EU Budget A tightfisted German bean counter on a mission to save

The European commissioner for the budget, Günther Oettinger, is becoming obsessed with the looming Brexit-related shortfall. He wants to revamp the way the EU is financed but is unlikely to succeed.
Let me count that again.

Germans aren't big spenders and then there are the famously frugal Swabians, the Scots of Germany, you might say.

Arguably, that would make Günther Oettinger, the EU budget commissioner who comes from Stuttgart, in southwestern Germany's Swabia, the ideal man for the job as chief bean counter of Europe.

Mr. Oettinger, who got the job at the start of 2017, is living up to his region’s reputation by trying to make Brexit a chance to revamp the EU’s spending. Right now, the EU spends most on subsidies for farming and regional development and Mr. Oettinger is becoming obsessed with changing this — though he is not likely to succeed.

A hole is looming in the EU's budget; after the UK leaves, the remaining 27 members of the bloc are likely to have to pay more — or save.

But how much? Last summer, Mr. Oettinger gave his first estimate for the budget gap resulting from Britain, one of the big EU net contributors, departing the bloc: €10-12 billion ($12 - $15 billion).

Since then, intriguingly, his estimate has been steadily increasing, to €13 billion before Christmas and to up to €14 billion now.

Evidently, Mr. Oettinger wants the gap to be as big as possible to increase the pressure on EU members to increase their transfers to Brussels for the future 2021 - 2027 financial period.

Government leaders from the EU’s member states met in Brussels on Friday for an informal summit to discuss the future post-Brexit budget and the man from Swabia is bent on getting as much bang from his euro as possible in future. “We only want to invest euros where we can see it bringing added value,” he said.

He has his work cut out because at present, EU spending on agriculture and cohesion accounts for 73 percent of the EU’s budget, dwarfing the amount available for innovation and investment.

Even net contributors want things to remain as they are.

Mr. Oettinger plans to present the leaders with a “menu” of new measures that could be financed by Brussels. They include comprehensive border control for the EU, a snip at €150 billion for the 7-year period.

The problem is that a number of EU states are resisting attempts to cut back on farming and development spending despite doubts about its effectiveness.

Even net contributors want things to remain as they are. Austria’s new chancellor, Sebastian Kurz, wants to keep the farming budget at 40 percent of total spending. An Austrian government paper demanded that the budget be adapted to a smaller EU post-Brexit “without disproportionate cuts in individual policy areas.” That stance is supported by Finland. Incidentally, Finnish Prime Minister Juha Sipilä leads the Center Party, which was founded as the Agrarian League.

The EU urgently needs to reform its agricultural spending because 80 percent of income subsidies go to the richest 20 percent of farmers. Irish economist Alan Matthews researched that 131,000 farmers at the upper end of the income table get a total of €13.8 billion per year, meaning that almost 10 percent of the EU budget goes to a “relatively small group of landowners,” he said. Brussels spends less, €10 billion per year, on the research program Horizon 2020.

Mr. Oettinger, it seems, is tilting at windmills, and he can’t rely on help from his home country. The German government has said it’s opposed to demands from the Netherlands, the biggest EU net contributor per capita, for big cuts in regional development spending. There’s a simple reason for Berlin’s intransigence: Germany’s 16 regional states all benefit from EU subsidies.

This article originally appeared in WirtschaftsWoche. To contact the author: [email protected].