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"Constrained Flexibility" as a Tool to Facilitate Reform of the EU Budget

Author: MARCO BUTI and MARIO NAVA
Published in PFM, Vol. 9 No. 4

The Sapir report in 2004 famously dubbed the EU Budget a historical relic. In spite of calls from many quarters for a comprehensive budget reform, the Council negotiation was hampered by many institutional and political constraints and managed to deliver only limited change. However, the final agreement on the Multiannual Financial Framework 2007/13 did introduce a potentially important novelty, namely a review clause in 2008/9. Such an occasion should be seized to introduce appropriate incentives and tools for revamping the EU budget with the aim of making it consistent with the Lisbon-oriented objectives of the EU. This paper argues for the respect of the Multiannual Financial Framework over the period covered rather than in every single year and per every single heading. This should be accomplished via an inter-temporal guarantee of the respect of the Multiannual Financial Framework and coupled with cost-benefit analysis of the additional spending carried out at the EU level. Such “constrained flexibility”, which can be introduced either under the current or the new Lisbon Treaty, should be supported by appropriate governance arrangements to ensure the respect of subsidiarity, allow an efficient running of the budget and enforce budgetary discipline.

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