hms iron duke

hms iron duke

Thursday, 22 November 2012

The EU Budget: Fog in the Channel Continent Isolated?

Alphen, Netherlands. 22 November. The Americans call it Thanksgiving.  Today is the day collected Yankdom commemorates the fact that the lunatics and fanatics we British (and sensible Dutch) had rather sensibly tossed out had survived for a year in a wilderness that was to degenerate into the United States.  They were helped by the local native Americans which was probably the greatest error of strategic judgement since (according to Blackadder) “Olaf the Hairy, High Chief of all the Vikings, accidentally ordered 80,000 battle helmets with the horns on the inside".  Today is also EU Budget Day when our Dear Leaders head to Brussels to spend what could be several nights (this summit could be a fabled ‘three-shirter’) disagreeing only for Germany’s Chancellor Merkel, the EU Headmistress, to eventually tell them the correct answer to a question none of them thought they should ask; just how much does European ‘solidarity’ cost? 
 
On the face of it the seven year 2014-2020 EU budget that they are disagreeing is a huge argument over relatively paltry sums.  At €940bn the EU Budget represents just under 1% of the entire EU economy.  However, there is an important principle at stake. At a time of real economic pain across the EU when cuts are biting deep everywhere the Omission wants a gob-smacking 5.9% increase to some 1.05% of EU GDP.  The Omission tries to finesse this away by saying much of the money has already been committed to projects and that since 2004 its tasks have grown exponentially.  However, that masks the two essential budgetary contradictions: the EU only works if there is economic growth and too few European taxpayers are expected to pay too much for too many. 
 

Twenty of the twenty-seven member-states are so-called ‘net beneficiaries’, i.e. they get to have significant amounts of my money transferred to them for what is meant to be investment in cross-Onion growth.  In other words some 200 million people in seven countries (Britain, France, Finland, Germany, Italy, the Netherlands and Sweden) effectively pay for 300 million others.  With Poland gaining the most such transfers are called ‘solidarity’, which in Onion-speak means give me your money or else.  That was fine when western European economies were able to afford it. But as yesterday’s increased British borrowing figures showed that is no longer the case.
 
The EU Budget is complicated further by the industry-specific subsidies which also generate transfers from rich country to rich country.  The Common Agricultural Policy or CAP represents some 40% of the EU Budget (down from 50% in 2004).  In 2013 Germany will contribute €3bn, Italy (which is broke) €1.9bn, the Netherlands (me - and I am soon to be broke) €900m and Belgium (definitely broke but pretending otherwise) €800m, with Greece, Poland, Spain, France, Ireland and Hungary the biggest beneficiaries.  The EU locks in aspic a chronically-outdated farming industry supported by a CAP that emerged in the early days of 'Europe' soon after World War Two when it was feared Europe could not feed its people.
 
The summit will quickly get silly.  France’s President Hollande is preparing to do battle with British PR-Meister Cameron over the CAP because when in doubt at home a French president always attacks Britain.  In fact, much though the British would love it to be about them so that Cameron can be seen to go down with ensigns a-flying and guns a-blazing, it is not.  The Germans, Dutch, Finns and Swedes are also unhappy with the Omission’s 5%.  Moreover, it is not just how much money is spent but where on earth much of it goes.  The Court of Auditors has refused to sign off on the Omission’s accounts for seventeen straight years because of implied fraud in many EU projects (that is why I call the Commission the Omission!). 
 
EU Pretend President Herman van Rompuy has suggested a rather natty, naughty little compromise designed to tempt the British into a political trap.  He wants a reduction of €60bn in the Omission’s proposals but rather sneakily demands Britain abandon a rebate that was negotiated by a handbag-slinging Margaret Thatcher back in the 1980s.  The aim is to make the British again the issue rather than the stupidity of the system. 
 
The solution?  It is precisely what the Germans are rather sensibly suggesting; a ceiling of 1% EU GDP, cuts and reform to the CAP and more money transferred to infrastructure and regional development funding which benefits Europe’s increasingly urban population. 
 
So, to avoid soiled hand-made, taxpayer-funded shirts why not just go to Brussels and listen to Headmistress Merkel?  In any case, the real battle will be over European political union which will erupt soon after she is re-elected next September. 
 
There may well be fog in the Channel, but it is made far thicker in Brussels by the opaque bureaucracy that the EU is fast becoming.  Enjoy your Turkey Yanks and give thanks; you could be an EU citizen!
 
Julian Lindley-French
 

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