IREF - Institute for Research in Economic and Fiscal issues
Fiscal competition and economic freedom
While several EU member states are facing an unprecedented sovereign debt crisis and others are struggling to cut their spending to avoid the crash, the EU Budget and Financial Programming Commissioner Janusz Lewandowski announced that the draft budget for 2012 represents € 132.7 bn in payments amounting to a 4.9 % increase over 2011. The Commissioner is justifying the increase with the involvement of the EU in many projects launched before the crisis. According to him, any decrease below the announced figure would require member states and the European Parliament to break the legal commitments that have been made on existing contracts. The Commissioner is also pointing out that the administrative expenditure for 2012 will be frozen and for the third year in a row, the Commission does not request any additional new post.
Nevertheless, if we look closer, there might be other possible spending cuts. For example, in 2012 the EU is devoting some € 57.7 bn to help member states increase their investments in “sustainable growth”; climate change projects expenses are to be increased with 6.1% in 2012 to achieve € 8.1 bn in total; about €80 bn. are currently allocated to farming subsidies and regional development. If we listen to EU officials, all those expenses are vital for the 500 mln EU citizens. But are they? From economic s point of view the question would rather be are they at least useful at some point? Nothing is less certain.