Thursday, July 15, 2010

Budget cut-backs are not popular

Further to the pious hope expressed by Lord Howell (or whoever was writing that reply)
At a time when Governments across the EU are reining in their spending, it is only right that the EU institutions think carefully about every euro that they spend to ensure that they get the most from their money. We are currently pushing for a freeze in the 2011 budget and expect salary levels to reflect the current economic conditions.
The European Voice reports a great deal of outrage in the Toy European Parliament on the subject.
Members of the European Parliament have accused national governments of seeking cuts to the European Union's budget that would undermine attempts to spur economic growth.

Ambassadors from the member states have agreed a draft budget for 2011 of €126.58 billion, €3.6bn less than the draft budget presented by the European Commission in April. The reductions agreed by the ambassadors would affect most areas of EU spending, but the biggest cuts would be to programmes intended to boost growth and competitiveness. The Council of Ministers wants to cut the allocation for growth by almost €2bn and save €1.075bn on cohesion spending compared to the Commission's proposal. A further €821 million would be cut from spending on support to farmers and the fisheries sector.
To a more or less rational person the idea of taking more money away from the potentially productive sectors of society and giving them to the leeches that constitute the eurocracy would contribute to economic growth is insane but these puffed up little muppets (apologies to Kermit, Miss Piggy et al) really do believe it that they are the ones who are essential for that process.
Sidonia Jedrzejewska, a Polish centre-right MEP who is preparing the Parliament's position on the 2011 budget, told her colleagues on the budgets committee: “I take these cuts not only as a provocation but as an offence.” She pointed out that the budget lines concerned were supposed to pay for the Europe 2020 strategy, which aims to boost competitiveness and stimulate growth. Jedrzejewska called plans to cut the budget for youth training programmes, which the Parliament has made a priority, “a slap in the face”.
The Europe 2020 Strategy was, as this blog mentioned before, the one thing that came out of the last European Council. It is to be the replacement for the Lisbon Strategy that was going to make the European economy [sic] the most modern and most competitive by 2010. And what a success that was.

Seven member states, Austria, the Czech Republic, Denmark, Finland, the Netherlands, Sweden and the UK, think that the Council has not gone far enough and there should be even further cut-backs. After all, they argue, we all have to introduce austerity measures and, indeed, the Commission is demanding that; it seems somewhat wrong for the EU budget to remain as large and as wasteful as it has been all these years. One might argue, pace certain Polish apparatchiks centre-right MEPs that continuing to extract money for EU projects when everything else, including employment is being cut back, is a slap in the face of the taxpayer.


  1. The austerity measures will be in vain, for the next bail-out for financial institutions will cost sums that are several times as high as any conceivable savings governments can push through.

    The German bail-out package in response to the financial crisis was relatively modest by international standards, but even so it boosted public debt from 66 up to 80 percent of GDP in one go.

    The global financial system is as vulnerable as ever, despite all the recent efforts to strengthen it by government. The most effective measure to save money would be a refusal to bail-out any more financial institutions.

  2. Sorry about the typos in the third paragraph: Not 'by government' but 'by governments', also 'to bail out' instead of 'to bail-out'.

    I should add that a refusal to save moribund institutions is desirable, but highly unlikely.

  3. Thanks for that comment (corrected typos and all), Ralf. I completely agree with your very last paragraph. Nevertheless, from a political point of view it might be a good idea for MEPs not to behave like aristos of the ancien regime.

  4. Thanks and you are welcome.

    MEPs certainly should not have special privileges. Otherwise they might begin to plan further enlargement of the EU even before the crisis has properly ended, for example. I don't think that they have ever given up membership for Turkey, it just has been postponed due to the French and Dutch referendums on the rejected EU constitution.

    One last amendment to my first comment (I wasn't fully awke that late in the evening anymore): The change from 66 percent to 80 percent of GDP in debt also included measures that propped up non-financial businesses as well as losses in tax revenue during the crisis. Since all that was a consequence of the financial crisis, the original point still stands: The deficits increased sharply due to factors that weren't caused by 'normal' government spending. We badly need a free-market solution that makes sure that we have a working financial system no matter what happens, without throwing billions and trillions at the problem.

  5. Yes, indeed, we need a free-market solution as we are throwing good money (well goodish) after bad. However, we are not going to get it in the EU, which is dedicated to a planned and managed economy (and no, I do NOT think it is like the Soviet Union). Frankly, we are not likely to get it with any of the present lot of politicians.

  6. Unfortunately, hardly any politician around the world would support it. They are all too eager to get a lucrative job with a financial business (they write regulations accordingly).

    We might have to wait until the only option left is to let failed institutions go bankrupt. Hopefully, the bail-outs won't bankrupt taxpayers before then.