own interests. In the 70s and 80s, the Commission obstructed the reform of the CAP to protect the interests of the COPA, a key ally. However, in order to preserve its institutional credibility in front of external actors (in international trade negotiations), the Commission changed position entirely in the 90s by promoting the reform.
Finally, as a concluding act we would support the idea that despite the harsh interactions between all the actors presented above, the result is still a good example of a democratic political system. Competition among private or institutional interests require support from the public opinion which eventually translates itself into projects for the public good, into more information for the voters, into political alliances that can overpass procedural blockages. The fact that the stronger get more than the weak is also not undemocratic in our opinion. Good governance is about allocating resources to the most important areas. It is about prioritizing. The fact that some interests manage to unify better could show that their cause is more serious and thus higher on the priority list of the resource allocation list. Lastly, after the Lisbon Treaty the EP has become co-legislator on the entire annual EU budget. The EP is the symbol of a democratic EU, thus greater powers equals a higher level of democracy.