EU budget issues

Posted by Horatiu Ferchiu on 29/11/12
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I look at this whole debate on the European Budget and I try to grasp the benefits on grass root level for the money brought into debate – € 1000 billion. The sum is impressive to say the least. For an estimated population of 503 492 041 citizens [1] distribution per capita of that budget is roughly € 1987. There is an estimate of 80 million people living under the poverty line in the EU [2]. So the whole debate on where to cut 100 billion from starts to sound a little childish. And utterly pointless.

And yet there was talk of downsizing the Erasmus Program. In 2008 EUR-31 total expenses with the Erasmus program amounted to € 414.578.000, and in 2007 it was 369.171.371 [3]. That is less than € 1 per capita. Extrapolating these figures, for the € 985 billion [4] budget for the 2007-2013 period, the total cost would be roughly somewhere around € 3.8 billion [rough calculation based on the 12% growth for 2007-2008, extrapolated for 2008-2013]. That amounts for 0.385 % of the budget. And this is where the cut is needed. Even if it went up to 1 % and it would still be stupid to consider a cut.

On the other hand, operating in Brussels and Strasbourg costs the European Parliament some € 250 million a year [5]. So for 2007-2013 it should amount to € 1.5 billion. And I don’t mean to be rude, or insensible, but I have the feeling that the whole Strasbourg offices are strictly to keep the French happy. There shouldn’t be a tax of € 1.5 billion to keep any country happy. Ever. Not in a million years.

It’s very simple – we just have to admit that Brussels has come to be what other countries call a federal district. Sure, you can be upset, you can cry about it, but let’s just move along. There is no special prize for having the EP in your country.

I have lots of other things to point out, and maybe I’ll dedicate a longer post to this issue. But for now I am just offering some rough data because I cannot believe we are debating a € 100 billion as if it were a matter of life and death. This budget should be about the people of Europe, and their well-being, not about getting reelected back home for “doing the right thing” on the EU budget.

 

7 Responses to EU budget issues »»

  1. Comment by George Mc | 2012/11/30 at 23:32:37

    Horatiu,
    EU Budget Issues. I read quite a few of the European Blogs and stumbled on yours today. I do not think you will get too many disagreeing about the Strasbourg circus which is about French pride and of course money spent in same. Good luck in trying to fix it though!

    I would however disagree with you that 100 billion Euros is insignificant (approximately £80 billion sterling). I suspect that your opinion is informed by the fact that you live in a non contributing country somewhere in Eastern Europe. Now I understand how this goes, the richer states support the less developed states and as your economy improves, you buy more goods and services from us.

    That is all well and good when things are going well, however, I would be grateful if you were able to tell me what I should say to fellow citizens in my country (a G8 country) who are being asked to make sacrifices to help get the country out of serious trouble. Do you not think that maybe the poorer countries should say well maybe we should accept economic reality and accept slightly less until things get better. Putting it in further context my country (just over 5 million population) has an annual budget of approximately £33 billion, so your 100 billion Euros would keep us afloat for nearly two and a half years.

    If we are unable to agree on that one I am sure that you will be struck by a blinding flash of reality when you ask the French to stop being so selfish and Nationalistic.

    Regards
    George Mc

  2. Comment by Horatiu Ferchiu | 2012/12/01 at 00:00:01

    Hey George,

    I can’t disagree with you because you make a good point. On a smaller scale back in Romania (this is where I am from for the record) there is a similar debate on contributions to the national budget from various regions and the return they get for their money.
    Strictly as a personal opinion I think that no one should get a cent from the EU budget unless they can prove, or at least imagine the way, they can return at least double of that amount to the Eu budget in a foreseeable future. I live in a country where use of EU money is in some cases not even remotely justifiable, but I remain optimistic that this will change, sooner rather than later.

    I can understand your point on the 100 billion euros. I can sympathize with your point of view, and to some degree to find it justifiable. Same type of critique was also imposed on the Marshall Plan in its time. However, I am also a firm believer in the European project. And as a planner i have the experience to understand that some times implementing development is not exactly fair with all. Achieving balance in development on large scale territory can sometimes leave the impression of a Robin Hood kind of approach. But it is something that has to be done.

    My point with the 100 billion was not intended to minimize efforts from contributing countries. The point was to show that on the larger scale those 100 billion are largely minimal to the problem. Calculating all that has been invested in the EU project so far, and all it will take to continue with it, would probably render those 100 billion as petty change.

    There is a point to supporting development in non contributing countries – that point is that when they eventually reach the point of contribution, that contribution will be larger that wan can be expected of them to contribute right now.

    I will draw your attention to the following [source : http://en.wikipedia.org/wiki/Budget_of_the_European_Union

    The four largest net recipients in absolute terms are Poland, Greece, Hungary, Portugal.
    The four largest net recipients in per capita terms are Luxembourg, Lithuania, Estonia, Greece
    The four largest net recipients as a proportion of GDP are Lithuania, Estonia, Luxembourg, Hungary.
    The four largest net contributors in absolute terms are Germany, France, Italy, UK
    The four largest net contributors in per capita terms are Denmark, Finland, Germany, Italy.
    The four largest net contributors as a proportion of GDP are Denmark, Italy, Germany, Finland.

    If you are asking me to justify your country’s expenses with the EU budget I probably can’t do it right here, right now. But i will draw your attention to the fact that those 100 billion don’t come out of your budget only. And the 1% of GDP principle still holds.

  3. Comment by George Mc | 2012/12/01 at 20:59:23

    Horatiu,

    Many thanks for your very prompt reply.
    We are probably not a million miles apart on most of what you say and I do take your point that the 100 billion Euros is spread around the contributing countries.

    I do have to make the point though that when you get a leviathan like the EU, run by Eurocrats and Technocrats, resources get wasted and corruption can be a problem in some states. I am a bit old fashioned and support the idiom of “look after the pennies and the £pounds with look after themselves”.

    You will be aware that the UK electorate and quite a number of our politicians have become very Eurosceptic. I must admit that I am one of those who would like to see the UK leave the EU and replace it with some sort of trading agreement. There is a general feeling in the country that we are losing control of our own destiny and that enough is enough.

    Thank you for providing the statistics on the European budget, which I was aware of, but then had to admit a huge amount of surprise when I saw that Luxembourg received more than they gave. I am not sure if you can throw any light on that? When you Google Luxembourg you see that they are one of the richest countries in Europe and also rank quite highly in world terms. I really cannot understand that one.

    http://urbanpeek.com/2012/03/09/the-worlds-top-10-richest-countries-in-2012/

    Romania is quite a populous country and being part of the EU will no doubt help greatly to raise the standard of living for many of your countrymen. My country is expecting quite an influx of Romanians and Bulgarians in 2014 (when they become the new Poles) which of course will cause plenty of excitement in the jobs market if the economy has not picked up by then.

    http://www.ukimmigrationbarristers.com/blog/uk-immigration-prepares-for-influx-of-romanian-and-bulgarian-immigrants/

    Lets hope that is not the case and that the Euro countries have sorted themselves out and started some large projects which will provide employment. I live in the northern part of the UK (Scotland) and we could certainly do with the economy picking up.

    Horatiu, I do wish you well with your studying and feel sure that you will achieve all your goals. In closing I would just like to congratulate you on your excellent English.

    Regards
    George Mc

  4. Comment by Horatiu Ferchiu | 2012/12/02 at 14:19:39

    Hi George,

    In what concerns EU budget expenditures, and the way that the money is managed, i have to agree that the current system is not exactly the best in terms of accountability and transparency. EU transparency is quite spectacular if you think of it in brute terms, but when you start looking into it you realize that you most likely need to go back to school for a couple of years to understand the language, terms and system. It’s actually interesting how they managed to be transparent without really being so. The amount of paper the EU administration generates is impressive. And it would take most people a lifetime to go through it.

    That’s one of the reasons i support a Federal Europe and increasing the penetration of direct democracy in European Administration. A federal system will, to the surprise of many, generate less bureaucracy, than this part confederal part union of states we have now. I’m not overly optimistic on the viability of a federal system today, and that is why i place my estimate at 70-100 years from now.

    A Federal Government, as i previously outlined here – http://fedeu.blogactiv.eu/2012/09/03/fraud-within-the-nation-vs-fraud-within-the-federation/, will have more tools to control and correct spending and corruption.

    It is my hope that the UK will be a part of the EU family for the years to come, and the things that are unsettling to you and your countrymen today will be resolved sooner rather than later.

    In what concerns an increase of migration from RO and BG to the UK, as soon as the labour market restrictions are lifted, I can understand your concern. However, it is not my area of expertise so I can’t really shed any light there. I can however tell you that the current atmosphere in RO at the moment kinda pushes white collar migration to a new height. There is still time left till 2014, and hopefully things will be better by then.

    In what concerns Luxembourg i shall have to look into it, because i don’t have an answer for you just yet.

    Best of wishes,

    H.

  5. Comment by George Mc | 2012/12/02 at 23:23:05

    Hi Horatiu,

    Just a couple of points. I think that your 70-100 years for a Federal Europe is very pessimistic.
    My reasoning on that is very simple. I believe that the Euro countries have got about 5 years tops to save the Euro. The Euro cannot be saved without a Banking and Fiscal Union. As you know that probably means a EU President and EU Finance Minister (or what ever you wish to call him/her) which will be the start of your Federal government. For the avoidance of doubt that means that all Euro countries will have their National Budgets approved by Brussels. If an erring country strays off message then the Heavies from Brussels will visit them, point out the error of their ways and install a solution. A bit like Greece and Italy only with more rigour.

    I am absolutely convinced that the above will happen. If it doesn’t happen then I fear that the whole EU project will collapse or at best out of the rubble will rise a core of fewer countries. I would suggest that this may Germany, Austria, Holland, Luxembourg, Belgium, France with Italy Spain and Poland later conscripts. So Horatiu, I think you may get the beginnings of your wish a lot sooner than you think. If I am correct then I can think of no reason why the process should not crack along at a goodly pace. The latter could be very serious for all concerned including the UK.

    A short look into togetherness

    I just loved your analogy of the apartment block and the utility bills. I would caution you to stop using it though or tidy it up a bit because it almost perfectly describes the birth of the Euro and its current problems.

    Regards
    George Mc

  6. Comment by Horatiu Ferchiu | 2012/12/03 at 08:40:32

    George,

    While I do understand you reasoning, it does not apply to my estimate, because what you are presenting is the current solution advertised – that of a confederation of nation states, which is federal but nor really, and enables politicians from nation states to save face. My timeline includes a federal project at a regional level, with the abolishing of the national state as we know it today. That is why the timeline is so long.

    As for the analogy it was indicated in the conclusion that the solution was the introduction of a building manager, aka a Federal Government. The analogy in the beginning served the purpose of establishing a simple parable to ease the issue for non-EU aficionados. But please, turn your attention to the concluding paragraphs.

    Have a great week!


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    [...] offices of the EU should be scrapped instead, resulting in a much larger spending cut.” Horatiu Ferchiu at [...]

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