Of course this is what can be expected with the decision-making system we have. When each and every of 25 able politicians who are only answerable to their own constituencies can veto an agreement any time they like, and when the whole thing has to be brokered by another able politician who is only answerable to his own constituency and has a giant stake in the outcome, the result is bound to be riddled with the effects of pork barreling. However, after the defeat of the European Constitution last summer and subsequent grandstanding on “reform” and “leadership” and “reconnecting Europe to the people”, this is much, much worse than what could be expected, even within the constraints posed by reality.

The UK’s long-awaited proposal for the EU’s new long term budget, the first one since the collapse of negotiations at the June EU summit, was finally published on 5 December in the evening. Other member states had already been claiming that the proposal came too late, leaving no time for negotiation. When it finally arrived, nearly all member states reacted negatively (“cynical”, “a very good proposal – for Britain”, “it’s like the Sheriff of Nottingham – stealing from the poor to give to the rich”), so much so that it took only two days for the UK to announce an adapted proposal. This second proposal was published on Wednesday. However, even if the publicitary backlash made the British government decide to offer a little more to the new member states than in its first proposal, the second proposal marks no substantial improvement. For this, both versions fail to address too many difficult but urgent matters. In fact, they fail to address them all.

First some numbers in the table below, where UK1 refers to figures from the UK’s first and UK2 to its second proposal. For comparison, the amounts proposed by the European Commission (EC) and Luxembourg (Lux) are included too, as well as relative and absolute differences with the Commission proposal. The table gives figures for 2007 and for the entire 2007-2013 period. To allow for comparison with current spending levels I have also included figures for 2006, which belongs to the current, 2000-2006, Financial Perspectives. For a more detailed explanation of how the budget is composed and how EU budgets work, see aforementioned Finances in perspective.

Comparing the figures in the table, we notice several things:

• In chapter 1a, competitiveness, the UK wants to cut almost half the amount proposed by the European Commision, taking it even below the current spending level. Most of the money in this chapter is spent on research, one of the key elements of the Lisbon agenda that should make Europe more competitive on the global market. In his “inauguration speech” to the European Parliament on 23 June, Blair said:
  

  Thirdly, implement the Lisbon Agenda. On jobs, labour market participation, school leavers, lifelong learning, we are making progress that nowhere near matches the precise targets we set out at Lisbon. That Agenda told us what to do. Let us do it.

  And look what they did: this chapter sees the biggest cuts in absolute terms of all chapters in the entire budget. And from what remains, 500 million per year is to be spent on a “Globalisation Correction Fund” to compensate regions hit by mass job losses caused by “globalisation” – and failing government.

• One of the largest cuts compared to the Commission proposal comes from chapter 1b, cohesion. These are the funds for poor regions, most of which are spent in the new member states. This is also one of the biggest extra cuts the UK presidency makes to the Luxembourg proposal of June, although in absolute terms, the Luxemburg cut is much larger. That the fuzz is much bigger this time, however, may be due to the fact that Blair took it specifically from the new member states, where Luxembourg tried to spread it more evenly.
• Another large cut is taken in chapter 2, where 10 billion comes from funds for rural development and environmental policy. That all time favourite, the Common Agricultural Policy, however, is not touched – except for a clause saying that by 2008 the Commission should make a “comprehensive and wide-ranging review, covering all aspects of revenue and expenditure, including, inter alia, the Common Agricultural Policy, and the UK rebate.” There is however nothing substantial in the review clause as to the direction that review should take.
  It should be noted that the rural development and environment funds of this chapter also include the agri-environmental subsidies on which I wrote earlier. I suppose these would be the only budget cuts I should welcome, as I concluded that this reformed version of the CAP especially should be renationalised, at least partly. On the other hand, cutting these funds would so be in contradiction with current policy trends that I doubt it was done deliberately (or that these funds, rather than the environmental programmes of chapter 2, are envisaged at all).
• Chapter 4, “Europe as a global partner”, sees large cuts in external aid. Funds for humanitarian and emergency aid, development cooperation, the European Neighbourhood Policy (assistance for democratic and economic development and stability in the countries surrounding the EU) are almost cut in half. It should be noted that the Commission figures do include the European Development Fund (EDF, about 3.5 million euros per year) which, as an intergovernmental instrument, is currently left outside the EU budget, and remains there in the Luxembourg and UK proposals. But even with the EDF taken into account, the cuts in chapter 4 are substantial and – especially with regard to the European Neighbourhood Policy – not at all in Europe’s interest.
• Interestingly, considering current policy priorities, chapter 3 on security and justice sees itself cut almost in half as well by the Luxembourgers and cut a little further by the UK. Although this may rejoice those of us (including myself) who are worried that the fight against terrorism is often taken a little too far, it is a little strange considering Blair’s own priorities and the fact that the fight against organised crime and terrorism is among the EU policy areas that has the strongest popular support.

Comparing the text of the second British proposal to the first, it is easy to spot the little gifts that are handed out to buy support from those who objected most strongly to the first version. Examples of such little presents that are out of place in a general agreement like this include:

• Under chapter 1a, 375 million euros is allocated to Slovakia and 865 million to Lithuania for decommissioning the nuclear power plants of Jaslovske Bohunice and Ignalina.
• In chapter 1b, the maximum amount Poland can receive from the cohesion funds is increased for the 2007-2009 period “in order to reflect the value of the Polish z?oty in the reference period”.
• The Közép-Magyarország region in Hungary, the Prague region in the Czech Republic, Estonia, Latvia and the Spanish territories Ceuta and Melilla receive extra funding under the second proposal, as well as several regions in other countries that were already in the first UK and the Luxembourg proposal.
• The “retention costs” the Netherlands may keep for collecting EU import duties are increased from the current 25% to 40% of the amount collected. The real costs of collecting such duties would be less than 5%. This measure is only temporary, for the 2007-2013 period only.
• Sweden, Germany and the Netherlands see their VAT contribution to the EU budget reduced, whereas the Netherlands and Sweden also get a reduction on their GNI-based contribution to the budget. These measures too are temporary.
• As a gift to itself and to its difficult tabloids, the UK offers to reduce its rebate to a level that is lower than it would be otherwise but that is still higher in absolute terms than it is now. It proposes no change to the ridiculously complicated system of calculating the rebate, nor does it adopt the Commission’s proposal of transforming the rebate into a generalised correction mechanism that would apply to all countries whose net contribution is higher than reasonable.

So whoever threatened with a veto is rewarded with extra money, irrespective of the strength of his case. Whoever did not threaten with a veto, for instance out of fear of retaliation in other dossiers, is mercilessly exploited by the rest. None of the structural problems and challenges of the Union is dealt with. None of the policy priorities of the Commission and most governments receives extra funding. There is no solution for the CAP. There is no solution for the net inequalities caused by the EU’s funding system. There is no investment in future economic growth by providing extra money for research, and for better infrastructure in the new member states.

On 23 June, Tony Blair told the European Parliament:

People say: we need the Budget to restore Europe’s credibility. Of course we do. But it should be the right Budget. It shouldn’t be abstracted from the debate about Europe’s crisis. It should be part of the answer to it.

Indeed it should have been.

If what the government leaders eventually come up with is close to what is currently proposed, the Commission and the European Parliament owe it to their role as supranational guardians of the common interest to use their veto to block its adoption. Nowhere in the Treaties does it say that the annual budget procedure requires an agreement on Financial Perspectives. The fact that ordinary budgets are decided with qualified majority voting (QMV) – where unanimity applies for the Financial Perspectives – can only be an advantage. Anything is better than to be stuck with this failure for seven years to come.

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* update Sat 17 Dec 13:10 (GMT+1) * There is an agreement now. The text is not yet on-line (update Sun 18 Dec: it is now), but from what I understand the UK agreed to a little extra reduction of its rebate (which still continues to grow) while the budget as a whole increases to 862.4 billion euros. Poland apparently received an extra christmas gift of 4 billion euros, and the Netherlands sees its BNI contribution reduced by another 0.4 billion euros compared to the previous offer (which makes it an average, instead of the largest net payer relative to BNI or head of population). The clause on a general budget review to take place in 2008 (including CAP and rebate) has not changed – i.e. nothing substantial there. Barroso is happy. My hope is on the European Parliament now.

PS: Read BBC correspondent Mark Mardell’s summit diary. Reads like a thriller. Or perhaps that’s just me…

When the old CAP was devised, the central idea was to safeguard Europe’s food production. We are talking about the 1950s, just after two world wars and a deep economic crisis, and before the invention of the common market, globalisation and intensive farming. At that time, a continuous and sufficient supply of food did not seem as obvious as it is today in the industrialised world. As we know now, the CAP’s system of production and export subsidies and border tarrifs, stimulated intensive farming methods and high production levels all right. But they also discouraged diversification of the agricultural sector and prevented the disappearance of inefficient farms, to the detriment of innovation within the EU and of more cost-effective producers outside the EU – most notably those in development countries.

Many negative effects are attributed to the CAP, but I take a nuanced position there. Had there been no CAP and had agriculture been left to the market, I doubt that the pressure on farmers to intensify their production levels had been weaker, and that the state of the environment and of animal welfare would have been better today. Similarly, many of the examples used to underpin claims that CAP export subsidies damage the third world are not as clear cut as they are often presented. For instance, the biggest beneficiaries of the EU reducing its subsidies for sugar exports and its tariffs on banana imports are not the small farmers from the poorest countries. They benefited from preferential trading schemes allowing them to sell large shares of their production to the EU against internal EU prices that are considerably higher than on the world market – an advantage they are now set to lose. As EU market prices lower and imports are liberalised, they will probably lose their market position to large companies in much wealthier countries like New Zealand, Brazil and the United States – not without reason the strongest forces behind the WTO pressure to reform.

Where I do think the CAP is bad, is in the efficiency department. If it has not done much good (if any at all), then it has been a tremendous waste of tax and consumer money. Not to mention the way its subsidy structure has held up reform and innovation, both inside the EU and outside it. There is something inherently repulsive about a scheme that caters so obviously to sectoral interests that it ends up directing 80% of its support to the upper 20% of farms and companies, and that constructs trade tariffs and subsidies in such a way that it prevents development countries from actually developing and shifting their exports from low to higher added value.

Fortunately, thanks to WTO pressure, increased EU-scepsis among voters and the accession of new member states, it is slowly dawning on government leaders that they have to reform the CAP. The problem is that they disagree how to reform, with views ranging from the sovkhoz-like model favoured by France to the hands-off model favoured by the WTO, Europe’s state-sponsered competitors in the US and, at least to an extent, by the UK. Therefore the gradual steps Europe is taking towards CAP reform are more and more in the direction of a compromise that allows the continued state-sponsoring of farmers but in ways that the WTO, oddly enough (or would it have something to do with US and EU dominance in that organisation?), does not consider market-distorting. So instead of the old production subsidies, which coupled the amount of support directly to for instance the numbers of hectares occupied by a certain crop, we now get a mixture of direct income support to the farmer’s bank account (with no link to his production) and so-called agri-environmental schemes, under which the farmer gets paid for the costs of certain contributions to environmental goals (like landscape maintenance, or biological farming).

Sounds good then, at least the agri-environmental bit? Yes, I think so too – that is, provided there is a reliable way to quantify those environmental contributions and their costs or value. But that now is the problem. In paragraph 4.46 of its annual report on the spending of the 2004 budget, the European Court of Auditors writes:

EAGGF-Guarantee rural development expenditure amounted to 5 395 million euro in 2004 (28) (12% of CAP spending). This covers spending on agri-environmental schemes, compensatory amounts for farming in less-favoured areas, forestry, investments, support for young and for retiring farmers. Schemes of this kind frequently have relatively complex eligibility conditions which are difficult and costly to check and which therefore present a high risk of irregularity.

Therefore (par 4.48):

Most entitlements to rural development support are dependent on respect of commitments entered into by the beneficiaries, such as respect of good farming practices, and are calculated on the basis of the number of hectares used, number of animals etc. The Court’s Special report on agri-environment measures (see paragraphs 4.98 and 4.99), the largest type of expenditure in the rural development area, concludes that the verification of such expenditure poses particular problems and that verification can rarely lead to reasonable assurance of the legality and regularity of expenditure at a reasonable cost.

And in indent VII of the summary of aforementioned Special Report number 3/2005 on agri-environment spending:

The Commission, Council and Parliament should consider, for the new programming period commencing in 2007, how to take into account the principle that if a measure cannot be adequately checked, it should not be the subject of public payment.

What this means is that one of the main elements of the reformed agricultural policy should disappear if the Court is ever to deliver a positive judgment on the EU’s budget spending. And this when, ironically, the same report also concludes that irregularities in the traditional, production related CAP subsidy schemes are rapidly becoming a thing of the past, thanks to a new control system called IACS (Integrated Administration and Control System).

So is there no other solution than leaving agriculture to the market, which in Europe’s case means it will largely disappear and that its landscapes and population patterns will change dramatically (and not for the good)? I think there could be, if the idea of agri-environmental spending is taken to a much lower level of government. At the national, or better still regional level the results of environmental contributions by farmers, and their value, can be assessed directly by those who benefit from them: local voters who can express their wishes and appreciation through the ballot box. But that requires two things: 1. that the EU’s CAP is abolished (but leaving environmental legislation and market regulation (to prevent state aid!) at the EU level) and agricultural policy moved to the regions; and 2. that voters can actually express themselves directly on agri-environmental policy – that is through (budget) referendums (because old-fashioned representative democracy is just as vulnerable to the farmer’s lobby as the EU has proven to be).

And rightly so! After all, no less than 80% of the EU budget is spent directly by the administrations of member states, not by the European Commission. And the only reason why the Court has refused, for the eleventh year in a row, to deliver a Statement of Assurance (Déclaration d’Assurance, DAS) on the 2004 budget, is that it finds it impossible to check whether spending by the member state administrations, not the Commission, is done in accordance with the rules.

This is a crucial difference with the usual “Brussels fraud” rants found in national newspapers, as first of all most of the money not properly accounted for is not lost (and certainly not on “fraud”) but just badly administrated, and secondly this does not happen in Brussels but in national capitals, by national civil servants supervised by national governments and parliaments.

Not surprisingly then, most of the transactions which the Court of Auditors finds have been accounted for in accordance with the rules (revenue, commitments, administrative expenditure and pre-accession strategy) all fall directly under the Commission. Correspondingly, most of the budget refused a DAS (agricultural spending, structural measures, internal policies and external action) is administered jointly with the member states.

It will be interesting to watch the follow-up of this report during the coming year. Not so much with respect to the European Parliament’s annual discharge of the Commission (although the Santer Commission fell in 1999 after it was refused discharge on the 1996 budget), but in the way member states’ governments handle the European Commission’s roadmap towards a positive DAS within a couple of years. As part of the plan, national accounting systems have to be made irregularity-proof so that the European Commission and the European Court of Auditors will be able to trust their findings without having to do it all over themselves (Single Audit principle).

Even more interestingly, the next step of the plan is that national governments sign an declaration each year, saying that their administrations have spent EU monies in accordance with the rules. And although, obviously, there is every reason to have faith in the quality of the financial control systems of each and every one of the member states, asking for a signature to confirm that causes a bit of unease among our ministerial friends. At least that is true for some of them, as becomes obvious from the way this crucial element of the plan carefully is not mentioned in the conclusions of their latest meeting as Ecofin Council.

Press reports (BBC, FT) have it only the Dutch and Danish governments supported the plan. The Financial Times explains:

However, finance ministers decided at a meeting in Brussels that signed declarations went too far, and could lead to them being dragged before the European parliament to explain themselves.

And we couldn’t have that, could we?

Pressure on the negotiating parties has increased considerably after the double ‘no’ in France and the Netherlands, but in two opposing directions: Firstly, to come up with some good news to keep the EU going, which means being flexible and reach an agreement. Secondly, to take voters’ concerns into account, which means standing firm for “the national interest” and use the veto when necessary. So although the Luxembourg Presidency intends to finish the negotiations this month, during the European Council meeting of 16-17 June, it is by no means clear that it will succeed.

Reading the British press and weblogs from the anglosphere, one could easily get the impression that abolishing the British rebate, which limits the UK’s net contribution to the EU budget, is the main issue on the negotiating agenda and that it was put there by a French government in trouble blaming it on the Brits. If only it were that simple, and the UK that important.

The current “negotiating box”, a document published 6 June on the Presidency’s website, outlines the Perspectives’ main budget lines and unresolved dilemmas. Net contributions per country are only one of them, but the most striking thing here is not that Britain is paying more than France, but that both the UK and France pay considerably less than other net contributors.

How much do we pay: the group of six

Although the ceiling of own resources (see infobox: the budget is an onion) has been 1.24% of the EU’s GNI for years, annual budgets have never really exceeded 1% of GNI. For the new Financial Perspectives, however, the Commission is proposing a payments ceiling of 1.14% on average. It says higher expenditures (relative to GNI) are necessary because member states have been transferring more tasks to the EU level (Lissabon process, external policies, justice and home affairs), and because of the Union’s enlargement which increased the EU’s population with 30% but its GNI only by 5%.

A group of six member states, all net payers, disagree. These six (the UK, France, Germany, the Netherlands, Austria and Sweden) want to limit the EU’s expenditures to a maximum of 1% of EU GNI. Brushing aside the Commission’s arguments, they say 1% is possible, because most budgets in the past did not surpass that limit either. They add: “In view of the painful consolidation efforts in Member States our citizens will not understand if the EU budget were exempt from this consolidation process.”

Rather cheekily but not without grounds, the Commission’s reply to this is that national budgets, which take up 45% of EU GNI, increased more than twice as fast over the past seven years as the EU’s budget of just over 1% of EU GNI. The Commission also expects an end to underexpenditures in funds allocated to the ten countries that joined the EU in 2004, as a result of improving administrative capacity. It therefore fears limiting the EU’s budget to 1% of GNI requires more serious budget cuts than it would seem at first sight.

What the “group of six” are looking for is, of course, a way to limit their own financial contributions to the EU. A closer look reveals that there is actually more that separates, than unites them:

As we see, the UK’s net contribution relative to both GNI and population size, is one of the lowest in the group of six. Swedish and German taxpayers pay twice as much, and Dutch taxpayers even three times what Britons pay to the EU. Note, also, that Ireland is the highest net recipient per head of the population, despite the fact that it is now one of the richest countries in the EU.

Such anomalies emerge, in the first place, because we calculate them at all: No one ever calculates regional net contributions to the national budgets of Member States because it is not seen as relevant. But if we did, we would probably see the same kind of anomalies as we get here, although the differences are likely to be smaller. This is the result of the lop-sided way (compared to national budgets) in which the EU budget is composed, with about 40% going to agriculture and 30% to regional funds. Countries with large areas qualifying for either, receive a large share of the EU’s budget, even if their GNI is relatively high.

Naturally, with such discrepancies between countries’ financial means and their actual contributions, the other net payers want to see the UK’s special rebate replaced with a general rebate that is available to all. Such a General Correction Mechanism has in fact been proposed by the Commisson. The idea is supported by all net contributors, except the UK.

The result of all this is that net payers may or may not have a common interest in limiting the total size budget – depending on the composition of the funds they receive. Even in case a common interest exists regarding the total size of the budget, it may disappear depending on which funds are cut in order to reduce the budget to the desired level. For the UK, giving up the rebate in return for cuts in the Common Agricultural Policy makes sense, as the net effect on the UK’s contribution is the same. For France, cutting the CAP in order to get to a general spending level of 1% of GNI may even lead to an increase of its net contribution. Similarly, cutting regional funds is a no-go for net contributor Italy, let alone for current recipients Spain and Portugal.

What do we pay for: Luxembourg’s moves on the budget chessboard

So in the end, how much the EU costs you depends on how it spends its money. Add to this the enlargement with ten poor countries wanting a share of the cake, weakened French and German governments unable to take the lead, and 25 nervous government leaders each in possession of a veto, and you have in a nutshell why the negotiations on these Financial Perspectives are so much more unpredictable than the previous ones.

For a clever Presidency, however, it could still be possible to achieve results, provided the will to reach an agreement at all is strong enough to outweigh all other considerations (as I said at the beginning, I do not know if that is the case). And it must be said that Luxembourg, in the incarnation of its prime minister (and Mr Euro) Jean-Claude Juncker, is doing its best by skillfully applying divide-and-rule tactics. Let us first have a look at the Commission’s proposals and how Luxembourg is proposing to change them:

For comparison, the table shows one column with figures for 2006 (under the current Financial Perspectives), and one with figures for 2007 (new proposals). It also lists totals for the entire 2007-2013 period, and the differences between Luxembourg’s current proposals and the Commission’s in both absolute and relative terms. All amounts are in million euros, 2004 prices.

Obviously, Luxembourg’s figures are considerably lower than the Commission’s, as Luxembourg is trying to comply with the group of six’ request to reduce the budget to 1.0% of EU GNI. It did not entirely succeed in doing so: payments according to Luxembourg’s proposal would amount to about 1.06% of the budget. This is where we see the first cracks in the common front of the Six, as apparently, Germany and Austria are already giving off signals that 1.06 is close enough to 1.0, while the others insist that it is not.

More interesting, however, is which budget lines Luxembourg is proposing to cut in order to arrive at a grand total of 1.06%:

• 58 billion euros (44%) in chapter 1a – competitiveness for growth and employment: this is the Lisbon agenda which is so dear to both the Commission and the market-oriented countries in the EU (UK, the Netherlands, Scandinavia and others)
• 43 billion euros (13%) in chapter 1b – cohesion for growth and employment: the regional funds dear to Spain and countries in Central and Eastern Europe
• 6.5 billion euros (35%) in chapter 3 – citizenship, freedom, security and justice: Tony Blair and a number of others will not be happy
• 45 billion euros (47%) in chapter 4 – the EU as a global partner: this excludes aid to developing countries, but includes the pre-accession policy for Romania and Bulgaria, the European Neighbourhood and Partnership Instrument (Ukraine, the Balkans, Georgia) and the Development Cooperation and Economic Cooperation Instrument – in short: long-term stability and safety in the EU’s neighbourhood

Note, also, an inexplicable increase of 23 billion euros (79%) for the administrative expenditures of EU institutions other than the Commission. This is probably just change to negotiate with – or an attempt to move foreign policy money for the Council to “administrative expenditure” in order to keep it out of sight for the European Parliament.

As you may have noted as well, Luxembourg is not (yet?) proposing to reduce spending on the Common Agricultural Policy (CAP). The problem here is of course that agreement in this area is notoriously difficult to reach, and that there is a relatively recent agreement (2002) to freeze CAP spending at the 2006 level. The fifteen members of the old EU agreed this among them just before the accession of the ten new members, anxious as they were that they would demand even higher CAP spending if they waited until they got in. Attractive though it may seem to break open this agreement in order to solve the budgetary dispute and at the same time set off serious reform of the CAP that is long overdue, which seems to be the strategy of the British government, there is always a risk of backfiring because new member states start demanding more CAP subsidies.

The conclusion of all this is that Luxembourg is trying to force a result by setting everyone against everyone. Risky, as it could end with everyone in the trenches and unable to move until all deadlines have passed, but great fun to watch. And if the pressure on government leaders to come up with some good news is great enough, it might be the only strategy that works.

Next: for a change, putting the general interest first?
Where is the greater European ideal in all this, you may ask – solidarity, peace, common goals? Totally absent, it seems, and that is unfortunate. Not even because every national government is trying to get the most out of it, for its narrow, national, self-interest, by getting as many subsidies for as little money as possible. That is sad, but it could be expected. What is more worrying, is that national government leaders are doing so little effort to define common goals and policies which are in everyone’s own interest as well.

Cohesion funds, for instance, could be used in such a way: The funds themselves may only benefit specific (poorer) regions and countries directly, but if they contribute to developing a region and increasing its wealth this is also in richer countries’ interests, through increased trade and better social and political stability. Likewise for their external policy equivalents allocated to the EU’s neighbours. Agricultural subsidies spent on production or income support, on the other hand, are unproductive as they do not provide recipients with incentives to invest and improve until they no longer need to be subsidised, and are therefore doomed to be needed for ever by every farmer who ever received them. Yet instead of keeping cohesion funds, directing them to the new member states, increasing funds allocated to the European Neighbourhood, and decreasing spending on the CAP, the summation effect of each nation looking after its national interest is that we do the exact opposite.

I have said it before, and I say it again here: what Europe really needs to move it forward is better leaders. But that is the subject of another blog posting I am hoping to get finished soon.

• This year and the following, nine countries will be holding referendums on the EU Constitution and twelve others will ratify by a parliamentary vote. With a French ‘no’ now looking dangerously likely and increasingly eurosceptic populations all over the continent, governments struggle to prove to their voters that they stand firm for the “national interests” by getting less and less flexible at the negotiation table. Still, voters also expect them to make progress on getting the Union more in line with often contradictory national preferences. Whatever way governments find to eventually square this circle, the only predictable thing is that “Brussels” will be blamed for any drawbacks.
• There are the negotiations on the Financial Perspectives 2007-2013, which will set the directions of EU policy-making and spending for seven years to come. As there are net contributors that want to decrease spending, whereas new members want to receive structural funds and agricultural subsidies, old member states want to keep current structural funds and agricultural subsidies, and Britain wants to keep its rebate, negotiations will not be easy. Especially so as, in the light of upcoming elections and referendums, the ‘window of opportunity’ to reach an agreement is small and close: some three weeks in May or April, according to Budget Commissioner Grybauskait?.
• There are the negotiations on reform of the Stability and Growth Pact which, to the relief of some and to the horror of others, was de facto suspended by the Council in November last year. An agreement on a softer pact was reached by Finance Ministers last Sunday, so it looks like giants Germany and France have won the battle against firmly squeaking Austria, Finland and the Netherlands. Although no one knows yet what price was paid for the deal. For instance, Bengt Karlsson’s Euroblog points to an article in Die Welt suggesting that Germany has agreed no longer to ask for a reduction of the EU budget in return for support for this deal on the stability pact.
• There is the ongoing uncertainty about the economic situation and the pressure this puts on governments to choose between short term popularity and long term necessities to reform (the Lisbon Agenda). Trade unions demonstrated in Brussels last week against the so-called “Bolkestein Directive” [subscr.] on creating an internal market for services in the EU. Proponents [pdf] point to the fact that services account for 66% of GDP and about 75% of employment in the European Union, and say that liberalising the services market could create up to 600,000 jobs. But although the so-called “country-of-origin principle”, which allows service providers to work everywhere in the EU under the legal conditions of their home country, does not apply to national laws on working conditions, opponents maintain that the proposal amounts to “social dumping” and a “race to the bottom”. The French government, squirmish as it already is about winning the Constitution referendum, has joined their side, and even the new Commission seems to be backtracking.

Additional strain comes from the enlargement with ten countries which are relatively poor but have much more flexible economies than the old member states – and different views on many of the old EU’s accepted truths.

The problem with the public debate on all these issues (and one of my own hobby horses) is that it is so often confined to national spheres. So when the Council chose not to enforce the rules of the Stability and Growth Pact on France and Germany after they breached the 3% public deficit ceiling, the media and public opinion in the Netherlands were upset because big countries were let off the hook, whereas media in the UK [subscr.] and France pointed out that the rules were stupid. Both sides were disappointed with the EU but for opposite reasons – and both were equally convinced their own position was the most sensible one.

This pattern is common with contentious EU decisions: Public debates in individual Member States take place within historically and culturally determined frameworks of “acceptable” arguments. As a result, common arguments from one Member State do not reach another where they could have served as a new argument in the debate (where it would have been of interest if only for the fact that this is a European, not a national, decision being taken). National politicians join the national chorus in order to stay in tune with their voters, but have to go on negotiating on policies where common EU action is expected.

The result is that the compromises they reach in this way are not accepted by voters, who remain unfamiliar with the arguments from other countries and only see results that differ from the outcomes of the debates at home. EU decision-making appears distant and intransparent even if, in reality, every effort was done to make it as transparent as possible. National politicians who took the decision have an interest in conserving this myth, as it allows them to escape responsibility by pointing to “Brussels”. Some of the EU’s legal constructions seem designed to keep it this way, for instance when the European Commission is made responsible for things it does not have the means to control (like EU spending, 80% of which is done by Member State governments).

So what we need in order to hold those really responsible to account, is better knowledge of what goes on at the EU level and in other Member States, and more (informed!) media involvement (another hobby horse).

The table below is an attempt to a contribution. It lists and colour codes for every Member State, as well as I could, its QMV voting weight in the Council under the Nice Treaty, whether it is a net contributor or recipient of EU funds (relative to its GNI), whether it is a member of the eurozone, fulfills the 3% budget deficit condition of the Stability Pact, is a supporter of a strict or a weaker Stability Pact (a position which often relates to its deficit condition), and its general position on the Common Agicultural Policy, market liberalisation, on the integrationalist vs. intergovenmentalist debate in EU constitutional matters, and on its position vis-a-vis the United States and Europe’s role in world.

I hope it will help identifying patterns in voting behaviour or in trying to predict how a particular country might vote on specific issues. I will try to expand and improve the table in the near future. Any comments are of course more than welcome.

sources: Eurostat 2003, European Commission