Making sense of the insensible

A paper floated by the Commission proposes to give the EU budget a more sensible focus - away from the current Byzantine arrangement in which subsidies are dished out to farmers and non-farmers alike and a range of ludacrious projects in richer member states, with no positive impact whatsoever on jobs and growth. EUobserver tells us that the Commission paper proposes to spend money “only on projects which really have an impact on research and technology, on greening the economy or on creating jobs.” This, of course, sounds sensible.

The EU’s regional spending programme (structural funds) is painfully ineffecient at the moment. EUobserver gives an illustrative examples of what kind of perverse incentives the EU’s structural funds create: one Spanish official has apparently admitted that some regions in the older member states keep their economies below or just around 75 percent of the GDP average (the threshold for areas considered particularly deprived, and therefore eligible for additional funding) in order to qualify for the extra EU funds. Compare this with the aim of the structural funds, which is to have poorer regions catch up with richer ones.

In its papers, the Commission actually gives two decent proposals for making the funds better targetted:

First suggestion is to put in place a “sunset clause” to reduce support for member states which have failed to make good use of the money, or failed to move up the convergence latter.

A second suggestion is to link the regional aid to the length of EU membership, which could end the ridicoulos system whereby the EU’s richest member states send money to Brussels, only to get some of it back (minus the huge adminsitrative cost involved in this recycling operation).

The most sensible way forward, of course, is to limit the structural funds to the newer member states, where they really can make a difference (if propoerly targetted and distributed) - as we long have argued.

These are some ideas that could make the EU budget a bit less irrational. Don’t hold your breath though - any such ideas are likely to run into massive opposition from the likes of Spain and Greece. And today, MEPs voted in favour of a 10% increase in the budget, including setting aside more trade-distorting subsidies for dairy farmers.

In other words, an incoming Conservative government has some work to do.

Source:
http://openeuropeblog.blogspot.com/2009/10/making-sense-of-insensible.html