Europe’s budget deal is flawed

By Martin Schulz

As European Parliament president, Martin Schulz says he will not accept what amounts to deficit budgets

When Herman Van Rompuy comes to the European Parliament on Monday he will have some explaining to do. The president of the European Council greeted the conclusion of the recent budget negotiations between heads of government with a celebratory tweet that a deal had been reached, one worth the all-night haggling. But the result left many, including me, distinctly underwhelmed.

First, the proposals represent the most backward-looking Multiannual Financial Framework, or MFF – the jargon for the EU’s seven-year budget packages – in the history of the union. Second, the agreement reached in the early hours of the morning in Brussels is in fact just the start of a negotiation phase with the parliament – not a final deal in itself. And third, the proposal does not provide the EU with a budget fit for a globalised world. Payments over the period to 2020 would in effect be frozen at roughly the level of the 2011 budget.

For these reasons the parliament cannot accept the current budget proposal as it will not strengthen the competitiveness of the European economy but weaken it. The proposed cuts, the lack of radical change in priorities and lack of focus on those areas where the EU adds value mean that the leaders of the four largest political groups in the parliament have jointly stated that the current budget proposal from the European Council is unacceptable.

Mr Van Rompuy still has to make the case for this proposed budget and explain to MEPs why member-state governments are requiring the EU to do more with less. He will need to be convincing, since without the parliament’s approval there can be no MFF. Under the terms of the Lisbon treaty, which overhauled the workings of the EU, parliament has the power to reject the bloc’s budget.

The EU must maintain support for future-oriented policies, boosting competitiveness and research. Yes, there has been a shift towards research and development- and growth-oriented measures in the current proposal compared with the previous MFF. But the amounts proposed are much less than the European Commission and the parliament deemed necessary for the EU to realise its potential. It is misguided not to shift investment towards research and development, education, training, foreign relations and development aid, areas where European added value are at their greatest.

There are positive aspects of the agreement. The mention of a possible review of the budget is a good one – but must be made legally binding. Such a review should take place after two or three years without one member state being able to block it – meaning by qualified majority voting. Moving ahead with a financial transaction tax will contribute to social justice and create a new revenue stream that will over time reduce member states’ contributions to the budget.

However, ultimately what was agreed by the European Council was largely more of the same with some added national sweeteners for member states. The result is the sum of 27 national demands – not a budget focused on the wider European interest.

The vociferous calls from some member states for cuts in the budget may be popular but they are largely economically unsound. After all, cutting back on the EU budget – more than 90 per cent of which is invested in member states – means cutting back on the most powerful form of economic stimulus available in the union. At a time of crisis, we need that stimulus more than ever to promote growth and jobs.

What is astonishing is that heads of government have agreed to a financial framework that will only serve to deepen the existing structural deficits in EU budgets. Large gaps between payments and commitments will only store up trouble for the future and not solve existing problems.

As president of the European Parliament, whose signature is required for the definitive adoption of the budget, I cannot, will not and, indeed, may not accept what amounts to deficit budgets.

The European Parliament will act in a responsible manner on the EU budget – putting the interest of the European people first, as is our duty. Yet it is clear that the current proposal from the member states is unacceptable to the vast majority of MEPs.

The writer is the President of the European Parliament.    Copyright The Financial Times Limited 2013