Alfredo De Feo European pratictioner and researcher

The EU has different faces and roles – the regulatory role, the legislative role within EU and its role as actor in the external world – but a (almost) single delivery tool: the EU budget. The reform of the EU should cover both institutional and budgetary aspects.

Is a modification of the Treaty necessary to relaunch the European project and reform the institutional and financial mechanisms? The Union is a community of Law the revision of the Treaty is the best mechanism to secure new procedures, new competences. The preparation of a new Treaty is a long and complex exercise, which include the ratification by the National Parliaments and in some case referenda: a mission impossible in the time span. A procedure which most of European Leaders are reluctant to follow. The history of Europe has taught us that in many cases the modification of the Treaties have followed best practices and soft law.

This study will focus on reforms which can be achieved within the current Treaty. At this early stage of the study ten possible reforms, in the institutional and budgetary domain have been identified, where probably a revision of the Treaty will not be necessary.
A precondition to the reforms is that the Commission delivers, in the next months, the proposals announced by President Juncker in the State of the Union 2017, ranging from industrial policy, to migration management, protection of external border, climate change, cybersecurity on top of the ones already presented as the European Defence Fund or the extension of the duration of the European Fund for Strategic Investments (EFSI). All those proposals useful for the relaunch of a new image of Europe should be on the negotiation table so that the discussion on the political priority can start.

The ten possible reforms

1. European elections.
2019 will mark the 40th Anniversary of the European elections and the beginning of the 8th term of the Parliament. Is Europe more democratic and accountable with an elected European Parliament with fully fledged legislative power? My answer is that we have never had European elections, but only national elections to elect Members to the European Parliament and this is the reason why in spite of the presence of a fully fledged Parliament, with legislative competences there is still progress to be made in terms of democracy and accountability.

The European Political parties could open the way to a ‘revolution’ should they agree to conduct European election on the basis, and exclusively, of European programs. Up-to-now, paradoxically only the anti-European parties have done a campaign on (anti)-European themes.

The responsibility cannot stay only with Political parties. The TFEU entrusts Parliament with two obligations: draw up a proposal for uniform electoral procedure (art 223) and for the apportionment of seats in a House (Art 14), which is now concrete with the necessity to apportion the 73 seats which will be freed by the UK Members in 2019. The idea of a transnational list will be an incentive to European campaign, even if EP seems to be hesitant, to say the least, on this subject. Progress on all these points would have an impact on the role of the European Parliament and its link with European citizens.

2. SpitzenKandidaten
The experiment launched in 2014 to present the Lead candidate President of the Commission gave more visibility and transparency to the obscure appointment procedure, in the corridors of the European Council. The Treaty offered a, weak, link “Taking into the account the elections” but sufficient to develop this idea which previously already circulated in scholars papers. Nevertheless this idea took form in a disorderly way with a certain degree of improvisation, especially in the selection of the candidates by the European parties.

The experiment was ‘indirectly approved’ by the European Council, thanks to the pressure of the media. It was an interesting experiment but it didn’t spark a renovate interest in the appointment of the President of the Commission, the turnout remained low, it could have fallen even further without the active participation of the anti-european parties. Several shortcomings appeared: a modest media coverage due to the absence of contraposition among at least three of the candidates, the linguistic barrier in public debates across Europe, further to this the risks of an excessive parliamentarization and politicisation of the whole process (what if a EP with anti-european majority?).

In spite of the shortcomings, this process should be replicated in a more structured form, for instance the link with national (or transnational) lists needs to be reinforced, candidates should present a clear vision of their idea of Europe to engage debate with public opinions. Here again the role of political parties will be essential in making a success of this procedure.

3. New functions
The proposal to create a Finance Minister or to merge the functions of President of the Commission and of President of the Council is in principle linked to a modification of the Treaty, as the Treaty define the functions and the appointment mechanisms of various bodies and or personalities. Could this objective be reached without a change of the Treaty? What if the Council decides to appoint as President of the Council, the President of the Commission would this be against the Treaty? The same for the Minister of Finance, what if a Member State appoints as EU Commissioner a (senior) Finance Minister with a vocation to become the EU Finance Minister? Who will oppose that he/she enlarge informally his/her domain of action. Maybe even in this case soft law could prepare for later change of the Treaty.

4. European added Value & Subsidiarity
The reforms of the EU spending could also lead to an improvement of the efficiency of the the European Union and make available supplementary resources.
As general principle, EU should intervene when its action is more efficient than the one of the single Member States. There is the doubt that European Added value and Subsidiarity are not the leading principles of European spending. An assessment of all legislation to verify the respect of these two very basic, but also subversive, should involve all the Institutions with the commitment to discontinue the legislation not respecting these principles. An interinstitutional agreement could define the modalities of this spending review.

Further to that, EU spending should be focused more on outputs. More than seven hundreds ‘smart’ indicators are included in all EU legislation, since 2014, but the link between the evaluation of the indicators to assume informed policy decision is still very weak or missing. The legislative and budgetary authority should take more ownership. A structured dialogue among the Institutions should be setup first to decide the indicators and then the procedure to evaluate their results and, if necessary, embed them in the decision making process. Up-to-now the smart indicators included in the regulations are perceived as a technocratic exercise, which might suppress the political decision from the budgetary procedure, transforming the EU budget in a perfect algorithm.
An agreement between Institutions should frame a decision mechanism linked to the evaluation of the EU policies.

5. Traditional vs New policies
The financial resources allocated by Member States to the EU are capped at 1,23% of GNI. If Member States are serious in addressing the new challenges – Youth employment, security, defense, border control and migration management and climate – supplementary resources will be necessary. As EU cannot finance itself with loans. The new policies could be financed:

➔ by Member States, with fresh money, through the EU budget within or beyond the ceiling, certainly the most desirable solution but also the most unlikely;
➔ by the allocations available, reducing the support to the current policies, practically an unsatisfactory statu quo;
➔ by discontinuing the EU policies with less Added Value or with weak output, but also with supplementary resources allocated by Member States, by European taxes, or financial instruments.

My conclusion is that it is time to initiate a serious rethinking of the EU priorities, to focus on the policies with an higher added value. The first candidate for this exercise is the Common agriculture policy. This doesn’t mean cancelling the CAP from the EU but a profound rethinking on its role and its financing. Such hypothesis appear also, with a more soft language, in the Commission reflexion paper on EU finances. Even the introduction of a modulated national co-financing will liberate funds to finance new policies.

6. Scrutiny of EU Policies
The EU architecture delivers policies through the ordinary procedure, decision of the two Chambers, with the implementation left to the Commission. A weakness of the system remains the scrutiny of the EU policies, a function which often marginal for Council and EP. Council, as an Institution is not interested, Member States intervene directly with the Commission to solve implementation problems in their territory. EP is the Institution which should carry out scrutiny for a fair implementation of EU policies in the full respect of the regulations, included the general principles European added value. This function, politically less attractive, should be enhanced further by the EP. This is even more important in a period where the new legislation is diminishing.

7. Unanimity vs Majority vote
The Treaty of Lisbon didn’t solve the threat over the European decision making process, since the ‘empty chair’ crisis in 1965: the ‘passerelle’ clause would allow to pass from unanimity to majority decisions. The suppression of the unanimity in all the areas where the ‘passerelle clause is probably desirable but not likely to happen. There is at least one area where the majority vote would be essential to make reforms is the qualified majority for the enhanced cooperation. The qualified majority will simplify the procedure and avoid creating obstacles to the Member States ready to go further in some areas of concern for the public opinion. Enhanced cooperation encourages to remain in a community frame, with a perspective of having more Member States adhering and avoiding the disorder of individual initiatives.

8. Differentiated integration
Differentiated integration has helped to overcome the gridlocks, and to avoid major crisis, but is ha also created complexity and opacity. In spite of all the principles of the unity of the European project, differentiated integration is there to stay and even to develop further. If not structured, it could generate a proliferation of international treaties among a coalition of willing Member States, which will be the perfect recipe to increase complexity, to alien citizens from the European project further and accelerate the disintegration process. This is one of the major problem to solve, with highly political and institutional implications. There is no simple solution to this problem, but it is necessary to avoid that the denial of this problem leads to a more inextricable situation. The differentiated integration would need to be streamlined and managed.

The working hypothesis, which I would like to explore, is the idea of a differentiation by circles, mentioned already at the time of the enlargement, in 2004: The inner circle of the Eurozone, a second circle of the European community (basically the four freedoms) and the third circle the European (Continental) Partnership (see Sapir and al Brueghel study) regulating the external trade relations.

The Institutional aspects of the Differentiated integration, are also challenging. The Council, in a very pragmatic way, has created an Eurozone Council, while the Commission, the Court of Justice and the European Parliament defend the unity of the Institutions. Should EP decide to move into a different direction, would it be legally sound to act on the base of the autonomy that the Treaty allows to the EP, to decide on its own rules of procedure?

9. Own resources
The Final report of the High level group on Own Resources presents a number of proposals to replace the GNI base resources, at the same time the Report recognizes that the system has functioned well, while not perfect. The report suggests also that the problem of own resources cannot be solved without looking at the expenditure side of the budget.

The introduction of a tax, allocated to the European budget and linked to European policies will be a great step forward to complement the GNI-based financing, without a revision of the Treaties. I don’t have strong feelings which tax, among the ones selected is the most appropriate, the best tax or taxes will be the one(s) which collect the unanimity/majority of Member States. At the same time I don’t think that the introduction of a tax will contribute to demine the ‘juste retour’ approach, Finance Ministers will always find a method to calculate the burden on their national companies.
To conclude the introduction of EU tax could facilitate the visibility and understanding of EU finances and, eventually, the increase of funds without aggravating directly on Member States finances.

A second reform necessary, even if not urgent, in this sector is the increase of the own resources ceiling, 1,23%. Both these reforms do not need the revision of the Treaty but a modification of the own resource decision which is submitted to the ratification of National Parliaments.

10. Euro zone – Euro Area budget
The completion of the European and Monetary Union is probably the most advanced in terms of proposals, but also the one where the positions of Member States are more distant. Further to that the completion of EMU implies a fiscal policy to raise the funds necessary to the risks reduction and risks sharing which are the guiding principles of the completion of the EMU. Can this completion be achieved without a Treaty change?.Could the ‘assigned revenue’ mechanism finance the Eurozone budget? The research will determine which part can be implemented without a Treaty change.

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