Brexit Makes It Essential to Concentrate Scarce Resources on Truly European Tasks

In view of the many new challenges, the EU should restructure its budget in the Multiannual Financial Framework (MFF) after 2020. A fundamental reorientation of the European budget towards policy fields with a verifiable European added value is overdue. The current expenditure structure favours above all policy areas such as the Common Agricultural Policy (CAP) and cohesion policy, the European benefits of which are questionable. Instead, the EU budget should rather focus on financing policies that demonstrably create European added value. Professor Friedrich Heinemann, head of the Research Department “Corporate Taxation and Public Finance” at ZEW Mannheim made this position clear today at an expert hearing on the next MFF in the Bundestag’s EU Committee in Berlin.

“The EU has set the wrong financing priorities in its current budget structure. Not least due to Brexit, which implies the loss of a large net contributor to the EU, it is now essential to concentrate the scarce resources on truly European tasks.

The aim must be to re-focus the EU budget on policy areas with tangible European added value. The added value of the main budgetary item, the CAP, and parts of cohesion policy, is, however, not apparent. Direct CAP payments should therefore either be cut and phased out in the long term or transformed into an instrument that rewards efforts to deliver European environmental benefits.

One of the major shortcomings of the EU’s cohesion policy is that it pursues too many different objectives and that it has already moved a long way from its original convergence objective. It is advisable to concentrate cohesion policy on regions that are really in need. This is the only way to ensure a ‘convergence return’ in the long term – a reduction in cohesion budgets as convergence progresses. The European Commission’s proposal to link cohesion funds to compliance with the rule of law in the recipient countries is the right way to ensure a successful convergence policy.

The federal government should position itself more clearly than before in the budget negotiations. On the one hand, it defends the existing high budgets in agricultural policy and cohesion policy; on the other hand, it calls for a stronger orientation of expenditure towards policy areas with clear European added value, while rejecting an increase in German net payments beyond what results from Brexit. Such a negotiation strategy is not consistent.”