EU Still Spending Most of Its Money on Questionable Transfers

On Wednesday, the European Commission presented its much anticipated proposal for the European Union’s next Multiannual Financial Framework (MFF) for the years 2021 to 2027. Stefani Weiss, a senior expert at the Bertelsmann Stiftung, and Professor Dr. Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at the Centre for European Economic Research (ZEW), Mannheim, who have conducted a joint study on what requirements the future EU budget needs to fulfil, welcome the initiative, though are critical of how funds are being allocated.

Under the next financial framework, the European Commission envisions the EU budget growing from 1.0 per cent to 1.11 per cent of the EU’s total economic output. According to the Commission, this additional spending is to primarily go towards protecting the EU’s external borders, security and defence, foreign aid and research policy. Despite minor cuts being proposed in the areas of agricultural and cohesion policy, these policy areas will still dominate the EU budget, accounting for around 60 per cent of all expenditure over the next seven-year period.

Friedrich Heinemann explains: “The Commission’s proposals for correcting the current imbalance in EU spending is a step in the right direction. However, this reform is rather timid. The only minimal cuts to agricultural and regional policy are disappointing. Clearly, the combined pressure from local mayors and farmers’ associations was too great for any real change to occur. As a result, over the coming decade the EU will continue to spend most of its money on highly questionable transfers to the Member States.”

Stefani Weiss adds: “The fact that more funds are mobilised for truly European policy initiatives that are likely to bring real added value is mainly due to the planned increase in the budget. Though this will spare the Member States some of the nastiest battles over the allocation of resources once we lose the contributions from the United Kingdom, the Commission has again shied away from deciding on a truly forward-looking EU budget. The EU has once again demonstrated that European reform can only happen at a snail’s pace, if at all. It does raise the question of how much time the EU has left in the face of current growing global challenges.”

For further information please contact:

Prof. Dr. Friedrich Heinemann, Phone +49 (0)621/1235-149, E-mail friedrich.heinemann@zew.de