Sustainable Prosperity for Europe

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The EU budget in a era of austerity: setting the example or compensating for national spending cuts?

20 September 2011
Elisa Molino (External authors) and Fabian Zuleeg (Chief Executive and Chief Economist)



In this paper, Fabian Zuleeg and Elisa Molino discuss the European Commission’s proposals for the EU’s next Multiannual Financial Framework, investigating how the EU budget will cope the risk of a stalemate in the negotiations and the current need for austerity.

On 29 June, the European Commission tabled proposals for the EU’s next Multiannual Financial Framework, on which member states will have to agree by the end of 2012. The future EU budget will have an important role to play in helping EU countries to exit the economic crisis. But if the EU is to achieve its ambitious goals it needs to be given the necessary resources. Unfortunately, the current political context suggests that a budgetary stalemate is very likely to emerge from negotiations between member states, which may water down the Commission’s main innovative proposals.

Against this background, Fabian Zuleeg and Elisa Molino take a realistic approach to analysing the MFF proposal, highlighting the Commission’s efforts to focus the budget on European public goods. The financial perspectives should neither set an example, nor compensate for national spending cuts:  the EU budget needs instead to create synergies with national spending and concentrate on public goods that are better produced at EU level. The authors also argue that the budget is just one of several tools that Brussels has at its disposal to help the Union get back on a track of long-term economic growth: completing a well-functioning Single Market and exploiting the potential to stimulate and support productive investment are just two of the other paths to be followed.  

This paper was presented at a workshop entitled ‘The post-2013 financial perspectives: Re-thinking EU finances in times of crisis’ (7-8 July 2011), co-organised  by Notre Europe, the European Policy Centre, Centro Studi sul Federalismo and Istituto Affari Internazionali.

The EU budget in a era of austerity: setting the example or compensating for national spending cuts?

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