22/10/2012 10:40 BST | Updated 22/12/2012 05:12 GMT

Making Sure the EU's Long-term Budget Adds Up


Setting a budget is a difficult exercise at the best of times. Even when money is plentiful, it is never unlimited, so tough choices have to be made.

Now imagine 27 countries, all with their own of difficulties and preferences, having to decide about billions of euros for a seven-year period in the midst of the biggest economic crisis since the great depression.

This is the challenge the EU faces in coming months as it negotiates the long-term budget for 2014-2020. It's more than just agreeing on numbers. As the budget for each policy area will also be set, it is about determining the EU's future direction.

The European Parliament is set to play a key part in this. Under the Lisbon Treaty, no budget can be adopted without the Parliament's consent and MEPs intend to use that power to steer talks in the right direction, focusing on the greater good of the EU as a whole.

What does Parliament want? To put it simply, MEPs want a robust budget that is flexible enough to deal with unexpected challenges. At the same they also want a reform of the way the EU is funded so that it becomes less dependent on member state contributions.

Robust in this case means sufficient funding to meet the political goals that have already been agreed upon. MEPs want a budget engineered to generate growth, which includes much needed investment in new infrastructure, stimulus for research and development, support for the EU's poorer regions and help for small and medium-sized companies. Austerity will not suffice to restore prosperity, parliament believes.

Flexibility is also key. The last few years have shown just how unpredictable life can be, meaning there should be space in the budget to deal with any surprises. Take the nuclear fusion research project ITER, for instance. It emerged as a priority in the middle of the current budget period, but finding financing proved difficult. Scrambling for money can mean the EU misses out on some great opportunities.

The other major issue at stake is that of own resources. The treaties specify that the EU budget must be financed wholly from own resources, as was the case with its predecessor the European Coal and Steel Community, which was financed through direct levies on coal and steel production. Over the years the EU has gradually become funded through member state contributions. It amounted to 40% in 2000 but had increased to 75% by 2010.

A system of real own resources would be fairer, simpler and more transparent and equitable, MEPs believe. They are also keen to avoid the paralysing discussions between net payers and net receivers in the Council. They suggest a new income system could be based on a new EU value-added tax or a financial transaction tax.

The fate of the EU's long-term budget will be decided over the coming months On 23 October MEPs will vote on a resolution calling on member states to admit where they want to see cuts and on 22-23 November heads of state and government will meet at an extraordinary summit with the aim of striking a deal. The Cypriot presidency has indicated it wants to have an agreement before the end of the year. While member states will be keen to keep down costs, MEPs will fight hard to ensure it still offers plenty of value.

Thank you to Images_of_Money for making the photo available under a Creative Commons licence