Added Value is the Order of the Day

ZEW made its own contribution to the debate surrounding EU reform and the negotiations over the upcoming seven-year Financial Framework for the years 2021 to 2027 with the Lunch Debate “The EU Budget: How Europe Can Deliver” held on 24 January 2018 in Brussels. This particular ZEW Lunch Debate was hosted jointly with the Bertelsmann Stiftung. If the high level of interest in the event is anything to go by, this topic has struck a particular chord with the public.

In his keynote address, EU Commissioner for Budget and Human Resources, Günther Oettinger, stated his belief that the planning of the next Multiannual Financial Framework (MFF) provides an opportunity to respond to the many challenges currently facing the EU. This will, however, require a recalibration of certain EU priorities. While the EU’s current Financial Framework is focused primarily on growth and job creation, the next MFF will need to turn its attention to security, protecting the EU’s external borders and the challenges resulting from migration and a common defence.

According to Oettinger, the new budget must not only ensure that there is sufficient financing for these new priorities, but also address the losses in income caused by Brexit, which is set to leave a 12 to 14 billion euro hole in the EU budget. Any budget proposal must therefore combine carefully considered savings in EU outgoings with an increase in the Member States’ contributions to the EU budget. For this reason, the areas in which the EU is spending its money should be closely scrutinised. In Oettinger’s view, this spending must deliver visible added value; in other words, the EU should in the future primarily assume responsibility for policy areas in which it can achieve better results with greater efficiency than the individual Member States could alone.

Oettinger listed a number of policy areas in which this EU added value would most likely be found, including shared defence as well as effective joint efforts to control the EU’s external borders, a key condition for freedom of movement within the EU. A further example are projects in the area of aerospace such as the satellite navigation system Galileo. This is the kind of project that no single EU country could have attempted alone. Another project providing added value is the research funding programme Horizon 2020. According to Oettinger, making cuts to this programme in the new budget would send the wrong signal.

Oettinger did, however, also concede that the planning and ultimate passing of the next MFF will prove extremely challenging since it has to be approved by the European Parliament and all 27 EU Member States. Despite these obstacles, it is important that the new budget be done and dusted as soon as possible before the next European parliamentary elections in mid-2019. If no agreement is reached regarding the Financial Framework before the elections, the EU risks wasting precious time it cannot afford to lose to pursue its new priorities.

ZEW study on policy areas with European added value

Oettinger’s concept of “added value” as a criterion for deciding whether a particular task or project should be funded at the national or European level from now on was seized upon by Professor Friedrich Heinemann, head of the ZEW Research Department “Corporate Taxation and Public Finance” in his lecture. He presented the results of a study conducted by ZEW and the Bertelsmann Stiftung which aims to offer some guidance as to whether a certain policy area provides European added value or not.

The current division of responsibilities between the EU and the Member States has developed over the course of decades and is therefore not the result of careful considerations over whether an issue can be tackled more effectively on the EU or national level. According to Heinemann, this is where we need a rethink, which is where the current debate surrounding European added value can help. With this in mind, the study analysed a selection of eight policy areas to see if a joint approach from the EU or individual national policies would be more efficient and therefore more cost-effective in each area. The study found that policy areas such as defence or asylum and refugee policy should without doubt be under the remit of the EU, while Brussels should also have greater control over corporate taxation and development aid. In all of these areas, uncoordinated parallel efforts from the Member States would be more of a hindrance than a help, whereas showing a united front against external forces would be more advantageous. Meanwhile, policy areas such as agriculture or education can be dealt with more efficiently on the national level. Heinemann believes analysing policy areas in this way is important as it can serve as a means of demonstrating to EU citizens what the EU actually does for them and that EU funds are being used in an efficient and responsible manner.

Panel discussion on the EU Financial Framework

This was followed by a panel discussion moderated by Silke Wettach, EU correspondent at the German weekly business magazine “Wirtschaftswoche”. One of the main issues up for debate were the unusual circumstances under which the upcoming negotiations over the next MFF would be taking place and what effect this might have. Stefan Lehner, Director of “Own Resources, Evaluation and Financial Programming” at the Directorate-General for Budget at the European Commission, pointed out that the United Kingdom, who had always played a prominent role in previous budget negotiations, would no longer have a seat at the table. As a result, Spain could for the first time become a net contributor to the EU budget and there is a chance that France might be prepared to make concessions over agricultural subsidies. These factors, according to Lehner, along with other increasingly important issues such as security and defence could set evolutionary changes in motion. National interests may not change overnight, but they are not set in stone either. Shifting alliances of countries during the negotiations would certainly be within the realm of possibility.

Petri Sarvamaa, vice-chair of the European Parliament’s Committee on Budgets, was of the view that the principle of European added value ought to be taken into account when allocating EU funds to certain tasks during the planning of the new budget. According to Sarvamaa, this is the only way to provide solid reasoning for cutbacks to previously EU-funded projects whilst also providing justification for demanding higher contributions from the Member States to fund new and important initiatives. For Sarvamaa, tasks with European added value included tackling the causes of migration by supporting the development of neighbouring countries to the EU, particularly in Africa, securing the EU’s external borders, public procurement as well as security and defence.

ZEW President Achim Wambach emphasised the significance of European added value as a selection criterion for determining whether certain responsibilities should be assigned to the national or EU level. He did, however, pose the question of whether all those involved and particularly the European Commission had actually learned any lessons from the criticism levelled at them by many EU citizens, the rise of nationalist movements or Brexit, which should have been taken as a warning sign. These budget plans should not simply be a matter of putting more money in the EU pot. What is much more important, according to Wambach, is to continue to force the debate on European added value and to use this as a means of analysing and evaluating the EU’s tasks and policies.

This approach was supported by Aart De Geus, CEO of the Bertelsmann Stiftung and former Dutch Minister for Labour and Social Affairs, who saw in the current situation a window of opportunity for the EU to take action and to change things that many have thus far considered unchangeable. However, reliable research data is necessary to convince EU citizens of the validity and utility of certain changes, since ultimately, in a democracy, changes cannot be brought about without a political majority in favour. These arguments will have to be strong and convincing as European voters expect one thing above all else, and that is that Europe delivers results.