A Trillion Euros For What?

The Guardian, November 21, 2012

Edited by Andy Ross

The European Union quarter in Brussels is enjoying a building boom. An art deco pile is being converted into a palace fit for a European president, at a cost of €300 million. The European parliament is upgrading its environs with a history theme park, at a cost of €100 million. Not long ago it made a multimedia tribute to itself in the Parliamentarium, at a cost of €20 million.

To be one of the 56,000 eurocrats is to escape the pain of austerity. They work easy hours and take Friday afternoons off. Their children are educated for free at high-quality private schools. They retire at 63 on generous pensions and many retire early on full pensions. Staff not living in their native country receive a salary top-up for being expatriates. For all that, administration takes up less than 7% of the overall EU budget.

The real money is all in the areas of agriculture and so-called cohesion funds. These make up the tens of billions directed to infrastructure development, public investment, and co-financing of thousands of projects in the poorer parts of the union.

The Common Agricultural Policy comprised over one third of total spending last year. This is low, a far cry from butter mountain and wine lake scandals of 25 years ago when French farmers and others got over twice that share of EU spending. The CAP led to the equally infamous British rebate, calibrated to the level of farm spending from which Britain is deemed to benefit less.

Tens of billions are shelled out to farmers every year, but national authorities disburse the funds and then claim it back from Brussels. And national inspectors are responsible for monitoring how the money is spent. Auditors found that Britain ranked sixth of 27 in the list of offenders.

Cohesion funds took up over a quarter of the budget last year. They go mainly to the poorer countries of eastern Europe. They represent social democratic redistribution from the wealthy net contributors to the budget to the more needy who get more back than they pay in. A check of 180 transactions from the cohesion funds found that three out of five were faulty.

Officials in Brussels admit that money has been sprayed around indiscriminately: "We would ask two questions when we got an application — was the form filled in correctly? Was it sent in on time?"

The commission issued a "Myth Buster" leaflet in 23 languages to try to highlight the benefits of EU spending. It points to the example of building and supplying medical centers in Guatemala, where 61 of the 65 objectives were met and 130,000 people may have benefited. It is easy for critics to find laughable or shocking examples of ridiculous EU-funded projects.

Institute for European Environmental Policy senior policy analyst Keti Medarova-Bergstrom: "Appropriate EU action can be cost saving for member states, rather than cost increasing. Therefore, possible administrative costs should be seen as investment in improving the implementation and result orientation of future spending."
 

Cuts And Perks

Financial Times, November 23, 2012

Edited by Andy Ross

Angela Merkel is determined not to isolate David Cameron in the EU budget negotiations: "The positions are still quite far apart, and if we need a second stage, then we will take the time for it."

Germans want a unanimous agreement on a budget deal and want more concessions to trim the package. They say it "would not be the end of the world" if there were no agreement. They can try again in January.

Merkel thinks agreement on the seven-year framework is a far better solution than falling back on annual budgets. Germans calculate that only another few billion needs to be trimmed to reach an overall cut of €50 billion, which would bring the UK on board.

Council president Van Rompuy hopes to break the stalemate by restoring billions in funding for agriculture and poor regions to please France and Italy. He proposes cutting money from funds aimed to spur growth and pumping it to traditional EU fund suckers:
— The Common Agricultural Policy gains €7.7 billion
— The "cohesion funds" gain €11 billion
— A fund to build cross-border infrastructure loses €5 billion
— A pot for research and small businesses loses €8 billion
— A foreign aid fund loses €5.5 billion
— A judicial affairs fund loses €1.6 billion

Administrative costs for salaries and benefits for eurocrats are intact for now. Diplomats expect symbolic cuts there.

François Hollande: "I will stand firm and require that everyone contributes."
Enzo Moavero: "It's tough, let's see."
Mark Rutte: "We are really not there yet."

AR This certainly looks like a rich target environment for a war of cost attrition.