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Money quarrels are common, popular and never just about money.

European Union institutions and Member States are again fighting about small and big amounts of cash:

  • An immediate payment of € 9 billion resulting from a shortfall to the EU 2012 budget
  • The 2013 EU budget of € 137 billion, which is slightly higher than originally anticipated under the financial framework for 2007-2013 approved back in 2005
  • The EU financial framework for 2014-2020 projected at around € 972 billion, thus higher than that for 2007-2013 by about 150 billion.

On the institutional front, the European Parliament sides the European Commission against the European Council. Among Member States, the so-called net contributors are flexing their muscles against the net recipients, but also among each other with Great Britain leading the EU-bashing group.

All this is taking place against the background of the recent approval of the European Stability Mechanism (ESM), which was established as a firewall against the financial crisis and is expected to have an authorized capital of €700 billion, of which € 80 billion will be paid-in contributions. Not to forget the EFSF, the ESM predecessor, which was endowed with € 780 billion in the form of guarantees.

Against this background, the fight over the € 9 billion for the 2012 budget is a sham and, likewise, that over the 2013 budget. There is nothing substantive behind these brawls other than the politics of bargaining and cheap populism for the purpose of domestic consumption at national level.

The € 972 billion to be committed to the financial framework for 2014-2020 reads and sounds like a huge amount. In actual fact, it represents only one per cent of the EU gross national income and is distributed over 28 Member States (27 + Croatia which is due for accession in 2013).

The additional € 150 billion foreseen for the financial framework for 2014-2020 as compared to that for 2007-2013 is also minimal, considering, first, inflation, and, second, the pledge to boost economic growth through public investment.

So, what is this all about?

For one, it’s about symbols: the larger the EU budget, the greater the fear that we might be moving towards a United States of Europe. No risk there really. The EU budget is peanuts as compared to the federal budget of the United States. Take the U.S. federal spending in 2011 which amounted to $ 3,598 billion. The equivalent amount in the EU was around € 120 billion. Moreover, even if you were to adjust the U.S. figure to exclude payments for defense, interest and social security, which are not relevant for the EU, we would still be talking about $ 1,000 billion in the U.S. as compared to € 120 billion in the EU.

The second issue at stake concerns the funds Member State governments will themselves have to mobilize in order to receive money (back) from the EU budget. Because the EU is not a federal state, many of its funding programs operate on a co-financing basis, that is to say, EU funds become available through grants or subsidies only when Member States also contribute their share. Alternatively, as in the case of agricultural subsidies, to become eligible for EU funds, specific criteria have to be met, and these require the follow-through of policy harmonization. Thus, for every Euro committed to the EU budget, Member States are required to do some homework – and this they do not always like.

Or maybe it is all much simpler, and Europeans just want to show Americans they have their fiscal cliff dramas too …

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