MFF post-2020 is a unique opportunity for EU reform
The new MFF is a unique opportunity for the EU to reform its budget and make it more effective, writes Petr Zahradník.
The new MFF is a unique opportunity for the EU to reform its budget and make it more effective | Photo credit: Adobe Stock
The EU continues to face the consequences of the economic crisis and the need to cope financially with new challenges. There is also currently strong focus on greater effectiveness and producing concrete results. All of this combined provides a unique opportunity for a fresh start on EU finances after 2020.
This is relevant to all member states, regardless of whether they are net payers or net recipients. We are entering a period when fundamental changes to EU financing are not only expected, but also urgently needed.
The EU budget is outdated. It has very limited flexibility when it comes to reacting to asymmetric shocks and new development opportunities. The over-reliance of its financing model on subsidies is also increasingly obsolete.
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Likewise, the structure of its most important headings does not reflect the current or, more pressingly, the future economic, social, environmental, regional, or overall strategic needs.
Another significant issue concerns its size, or rather volume: It seems that in order to fully accommodate the concept of EU added-value (EVA), the roughly one per cent of EU GDP that is currently allocated is not sufficient.
EVA itself represents a frequently debated principle that could help to guide it in the right direction as regards specific, widespread needs, not only in terms of efficiency, but also as regards the typology of projects and programmes supported by the EU budget.
The EU economy performed well in 2017, but investment activity remains a burden for more sustainable and healthy growth in the future. The future of EU financing could therefore focus more on modern and effective ways of accelerating investment activity.
There is huge potential to understand and solve the topic of structural reforms, not only at national level, but across the EU as a whole; this could open up space for focusing on projects relating to business, infrastructure, research and development and other relevant areas that are cross-border in nature and make a stronger contribution to EVA.
A clear and commonly understood definition of EVA will be the next step on the road towards a new type of EU financing.
According to the generally held belief that the most common EU financial sources should be exclusively or predominantly allocated for a common purpose (cross-border, rather than merely national or regional), member states differ in their understanding of the specific parameters.
Therefore, a pragmatic definition of EVA based on objectively quantified thematic criteria is needed.
The EESC opinion on EU finances by 2025 endorses the approach taken in the reflection paper, whereby the basic aim of the EU budget must be to deliver EVA, achieving better outcomes than would be possible for uncoordinated member states acting individually.
The time has therefore come to abandon the logic of a ‘fair return’, of dividing member states into net contributors or beneficiaries, and of ad hoc rebates for individual EU countries.
The EU must first identify political priorities with high European added value and only then determine the resources needed to achieve them and to reform the EU budget.
The reform must aim at improving the budget, overhauling its structure as regards areas of expenditure and own resources, while also taking account of suitable rationalisation, efficiency and effectiveness criteria and maintaining direct, transparent channels of communication with the public.
The EU budget must also be able to provide the resources needed to achieve the strategic priorities, using suitable rationalisation, efficiency and effectiveness criteria in accordance with its structure and the way in which it is evaluated and updated. It must adopt a more decidedly performance- and results-oriented approach.
Policymakers should also evaluate the quality of the regulatory framework for allocating the EU budget. There is also a need to analyse developments in expenditure as a continuous medium-term process in which individual years represent a specific development trajectory that is required to secure the relevant results.
It’s also important to take into account the very close links between the EU budget, economic policy governance and current European economic dynamics. Additionally, EU budget policy and the implementation and evaluation of its goals all require continuity.
In this context, a significant factor also seems to be the need to maintain complementarity with the other measures being implemented as part of EU economic policy coordination.
For 2018, these include in particular a debate on creating a fiscal union; strengthening member states’ responsibility for and ownership of obligations vis-à-vis the euro area; the need for structural reforms within the European semester platform; further strengthening of economic coordination and governance; improving the system of financial intermediation, leading to the reinforcement of real long-term investment by using the role of the EIB, EIF and EFSI 2.0; the euro area exerting a greater influence in the world.
The key elements in the long-term include the sections of the December package that focus on deepening the EMU, in particular those related to the new budgetary instruments aimed at supporting euro-area stability, and a more active role with regard to accelerating national reform efforts.
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