Euro Zone Crisis: EU Budget is a Quagmire, But It Can Be Done

The European Union’s 27 leaders are meeting to decide the 2014-2020 funding priorities for the EU and the budgets they should receive. The main expenditures are focused on economic growth, natural resource management, security and justice, foreign policy and administrative requirements.  

The failure to reach an agreement on the budget is indicative of deep political and ideological divisions within the EU. Years of austerity have failed to produce a resolution to the debt crisis in Europe and growth has not been restored. In fact, the Euro zone has slipped back into recession, dragging the peripheral members with it.

The debt-stricken countries in Southern Europe, as well as the newer and poorer members of the Union, are pushing for a more liberal spending policy that will speed up conversion towards a unified European standard of living – that would reduce the time spent on a two-track Europe and allay the functional disparities produced from economies that are not equally competitive or dynamic.

The debate is between the originally proposed European Commission budget for €1,024 trillion against EU President Herman van Rompuy’s proposal for €973 billion and the opposition of many of the members to the figure. With economic growth projections for the medium term not being very positive, the question of making the budget viable rests with the what kinds of cuts will be made and what priorities sacrificed.

UK Premier David Cameron has conditioned support for the budget on reducing administrative expenditures to the tune of €6 billion over 7 years and several more countries, among which are Austria, Finland and Denmark, support the measure.

French president Francois Hollande is opposed to severe cuts to the budget, not in the least motivated by the large agricultural subsidies France has traditionally received from Europe, dating back to the days of the Common Agricultural Policy in the European Economic Community.

Germany’s Angela Merkel is sympathetic to Cameron’s sentiment, but her country’s centrality to the entire European project means that Merkel has no choice but to find a balance between the diverging and competing positions.

The UK is of particular concern, because sentiments in the country have traditionally been cool towards the European project and the current crisis might sharpen the feelings for suspending the country’s EU membership. Effectively, the EU is challenged by a number of centrifugal forces that might get worse before they get better, and the Merkel-Cameron dynamic is crucial; if no agreement is reached, Cameron may well veto the entire project. While she favors modest increases, he is under severe domestic pressure to push for cuts in the wider context of spending austerity.

Euro zone reform remains the bigger issue at hand, as do Greece’s own debt problems; what happens to the Greeks might be a microcosm for what awaits Europe down the line. It is an ideological and philosophical crisis on left versus right solutions to Europe’s problems, but coming together will be the only way to move forward.

Overall, the situation is rough, but far from hopeless. Europe has endured far more intense crises and emerged stronger from them many times in its history – this time will not be an exception.