Businessweek: Downturn May Spur EU Budget Reform - "and provide a more critical look at Eastern Europe's member States" - by Balint Szanko

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Downturn May Spur EU Budget Reform - "and provide a more critical look at Eastern Europe's member States" - by Balint Szanko

So tangled can European Union politics be that even some of the more federally minded chancelleries of Europe are surely thinking this as they survey the destruction the recession is wreaking on the Continent's political economy. In these thoroughly dramatic times few remember the hysteria surrounding the negotiations for the EU's 2007-2013 budget. Always difficult, these were so tortuous that some commentators were predicting the union would sink into irrelevance or might even split if no agreement were found. Agreement was duly negotiated with the proviso, demanded mainly by the United Kingdom, Sweden, and the Netherlands—the hard core of a band of fiscal conservatives in the European Council—that the entire system be reviewed in 2008-2009.

In mortal fear of Ireland that is holding the entire EU and its constitutional development hostage, Brussels is skirting the matter. The European Commission was due to make its proposal for the review of the EU's financing early this year. Wary of upsetting people before the ratification of the Lisbon Treaty is finally concluded, the review was delayed until at least the end of this year. The point of all this is that the delay is a godsend for those countries, like most Central and Eastern European members, who make a lot of money out of the EU budget. The deterioration of public finances driven by the economic crisis is so severe in Europe, not least in those states that finance the EU, that the community budget might be in for a drastic overhaul. The later this comes the better, they might be thinking, because in a couple of years the economy will pick up and there might be more money again to blow on things like the common agricultural policy. Last time around the easterners were mostly for conserving the regional development and agriculture support payments. Understandably, they wanted to milk the EU. Next time it may be a bit different. Successful little economies like Slovakia and the Czech Republic may become net payers into the budget, causing them to look at things through different eyes. Slovenia is already there, and the Slovenes now also have a strong stake in the stability of the euro. Slower movers, like Poland and Hungary, are going to have to be clever. Almost certainly, there is going to be less money. The huge redistributionist programs might be trimmed, perhaps seriously. Only a fool would suggest that these countries should give them up – there is too much money in them. But they will have to make a clear choice if they want to preserve some of their benefits. Stubbornly protecting the money pot will not work. And for those who believe in revamping what is a hugely inefficient and not very clever EU budget, that may be no bad thing, anyway. Setting real priorities for regional development spending, half of which is still geared toward the rich western members, might be a good place to start.