What is called a real budget mess?

You think US budget talks are complex and difficult? Imagine this:
Obama has a government of 50 members and all of them are appointed not by him, but by the state governors, and approved by the House. This Executive Branch of the Government prepares the budget and sends it to the House for an approval. After that the bill goes to The Senate where every senator has a veto right. I.e. full consensus is needed for this bill to pass.
Don't you think this will be a really complex and entangled budget procedure?
But it is not a fiction. It is absolutely real. In EU.

The only factor that makes the situation some simpler is the number of states. They are "only" 27. So the consensus is a little "easier" to get. And that budget procedure is exactly now going on. And the mess is something that on Capitol they even cannot imagine.

EU is in a deep debt crisis. All governments are pressed to make spending cuts. And logically most of them decided that they must also cut from their tribute to the EU budget. In UK even a parliamentary vote has passed overruling the Prime Minister's position that was to keep the old budget size with no increasing. Instead now Cameron is obliged under the parliamentary decision to negotiate a decrease or to veto the budget.

On the other side are EU administration and so called "poor" member-states that benefit most from the EU budget. Brussels officers are always eager on spending more. And former socialist countries on East, that joined EU in 2004-2007, rely much on EU funds for developing their economies to overtake the rich West.

So initially The Commission introduced a generous bill that planned an increase in spending. The Parliament (The House) was not very happy and required even more spending. Anyway it was eager to support the bill. But after that the bigger donors in the Budget (Germany, UK, Netherlands) said they will veto any budget that presumes an increase in spending. To pass the budget must be approved by the European council (In US - The Senate) where ever state has 1 representative (a president or a prime minister) who has a power to veto the decision.

Hearing that The Chairman of the Parliament said there will be no pass if spending is cut as The Council requires. I.e. a parliamentary block appeared on horizon.

So after these veto threats, the budget was back to Commission. It has made nothing. Instead of it the so called "rotary" chairman of EU (at the moment - the almost bankrupted government of Cyprus) offered a tiny spending cut. It was again rejected by big donors. Then in game entered the so called "permanent" Chairman of EU - Herman Van Rompuy. He offered some bigger spending cuts, but still not enough to make the donors happy.

In the meantime The Commission led by Jose Barroso (In US this is The President) stays away and just looks at the show. Imagine a situation in US where The White House is out of the budget talks :). But in EU this is logical and normal as The Commission is not appointed by Barroso, but is constructed by 1 commissioner from every member state. So every commissioner backs its own country's position so in fact The Commission is divided and blocked - just like the European council.
When the fans of spending cuts took ground, a fierce resistance appeared. Surprisingly it is led by France - the second as size donor in EU, that is implementing own budget spending cuts. It was expected France to be with Germany and UK. Instead France is for more spending. The reason is simple - France gets much of the agricultural subsidies that are almost half of the entire budget. A French veto will crash the procedure if French farmers remain with less money.

In last days a new veto threat appeared on horizon. Spain said it is ridiculous to become a net donor (i.e. give more to EU than it receives), that will happen if in spending cuts effort most are decreased the programs that are used by Spanish beneficiaries.

The overall budget of EU is not very big. It is a little more than 1% of the GDP of the Union. Much less than the 20-25% that Obama has in USA. Anyway the procedure of passing the EU budget is so complex, that in crisis situation like today, it is questionable if generally a pass is possible. There is another smiley thing in EU budget. It is very small as a whole but most of politicians rely on it to solve much of their problems. That is impossible even if any of the EU leaders achieves an entire victory. The EU budget also has become an excuse for EU politicians for their own incompetence to solve internal problems. So instead of addressing their problems they are redirecting the public attention to Brussels and to the EU money chaffer.

So do you still think there is a problem in US budget procedure :)))

November 19th 2012

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