Bargain Wars in Brussels: the members of the European Grocer’s Association (EU) all win their battle, but lose the war, letting the European citizens disgracefully down. The European Parliament has the chance to erase this flop.

Over and over again

I let you down

King’s X – Over and Over

On 7 and 8 February 2013, Brussels was the host city for one of the greatest showdowns in EU history: the EU budget talks 2014-2020 aka the Multiannual Financial Framework (MFF).

In this second MFF meeting (the first, failed meeting was in November 2012), the EU budget for the coming seven years had to be set. In case that the member states would not have agreed on the new budget for the EU during this meeting and would fail to do so throughout the remainder of this year, the budget for 2013 (inclusive a 2% inflation compensation) would be maintained in 2014.  

Fortunately, things didn’t come that far: after more than 24 hours of hard battles for the last Euro-cent, making it one of the longest meetings ever, an agreement was set.

Here are the pertinent snips from an article in the Financial Times on the EU MFF budget

Leaders agree cut to EU spending

Leaders agreed the first ever cut to the European Union budget after setting spending to the end of the decade at €960bln.

The deal emerged after a bruising battle that saw Britain’s David Cameron lead demands for deep cuts to reflect the austerity undertaken by many governments and François Hollande, French president, rallying the defence of EU spending to help recession-hit economies.

Angela Merkel, the German chancellor, helped broker the deal with Herman Van Rompuy, the European Council president, which includes a €1bln cut in spending on the Brussels bureaucracy and big reductions in cross-border infrastructure projects supposed to boost growth. However, €6bln was set aside for a special fund to tackle youth unemployment, which has spiralled following the financial crisis.

The seven-year budget, covering 2014-2020, is 3% less than the current budget, and well below the €1,033bln first proposed by the European Commission, the EU’s executive arm, at the outset of negotiations.

The compromise sets the figure for budget “commitments” – the maximum amount of money allotted during the seven-year period – at €959.8bln, while budget “payments” – the amount of money that can actually be spent – are more sharply reduced by €34bln to €908.4bln.

Most of the new cuts come from a fund to build cross-border infrastructure that the commission has touted for its potential to generate economic growth. The budget for agriculture – a key French priority – is being spared further cuts, although the seven-year total is more than 10% down on current spending.

This agreement has been created in the (in)famous European style, enabling all 27 member-states of the EU to come out as winners of this ‘superbout’, as everybody received a slice of the pie:

• The UK, Germany and The Netherlands got their desired reduction of the EU budget: down to €960bln from the €1,033 billion, as originally proposed by the European Commission;
  
• On top of that, the UK and The Netherlands – both net payers to the EU - maintained their discount on the EU contribution;
  
• France was able to continue most of its agricultural subsidies, keeping the farmers at home happy;
  
• The PIIGS countries maintained ample access to the structural funds, that enable investments in the infrastructure and other purposes to ‘reduce regional disparities in terms of income, wealth and opportunities’ (definition Wikipedia);
  
• The poorest EU countries (countries with a Gross National Income of less than 90% of the EU average) gained better access to the so-called Cohesion fund, which ‘contributes to interventions in the field of the environment and trans-European transport networks’ (again Wikipedia);

On top of that, Herman van Rompuy could write a ‘happy’ press release in which he ‘boasted’ about the achievements of the new EU budget deal:

• Compared to the previous Multiannual Financial Framework (MFF), there is an overall increase of €34bn (or nearly 40%) in the heading for Competitiveness for Growth and Jobs;
  
• There will also be a real, net increase for programmes like "Erasmus for all" and "Horizon 2020" for innovation;
  
• We have set aside €6bn for a new Youth employment initiative. A powerful incentive; 

After reading this, you might think that ‘everyone’s a winner’ with this European budget for the coming seven years, right?! Well, not exactly!

The EU-money that has been given away by lowering the EU budget to €960 bln, has been found in an €11 bln reduction of investments in trans-European transport, energy infrastructure and broadband networks and in a discount of €1 bln on the expenses of EU-institutions.

The investments in this cross-border infrastructure were exactly the investments that were aimed at the future of the EU and its member states. They were there to make the EU more modern and competitive and to further interconnect the European member states, for better cooperation in the future.

However, they were given away in favour of the ‘good old’ agricultural subsidies, which are present to maintain the status quo for especially the French and Dutch farmers, thus probably rewarding inefficient techniques and conservatism at one hand and animal-unfriendly mass-production of meat and poultry at the other hand.

Besides that, €6 bln for fighting European youth unemployment doesn’t really sound like ‘the mother of all solutions’. It smells like ‘tea from an already used teabag’.

Youth unemployment is THE biggest problem in today’s EU, is my opinion. In Greece and Spain more than 55% of youth is unemployed. This is a demographic timebomb, as these youngsters don’t have the means to raise a family and get children, but instead have to live upon their parents’ wallets. That is, if their parents still do have a job. If we are not cautious, a whole generation in those countries might get old in poverty and despair.

Also in many other EU countries youth unemployment is very high. The EU has an average youth unemployment of 23.6% and the ‘best’ scoring countries are Germany (8%), Austria (8.5%) and The Netherlands (10%).

This lousy €6 billion is not going to change one thing for these unemployed youngsters. And also the reduced investments in innovation will not add to the economic development of Europe and the European countries.

The 27 frogs in a wheel-barrow, that we lovingly call Europe, have to fight with countries that are either swimming in gas and oil (The United States and Russia), that have a lot of commodities, minerals and raw materials (Russia, China and Brazil) or that have almost unlimited numbers of cheap and well-educated workers, who can do the same job for a fraction of the money that workers in Europe ask (India, Korea and China). In other words: if we don’t pay attention, our continent will be in economic distress.

Europe can’t beat the aforementioned countries either on price of labour or on access to raw materials and commodities. That is a simple and plain fact. The consequence is that we should work harder and smarter.

This situation asked for a grand vision on the future from the leaders that the European citizens elected to represent us wisely and responsibly. 

In order to survive economically, the European Union has to stimulate education and innovation, out-of-the-box thinking processes, efficiency  improvement and a general level of excellence in the whole of Europe. The EU should be: 

• Fighting the devastating (youth) unemployment in especially the peripheral countries and Eastern Europe by creating new and useful jobs through the development of a EU-wide industry-policy.
  
• Endorsing efficient traffic of unemployed Europeans to places in Europe that are in need of workers
  
• Getting the best education possible for our youngsters and also for our currently working generations;
  
• Achieving better and more efficient (non-)financial services;
  
• Enabling new and groundbraking technical inventions that can set the pace for a new European era;
  
• Achieving breakthroughs in environmentally friendly, ‘green’, technology;
  
• Building more efficient production facilities that produce products of better quality at a lower price;
  
• Developing an agricultural industry that combines the latest techniques and agricultural innovations in combination with animal-friendly, safe and healthy production facilities; 

Sadly, we didn’t get this grand vision. 

To the contrary: this whole budget deal smelled like the ‘annual assembly of the European Grocer’s Association’: everybody has just been fighting for pennies and bargains, instead of looking for a big picture of where Europe wants to be in 5-10 years. Everybody won their battle, but lost the war.

Fortunately, the European Parliament can still say ‘nyet’ to this budget proposal, as its consent is legally required. Although such a rejection would initially lead to more administrative chaos and angry faces within the EU, it could force the leaders to look at the tasks ahead more responsibly.

Still, the odds are that the EU will continue to muddle through the next seven years: without vision and cooperation and without innovation. That would be a total disgrace.