The new European Budgetary Order

The Sovereign debt crisis pushed the EU to take a new step to the common
financial rules. After some years of ‘soft budgetary carefreeness’, the
European Budgetary Treaty boosted the movement of budgetary convergence in the
EU. The ‘Six Pack’ and the ‘Two Pack’ consolidated the effectiveness of a new
European budgetary order founded by the Maastricht Treaty and the Stability
and Growth Pact. Even if mechanisms adopted by the Member States are formally
different in law, conditions of European budgetary orthodoxy have been
definitively hardened. This new rigor has a great impact on all the public
administrations, as defined by the European Accounts System and Eurostat. The
EU is a key-player of the budgetary game. This great power makes the EU
accountable to the general economic situation within Europe and amongst all
Member States. Budgetary regulation must be conciliated with preservation of
some investment means to develop potential growth on the continent. ‘Giant in
law’, the EU has to be responsible from an economic point of view.

The problem is that, from a budgetary standpoint, the EU remains a ‘dwarf’.
The European general budget is about 1% of the EU gross national income. The
budgetary power of the EU is less than one twentieth of the USA federal
financial power. Balance between ‘budgetary dwarf ’ and ‘giant in law’ is
characteristic of ‘adolescence’ of the EU finances. Natural consequence of
this situation, the EU capacities for redistributing and stabilization are
still relatively limited. To overtake this powerlessness, the EU has used no
budgetary tools by appealing to the European Investment Bank and the European
Investment Fund. However, the ability of the EU to support public investment
is not sufficient today to promote an authentic economic relaunching policy
and to support the global competition, especially with the USA and China. With
a ‘powerful brake’ and a ‘poor accelerator’, the risk is the European public
investments continue to stand by. This is the investment paradox of the
European budgetary order.

Will the next negotiation on the multiyear financial framework post 2020 be
able to change the point ? It is not sure, especially in the Brexit context.
Negotiating an European financial agenda is always long and difficult. But,
the exit of the United Kingdom could makes the game more disputed than ever. A
thing is clear : beyond the technical and financial sizes of the new roadmap
proposals established by the Commission, the democratic control of the
European Parliament is still limited. The EU budgetary framework and timetable
are too inert, not enough reactive, far from European citizens actually. In
the historical moments we live, it is certainly a strategic mistake to not
involve much more citizens and their representatives in the crucial
negotiation on the long-term finances of the EU. This is the technocratic risk
of the new European budgetary order.