Member-State Principals, Supranational Agents, and
The EU Budgetary Process, 1970-2008
Mark A. Pollack
Associate Professor
Temple University
Department of Political Science
461 Gladfelter Hall
Philadelphia, PA 19122
E-mail: mark.pollack@temple.edu
Paper prepared for presentation at the Conference on Public Finances in the European
Union, sponsored by the European Commission Bureau of Economic Policy Advisors,
Brussels, 3-4 April 2008.
I am grateful to Johannes Lindner for comments and
suggestions that contributed substantially to this draft. Any remaining errors or
omissions are, of course, the sole responsibility of the author.
The Luxembourg and Brussels Treaties of 1970 and 1975 took the European
Union budgetary process decisively beyond those of other international organizations, not
only by giving the EU its “own resources” and by introducing qualified majority voting
among its member governments, but also by giving limited but real powers to two
supranational bodies, the European Commission and the European Parliament (EP). This
paper examines the changing roles and the influence of the supranational Commission
and Parliament on budgetary politics and policies in the EU, in four parts.
The first part provides a basic analytical framework for the paper, theorizing in
principal-agent terms the delegation of budgetary powers to supranational agents and the
subsequent influence of those agents in the adoption of the EU budget. In such principalagent models, I demonstrate, EU member states delegate specific powers and functions to
supranational organizations such as the Commission, Parliament, and Court of Justice,
and design control mechanisms to limit the prospect of agency losses from agents with
policy preferences distinct from their principals. Such models, I argue, often encounter
difficulty explaining the delegation of powers to the European Parliament, for which
member-state principals are held to be motivated by normative or ideological concerns
rather than by a concern to lower the transaction costs of cooperation; yet, I argue,
member states also have a clear incentive to calculate the likely consequences of such
delegation, and limit the powers of the EP if and insofar as those powers are likely to
result in unfavorable policy outcomes. Moving from the delegation stage to the
subsequent agency and agenda-setting of the Commission and the EP, I follow standard
convention in theorizing EU budgetary politics as a one-dimensional political space
(intergovernmentalism/supranationalism) in which the Commission and the EP are
assumed to have outlying “supranational” preferences for larger EU budgets and for new
EU policies, and in which both bodies press for such outcomes within the limits of their
respective powers.
The second section of the paper applies this framework to the adoption of the EU
budgetary system in the 1970 Treaty of Luxembourg, analyzing the nature and the limits
of supranational powers delegated in that Treaty, and assesses the empirical evidence that
the Commission and in particular the European Parliament were able to use their
delegated powers to influence policy outcomes in the period from 1975 though 1988. In
1
adopting the Luxembourg budgetary system, I argue, member governments were
motivated in large part by normative concerns about democratic legitimacy in their
decision to elevate the EP to one-half of the Community’s “budgetary diarchy.” Yet they
also calculated carefully the likely consequences of such delegation for valued policy
outcomes, and in doing so they designed a system that dramatically limited the EP’s
ability to influence decisions on revenue or on the Common Agricultural Policy (CAP),
and which placed clear limits on Parliament’s ability to increase overall spending outside
the CAP. An empirical review of this early period, from 1975 through the first Delors
Package and Financial Perspective, largely supports this view, and suggests that both the
Commission and the Parliament have acted systematically to foster the development of
new spending policies, particularly in areas designed to appeal to European electorates,
and that the EP in particular has succeeded in its efforts, albeit within the limits of its
Treaty-based powers.
The third section of the paper examines the changing role of EU supranational
institutions in the period from the first Delors package to the present. During this period,
the Union introduced a financial-perspective system based on multi-annual budgets
formulated within the European Council (albeit on the basis of a Commission proposal)
and later subject to an inter-institutional agreement between the Council, Commission,
and EP.
This new procedure did not replace the Treaty provisions on the annual
budgetary process, which remained unchanged.
Nevertheless, the creation of an
intergovernmentally determined multiannual spending framework, together with periodic
inter-institutional agreements, altered the nature of supranational influence in the
budgetary process, excluding the Parliament from medium-term budgetary planning but
giving the EP new powers in the revision of the financial perspectives, the use of a new
“flexibility instrument,” and the creation of a series of informal trialogue and conciliation
meetings that have altered the form, if not the substance, of supranational budgetary
influence. A brief case study of the 2008 budgetary process suggests that the essential
lines of Commission and EP preferences and influence on the budget appear largely
unchanged from earlier periods, but the two supranational bodies exert their respective
influence through an altered, and more informal and conciliatory, budgetary process. The
section concludes with a brief discussion on possible changes in the budgetary politics of
2
the European Parliament, noting the absence of hard data and calling for more systematic
studies of MEP voting behavior over time.
In light of these findings, the fourth and shortest section of the paper undertakes a
brief examination of the new budgetary rules established by the as-yet unratified Treaty
of Lisbon, asking about the likely impact of the proposed rules. The proposed changes to
the budgetary process, it is argued, largely codify the current system as it has evolved
during the era of financial perspectives, but it also introduces several new elements,
including the deletion of the distinction between compulsory and non-compulsory
expenditures and the inter-institutional agreements, that may affect the rights and theh
powers of the European Parliament in ways to be determined in practice.
A very brief final section concludes with three observations about member-state
delegation of budgetary powers, supranational agency and agenda setting, and an agenda
for future political-science research.
I. Delegation, Agency and Agenda Setting in the European Union
The original Treaties of Rome established and delegated powers to the core
supranational institutions of the European Union, including:
•
the executive Commission, which was given agenda-setting powers in the
legislative process, enforcement powers vis-à-vis non-complying member states,
regulatory powers in areas such as competition policy, and exclusive
representation of the Community in external trade matters;
•
the European Court of Justice (ECJ), which was given the right to interpret EU
law, adjudicate disputes among the member states and institutions and hear
“preliminary references” from national courts; and
•
the Consultative Assembly (later European Parliament), which was given nonbinding rights to “consultation” in selected issue-areas as well as the right to
supervise and censure the Commission.1
1
For extensive discussions of the powers of these bodies, see e.g. Pollack 2003, Franchino 2007, and
Rittberger 2005.
3
In addition to these powers delegated to supranational agents, the Treaties established a
Council of Ministers that could adopt binding regulations and directives, including, for
certain issues, by qualified majority vote (QMV). In the language of integration theorists,
then, the Rome Treaties both delegated sovereignty to supranational agents, and pooled
sovereignty through majoritarian decision-making in the Council.
Nevertheless, despite these strong supranational elements, the EEC Treaty of
1957 established a budgetary structure that, in the words of Luisa Guiriato, was based on
the dual principles of intergovernmentalism and veto players. That is to say, the key
decisions regarding both the Communities’ revenues and their expenditures would be
taken by the intergovernmental Council, with no binding input from supranational actors.
Within the Council, expenditure decisions could be and were taken by QMV, but such
expenditures needed to be taken within the framework of revenues that were decided by
the unanimous vote of the member states, giving each member veto power over any
increase in the size of EU’s budgetary envelope.2 More concretely, Article 201 EEC
provided for the creation of the Community’s “own resources” by unanimous agreement
of the member states, on the basis of a proposal from the Commission and after (nonbinding) consultation of the European Parliament and (binding) ratification by each of the
member states in accordance with its own constitutional procedures. For our purposes in
this paper, this original EU budgetary system featured no meaningful supranational
participation. This would change, however, with the adoption of two new budgetary
treaties in the 1970s, examined below. In order to understand the adoption of those
treaties, however, we need first to discuss, however briefly, the issues of member-state
delegation to supranational agents, and the discretion and agenda-setting powers of those
agents.
Principal-Agent Models of Delegation in the EU
In recent years, a growing number of scholars have theorized the delegation of
powers to supranational organizations, and the subsequent autonomy and agenda-setting
powers of those organizations, in terms of rational choice, principal-agent theories.
These studies generally address three specific sets of questions.
2
Guiriato 2006: 3. On the role of veto players in budgetary policy-making, see Tsebelis and Chang 2004.
4
First, they ask why and under what conditions a group of (member-state)
principals might delegate powers to (supranational) agents, such as the Commission, the
European Parliament, or the Court of Justice. With regard to this first question, principalagent accounts of delegation hypothesize that member-state principals, as rational actors,
delegate powers to supranational organizations primarily to lower the transaction costs of
policymaking, in particular by allowing member governments to commit themselves
credibly to international agreements and to benefit from the policy-relevant expertise
provided by supranational actors. Utilizing a variety of quantitative and qualitative
methods, the empirical work of these scholars has collectively demonstrated that EU
member governments do indeed delegate powers to the Commission and other agents
largely to reduce the transaction costs of policymaking, in particular through the
monitoring of member-state compliance, the filling-in of “incomplete contracts,” and the
speedy and efficient adoption of implementing regulations.3 These scholars, however,
have found little or no support for the hypothesis that member states delegate powers to
the Commission to take advantage of its superior expertise.4
By contrast, however, even strong rationalist scholars concede that standard
principal-agent models perform poorly in explaining the delegation of legislative,
budgetary, and supervisory powers to the European Parliament. Indeed, as Berthold
Rittberger has convincingly argued, the EU’s member states have generally delegated
powers to the European Parliament, not to reduce the transaction costs of policy-making,
but rather because the empowerment of a directly elected European Parliament was and is
seen by member governments and by their constituents as democratically legitimate.5
Nevertheless, while norms of democratic legitimacy have clearly been an important
motivation for member states in delegating powers to the EP, those decisions have not
been guided purely by a “logic of appropriateness” or with a blind eye to the likely
consequences of such delegation. Rather, as I have argued elsewhere6, the influence of
democratic ideology appears to be greatest where the distributional implications of
delegation are either unclear or unimportant. By contrast, in the many areas where
3
4
5
6
See e.g. Pollack 2003, Franchino 2007, and Tallberg 2007.
Moravcsik 1998, Pollack 2003, Franchino 2007.
Moravcsik 1998, Pollack 2003, Rittberger 2006.
Pollack 2003: 383-84.
5
member governments were able to anticipate the likely consequences of delegating
powers to the EP, even the champions of a strengthened EP have agreed to structure the
legislative, budgetary and supervisory powers to limit agency losses. As a result of this
pattern of delegation – motivated by member-state concerns about democratic legitimacy
but limited by concerns about potentially adverse consequences – the contemporary EU
represents a hybrid system, with a powerful Parliament enjoying full co-legislator status
in a growing number of issue-areas, while simultaneously being excluded from
legislation in other issue-areas. Similarly, as we shall see below, the delegation of
budgetary powers to the European Parliament in the 1970s was also motivated
predominantly by concerns about the democratic legitimacy of a supranational budgetary
process – yet the EU’s member governments (including the EP’s strongest champions)
were careful to design a system that hedged in Parliament’s powers, limiting the EP’s
ability to alter CAP expenditure or increase total expenditures, and excluding the EP from
revenue decisions, where no meaningful delegation has taken place.
Second, in addition to the question of delegation, rational choice institutionalists
have devoted greater attention to another question posed by principal-agent models:
What if an agent – such as the Commission, the Court of Justice, or the European Central
Bank – behaves in ways that diverge from the preferences of the principals? The answer
to this question in principal-agent analysis lies primarily in the administrative procedures
that the principals may establish to define ex ante the scope of agency activities, as well
as the oversight procedures that allow for ex post oversight and sanctioning of errant
agents. Applied to the EU, principal-agent analysis leads to the hypothesis that agency
autonomy is likely to vary across issue-areas and over time, as a function of the
preferences of the member governments, the distribution of information between
principals and agents, and the decision rules governing the application of sanctions or the
adoption of new legislation. By and large, empirical studies of executive politics in the
EU have supported these hypotheses, pointing in particular to the significance of decision
rules as a crucial determinant of autonomy for both the Commission and the Court of
Justice.7
7
Pollack 2003, Franchino 2007.
6
Once again, the situation is more complicated for the European Parliament. As
with the Commission and the Court, the Parliament as a whole may be said to be the
agent of the member states, insofar as the EU’s member governments have delegated
powers to the EP in various Treaties, and insofar as those same member governments
could, in principle, “recontract” by further increasing or decreasing the powers of the EP
in future Treaty revisions. Nevertheless, the principal-agent relationship between the
member states and MEP is at best a weak one, since individual MEPs do not generally
owe their positions to member governments, and since the ability of the member states to
punish the EP for “shirking” is minimal given the requirement of unanimity for any
future revision of the Treaties. For these reasons, principal-agent models would lead us
to expect that MEPs would much more independent of the member states than the
Commission or even the Court. Instead, as Simon Hix has argued, MEPs generally
respond to two principals, namely the political parties that select them to party lists and
the supranational party groups that determine their roles as committee chairs, rapporteurs,
and other highly valued EP positions.8
Third and finally, the principal-agent literature has devoted considerable attention
to the ability of supranational agents to “set the agenda” for their member-state
principals. Here, we can distinguish between “formal” and “informal” agenda setting.
Formal agenda setting consists of an agent’s right to set the member states’ formal or
procedural agenda by placing before them provisions that it can more easily adopt than
amend, thus structuring the choices of the member states in the Council. The best
example of this is the Commission’s “sole right of initiative” in first-pillar decisions,
whereby the Council can act only on the basis of Commission proposals that can be
amended only by a unanimous vote. This right of initiative and protective voting rule
confers agenda-setting power on the Commission when the Council votes by qualified
majority, making it easier to accept the Commission’s proposal than to amend or reject it.
In addition, the Commission retains the right, in most legislative procedures, to amend or
withdraw its proposal at any time.9 As we shall see, the Luxembourg and Brussels
8
Hix 2005; Hix, Noury and Roland 2006.
By contrast with this general rule, the codecision procedure allows the Council and Parliament
collectively to make any changes to draft legislation, without a unanimity amendment rule and without the
need for Commission agreement. These provisions, together with new second- and third-pillar procedures
9
7
Treaties denied the Commission any formal agenda-setting powers in the annual
budgetary process, while granting limited agenda-setting powers to the European
Parliament in the area of non-compulsory expenditure.
By contrast, informal agenda setting is the ability of a "policy entrepreneur" to set
the substantive agenda of an organization, not through its formal powers but through its
ability to define issues and present proposals that can rally consensus among the final
decision makers. This second variety of agenda-setting is more demanding than the first,
since it relies upon the superior information and entrepreneurship of a supranational
entrepreneur. Nevertheless, the literature on budgetary politics frequently credits the
European Commission with substantial influence in informal agenda-setting, including
the Delors Commission’s leading role in the creation and content of the Financial
Perspectives and the Delors I and II budgetary packages that resulted in the rapid growth
of the Community budget between 1988 and 1999.10
The Preferences of Supranational Agents
The implications of delegation, and the prospects for supranational agency and
agenda-setting, rest in part on the decision rules established to govern the interaction of
the member states and their agents, but also in part on the respective preferences of the
various actors.
Typically, principal-agent models of delegation begin with the
assumption that agents have preferences distinct from those of their principals. Indeed, it
is the prospect of “shirking” – of an agent acting on the basis of her private preferences
rather than those of her principal(s) – that is the central problem of PA analysis. In
requiring the Commission to share agenda-setting powers with other actors, account for the widespread
agreement that the Commission’s agenda-setting role has decreased since the adoption of the Maastricht
Treaty.
10
See e.g. Ross 1995, Laffan 1997, Lindner 2006. A similar informal agenda-setting role was played by
the Commission in the early 1980s, when Commission Etienne Davignon put forward the proposal for the
Esprit program. Unlike the earlier CAP and Structural Fund initiatives, both of which were designed as
redistributive policies that transferred EU funds from wealthy to poor member states, Esprit served as the
model for a new type of distributive program, in which EU public funds would be distributed to designated
constituencies according to a broad principle of juste retour (each member state receives from the budget
approximately what it contributes to the Union’s own resources). The Esprit model would later serve as the
model for a series of other programs, including the Framework Programs in research and development, the
MEDIA program in audiovisual production, the Erasmus and Socrates programs for student exchanges, etc.
Despite the initial success of this model, these programs have faced considerable resistance from member
states concerned to maintain fiscal austerity, and remain a relatively small part of the total EU budget for
“internal policies.” See Pollack 1994, 1995: chapter 7.
8
applications of PA analysis to politics, it is generally assumed that political agents – be
they government bureaus, independent agencies, courts, or international organizations –
have policy preferences which may be distinct from those of their principals, and shirking
in this context would consist of such an agent pursuing those policy preferences rather
than the preferences of the principal(s).
In the European Union context, a substantial number of scholars have adopted
similar assumptions about supranational organizations as “competence-maximizers” who
seek to increase their own competences and those of the EU more generally. In this view,
the issue-space of the EU is theorized along a single salient dimension – namely
integration, or the balance between centralized EU powers on the one hand and national
autonomy on the other hand – and the EU’s supranational organizations are placed
toward the integrationist end of the spectrum. This view is expressed most succinctly by
George Ross, who argues that supranational agents such as the Commission seek “more
Europe.”11 There are a number of reasons why such organizations might exhibit prointegrationist or competence-maximizing preferences, including self-selection for
integrationist preferences in European organizations, or socialization of personnel within
those organizations, or simply bureaucratic politics (“where you sit determines where you
stand”). In any event, principal-agent analyses of the EU have relied extensively on the
assumption of EU politics as a one-dimensional space along which supranational
organizations like the Commission, the Court, and the Parliament are all predictably prointegration, and they can be expected to use any available discretion to pursue further
integration and an increase of their own respective powers.12
Similar assumptions have informed nearly all formal analyses of the EU
legislative procedure, which feature the interaction of a simulated number of member
states (typically seven, with five constituting a qualified majority) with diverse
preferences along the integration of dimension of “more Europe” vs. “less Europe.” In
such models, the Commission and the European Parliament are typically considered to be
outliers with a strong preference for further integration, and their ability to move
legislative outcomes toward greater integration depends on the decision rules governing
11
12
Ross 1995: 14.
For a discussion and critique of these assumptions, see Pollack 2003: 34-39.
9
the adoption of legislation and the preferences of the member governments (see Figure
1).
----------------------------------------------Insert Figure 1 about here
----------------------------------------------Such assumptions, however, have not gone unchallenged, and indeed we shall have
occasion to challenge them later in this paper, in two ways. First, analysis such as the
one depicted in Figure 1 typically acknowledge a diversity of preferences among EU
member states in the Council, but model supranational agents as unitary actors (often
represented by the median or pivotal voter within each). Such a “black box” approach,
however useful for modeling inter-institutional relations, may obscure significant
variation within organizations like the European Parliament, and thus obscure important
aspects of the process.
Secondly, as Simon Hix has argued, the politics of the EU can be theorized in
terms of a left-right cleavage as well as the more familiar cleavage between national
independence and European integration.13 In this view, the EU political space is in fact
two-dimensional, with an “integration” dimension and a “left-right” dimension, neither
reducible to the other. We shall have occasion to relax our one-dimensional assumptions
in section 3 of this paper, looking at the internal politics of the EP and at the claim that
EU politics may be increasingly characterized by left-right contestation. Before doing so,
however, let us examine the initial decision to delegate budgetary powers to the
Commission and the EP, as well as the nature and limits of supranational influence in the
annual budgetary process.
II. Delegation and Agency in the EU Budgetary Process, 1970-1988
The issue of the Community budget, as noted earlier, was not definitively settled
after 1957, and indeed it was partly over the Hallstein Commission’s proposals for a new
budgetary system that French President Charles de Gaulle initiated the 1965 “Empty
Chair Crisis,” which resulted in a provisional budgetary settlement scheduled to expire in
13
See e.g. Hix 2005, 2007, and the discussion in section 3 of this paper.
10
late 1969.14 Ironically, it was de Gaulle’s successor, Georges Pompidou, who prompted
the establishment of a new budgetary system several years later.
Like de Gaulle,
Pompidou sought to establish “definitive” or automatic financing of the Common
Agricultural Policy (CAP) from which French farmers would be significant recipients,
and he sought to entrench this system institutionally prior to the pending enlargement of
the EU to include the United Kingdom and other new members. At the Hague summit of
December 1969, therefore, the Six original member states agreed to a package deal in
which France accepted the opening of accession negotiations with the United Kingdom
(which de Gaulle had previously vetoed) in return for a definitive system of EU financing
for the CAP.
The new budgetary system itself was negotiated in intense negotiations among the
member states between December 1969 and February 1970. The negotiations were
undertaken on the basis of a series of Commission proposals for the establishment of the
Community’s own resources, the adoption of a “financial regulation” for the CAP, and
the creation of new EP powers in the annual budgetary procedure. The Commission’s
initial proposals were “maximalist,” including the establishment of own resources to be
drawn from tariff collection, agricultural levies, and an EU tax to meet any spending
needs above these first two resources. In addition, the Commission proposed an annual
budgetary procedure that would provide both itself and Parliament with very substantial
powers. According to the Commission’s proposals, the procedure would begin with a
Commission draft budget, which would be sent directly to the Parliament, and thence to
the Council, with an eventual decision to be taken by a conciliation committee composed
of representatives from the Commission, Council and EP. If the conciliation process
failed, or if any of the three bodies failed to approve its outcome, the final word would be
left to the Parliament, which could reject any Council amendments (by an absolute
majority of its members and a 2/3 majority of votes cast) and adopt the final budget.
Parliament could also, with the agreement of the Commission but against the opposition
of the Council, vote to increase total budgetary expenditures. The Parliament itself, upon
being consulted by the Commission, supported these proposals, and also proposed that
future decisions on own resources should be adopted within the normal Community
14
This section draws extensively from Pollack 1994 and from Pollack 1995: Chapter 3.
11
legislative procedure, with no need for ratification by national parliaments.15
Nevertheless, as noted above, the Commission had only informal agenda-setting power in
the subsequent Council negotiations, where the final decision would be taken by a
unanimous vote of the member governments and ratification by national parliaments.
Within the Council, the primary cleavage was between France, which sought
primarily to establish and lock in a definitive system of financing for the CAP, and the
other five member states, which pressed, among other demands, for an increased role for
the European Parliament in the annual budgetary process.
In doing so, Berthold
Rittberger has convincingly suggested, these member states were guided primarily by
ideological motives, namely a commitment to European integration and to democratic
accountability in the budgetary process.16 On the question of own resources, the Council
quickly agreed to a threefold set of own resources, comprised by tariffs, agricultural
levies, and a third resource in which each member state would pay to the Community up
to 1% of its value-added tax (VAT) receipts. Contrary to the proposal of the EP,
however, the Council retained the so-called “double-unanimity” rule for future ownresources decisions, with a unanimous decision in the Council followed by national
ratification.17 This provision would continue to govern all subsequent decisions on the
Community’s own revenue, up to the present day.
The issue of the Commission’s and the Parliament’s budgetary powers also
proved intensely controversial in the Council.
Not only the French, but also the
nominally federalist members of the Council objected to multiple aspects of the
Commission proposals, including: the Commission’s presentation of the draft budget
directly to the EP, which would get the first reading; the creation of a conciliation
committee that would give potential veto power to the Commission and the EP as well as
the Council; and the provisions allowing the EP and the Commission a virtually
unconstrained right to increase total expenditures without the agreement of the Council.
15
Pollack 1995: 170-72.
Rittberger 2006. This should not be taken to imply, however, that the so-called “Five” were motivated
exclusively by ideological considerations. Italy, for example, insisted throughout the negotiations that wine
and tobacco be included in the financial regulation for the CAP, and held final agreement on the Treaty
hostage to these demands.
17
This double-unanimity system, which has been retained to this day (see Guiriato 2006), was insisted
upon by the German delegation, which held that the EP proposal would have violated the Basic Law.
16
12
Over a series of negotiations, therefore, the member states proceeded to overhaul
substantially the Commission’s proposals, dramatically reducing the Commission’s role
in the process, and placing multiple hedges around the Parliament’s ability to increase
total expenditures or to tinker with CAP expenditures. More specifically, in response to
French demands to reduce the discretion of the Parliament, the Belgian Presidency
proposed to introduce (1) a distinction between “compulsory expenditures” arising
directly from the Treaties and “non-compulsory” or discretionary expenditures, with the
EP given greater powers with regard to the latter; and (2) a “maximum rate of increase”
for non-compulsory expenditure, which would limit the EP’s ability to increase the total
size of the annual budget.
In sum, and consistent with the principal-agent approach put forward above, the
EU’s member governments sought to incorporate a role for the European Parliament in
the budgetary process for reasons of democratic legitimacy; yet they also anticipated the
likely negative consequences of such delegation, and designed a system that would limit
agency costs and protect their core interests (the own resources revenue system, overall
expenditures, and the CAP) from Parliamentary interference.
The Treaty of Luxembourg (1970):
Towards a Mixed Intergovernmental/
Supranational Budgetary System
On the basis of these provisions, the member states signed, the April 1970, The
Treaty of Luxembourg (later amended by the 1975 Treaty of Brussels), which established
the legal rules governing the annual budgetary procedure and the powers of the
Commission and the European Parliament. More specifically, the Treaty established a
five-stage budgetary process and a series of distinctions among different types of
expenditure with different procedural rules for each, summarized in Box 1.
----------------------------------------------Insert Box 1 about here
----------------------------------------------This procedure establishes a genuine, binding role for the Parliament in the annual
budgetary procedure, but EP powers vary across types of expenditure (compulsory vs.
non-compulsory), and the EP’s powers to increase expenditures and to veto the budget
13
are limited. The procedure also requires variable EP voting thresholds for different types
of expenditure and stages of the procedure (see Box 1), but in general require a
supermajority of members voting or an absolute majority of all members, or both, setting
a demanding threshold for EP unity vis-à-vis the Council.
For our purposes in
establishing the supranational powers of the EP, four elements are worth emphasizing.
First, with regard to compulsory expenditure, the EP’s powers vis-à-vis the
Council are limited. While the EP is entitled to adopt “modifications” to CE by a simple
majority, such modifications that increase expenditure require a qualified majority
support in the Council, while those that reduce or transfer expenditures require a qualified
majority to overrule – making it easier for the EP to reduce or transfer EC than to
increase it.
Moreover, the EP is not entitled to reintroduce in its second reading
modifications that are rejected by the Council.
Second, the EP’s powers with regard to NCE are substantially greater than for
compulsory expenditure.
Here, the Parliament can propose amendments to non-
compulsory expenditure in its first reading, which can be modified only by qualified
majority in the Council’s second reading; failing such a qualified majority, the EP’s
amendments are deemed to be accepted by the Council.
Regarding NCE items,
moreover, Parliament is not bound by the decisions of the Council, and may reinstate
these amendments in its second reading. For non-compulsory expenditure, therefore,
Parliament has the last word.
Third, however, Parliament is not free to increase non-compulsory expenditure by
as much as it likes. Rather, Parliament's so-called “room for manoeuvre” is determined
by the “maximum rate” of increase of NCE, the formula for which is a variable
percentage calculated for each financial year by the Commission on the basis of growth
in GNP, government spending and inflation in the Member States. The Parliament's room
for manoeuvre is equal to one-half of this maximum rate of expenditure. The maximum
rate of increase can be adjusted, according to the Treaty, but only by a joint decision of
the Council and the EP.
Fourth and finally, the EP has the power to reject the budget as a whole, resulting
in a system of “provisional twelfths” while the process begins again.
Rejection is
unlikely to be an appealing outcome for an integrationist Parliament, which would
14
generally prefer to adopt a new budget, typically with increased spending relative to the
previous year, rather than continue on a provisional-twelfths basis. However, the EP
might employ, and indeed has employed, the use or threat of rejection as a strategic
weapon in a long-term, iterated dispute with the Council over spending priorities or over
their respective powers.18
In sum, the Luxembourg and Brussels Treaties created a budgetary system that
combines strong intergovernmental elements with limited supranational powers. The
intergovernmental aspect is most readily apparent on the revenue side, where the member
states retain the right to take decisions on the Community’s own revenues by unanimous
vote, making each state a veto player and offering no meaningful opportunity for input
from the Commission (which simply puts forward proposals that serve as the basis for the
Council’s unanimous decisions) or from the EP (which enjoys only the right to nonbinding consultation).
The expenditure side of the budget, by contrast, is a mixed
intergovernmental/supranational system, with qualified majority voting among the
member states, but here as well the leading role is given to the Council vis-à-vis the
supranational Commission and Parliament.
The powers of the Commission in the annual budgetary process are dramatically
limited, in comparison both to the Commission’s original proposals and to its much
greater agenda-setting role in the legislative procedure. While the Commission does
begin the annual budgetary process with its “preliminary draft budget” (PDB), the
member states in the Luxembourg Treaty denied the Commission any formal agendasetting role.
By contrast with the Commission’s original proposal, which had the
Commission draft going directly to the Parliament, the Treaty has the Council adopt the
draft budget for consideration by the Parliament, after which the Commission’s
preliminary draft ceases to have any legal status. Furthermore, by contrast with the
Commission’s sole right of initiative in the legislative process, the Commission’s
preliminary draft is not protected by a unanimity amendment rule, but can be amended as
easily as it can be adopted, by qualified majority in the Council. Finally, by contrast with
its original proposal (in which the Commission would play a co-equal role in the
18
The EP has used its power to veto the budget three times, all between 1980 and 1985. For a good
discussion of these cases, see Corbett 2003: 98-103.
15
conciliation process with the EP and Council) and with the legislative process (where the
Commission can amend or withdraw its proposals throughout the legislative process,
except in the final stages of co-decision), the Commission has no formal role in the
budgetary process after its transmission of the preliminary draft budget to the Council.
The Commission may play an informal agenda-setting role by setting the terms of debate
in its PDB, and it may likewise shape subsequent budgetary negotiations by acting as an
“honest broker” between the Council and the EP.19 Indeed, many scholars have argued
that the Delors Commission in particular played an important role as agenda-setter and
broker in the adoption of key budgetary decisions in 1988 and 1993 (see below), as well
as in annual budget negotiations between the Council and the EP. In purely formal terms,
however, the Commission’s ability to influence budgetary outcomes under the Treaties is
severely limited.
The European Parliament, by contrast, gained genuine supranational powers in the
Luxembourg and Brussels Treaties. Indeed, the Parliament’s budgetary powers were
members of the European Parliament (MEPs) to focus much of the institutional attention
on the budgetary process prior to the increase in the EP’s legislative powers in the 1987
Single European Act and later Treaties. Furthermore, as Johannes Lindner points out in
his definitive study, the imprecision of the Luxembourg and Brussels Treaties left the
precise powers of Parliament unclear, giving MEPs a strong incentive to engage in
“opportunistic interpretation” of the Treaties in asserting their prerogatives. The result,
as Lindner demonstrates, was a prolonged period of budgetary conflict between the EP
and the Council, at least until the adoption of the Single Act in 1987 and the first
Financial Perspective (discussed below) in 1988.
Nevertheless, while the system established by the 1970 Treaty is often described
as a “budgetary diarchy,”20 the resulting system does not approximate the fully equal
partnership of the revised co-decision legislative procedure. Parliament does enjoy the
19
In addition, the Commission also plays a key role in the execution and management of the budget, which
is beyond the scope of this paper. Furthermore, the Commission itself is limited in these powers by the
Parliament’s ability to grant a discharge of the budget, and by the supervision of the European Court of
Auditors, both of which have taken an increasingly critical view of the Commission’s managerial abilities
over the years. See Laffan 1997: 176-216. Nevertheless, as Lindner (2006) suggests, the Commission’s
decision to implement disputed budgets has in some instances given implicit support to the EP in its
ongoing disputes with the Council.
20
See Strasser 1981: 12.
16
last word on the adoption of the budget, but its powers over the budget are limited by the
CE/NCE distinction, by the “maximum rate of increase” for NCE, and more generally by
a system in which the Community’s own revenues are set through unanimous agreement
by the member states. For all these reasons, the Parliament’s long conflict with the
Council over its budgetary powers would, over the first several decades, yield at best a
modest impact on the size of the budget and the on the EU’s spending priorities. In order
to understand how the EP would influence budgetary outcomes, however, we must first
understand what the Parliament – as well as the member states in the Council and the
other supranational agents in the EC – want.
Supranational Preferences in the Budgetary Process
Budgetary politics in the EU has been dramatically under-studied by political
scientists, particularly by comparison with the exploding literature on legislative politics,
which has formally modeled the full panoply of EU legislative procedures, and tested a
wide range of hypotheses with respect to roll-call voting datasets as well as case
studies.21 By contrast, we have only a handful of political-science studies of the EU
budgetary process, including the pioneering work of scholars like Strasser, Wallace,
Shackleton and Laffan who have traced the development of the EU budget, the intergovernmental battles among the member states over the size and composition of EU
revenues and expenditures, and the equally striking battles between the Council and the
European Parliament about their respective powers and priorities for EU expenditures.22
With the exception of Lindner’s recent book, however, political-science studies of the EU
budgetary process have generally not been informed by well-developed theories of
policy-making, and they have proceeded without the kinds of large-n datasets that have
informed work on EU legislative politics. Nevertheless, Lindner’s study in particular
provides an admirably clear set of assumptions about the preferences of the member
governments, the Commission, and the EP, all of which deserve a brief reference here.
21
For an excellent review and bibliography of this literature, see McElroy 2007.
See e.g. Strasser 1981, Wallace 1980, Shackleton 1990, Laffan 1997, and the excellent overview in
Laffan and Lindner 2005. More recent work on the EU budget has begun to approach the subject with the
rigor of the legislative studies literature; see e.g. Eberlein et al 2006; Lindner 2006; Guiriato 2006; and
Benedetto and Hoyland 2007.
22
17
As with the principal-agent and legislative politics literatures, Lindner adopts
traditional rational choice assumptions, assuming in the first instance that “material
interest is the basic driving force of actors’ behavior.” He further assumes, like the
principal-agent literature, that political actors have both policy preferences (e.g. for the
nature and type of revenue collection and spending) and institutional preferences
(preferring institutional settings the deliver predictably favorable streams of policy
outcomes and/or maximize their own influence on the process).23 The relative weight of
actors’ institutional preferences, he argues, depends on their time horizons. Actors with
short time horizons will typically focus on distributive policy outcomes, while actors with
longer time horizons will pay more attention to institutional preferences, possibly
accepting short-term distributional losses in pursuit of long-term institutional gains. In
this way, he argues, “games within rules,” such as the annual budgetary procedure, can
blur into “games over rules,” in which the various actors seek to reconfigure institutional
rules to their long-term advantage.24
Applied to the EU’s various member governments, Lindner assumes – together
with virtually all of the relevant literature – that each member government seeks to
maximize its net benefits, or minimize its net contributions, to the EU budget. In this
view, EU budgetary politics is largely a distributive battle among member governments
and the most important cleavages is between net-contributing member states, which form
an “austerity camp” in Council negotiations over EU revenues and expenditures, and netrecipient countries, which seek greater spending, particularly in policy areas (e.g. the
CAP and/or the Structural Funds) likely to benefit them. In institutional terms, each
member governments can be expected to champion institutional rules likely to produce
the greatest benefits over the long run, which for net-contributing member governments
typically means the retention of an intergovernmental, veto-player system that limits
supranational influence and grants each member state a veto over revenue and
expenditure decisions. Net recipients, by contrast, may favor qualified majority voting
and/or greater supranational influence, particularly insofar as these rules might increase
their net benefits over time.
23
24
Lindner 2006: 24-25.
Lindner 2006: 25.
18
Much of the literature on EU budgetary politics has focused precisely on the
distributive and redistributive elements of intergovernmental bargaining among the
member states. Scholars of the budget, as well as of the CAP and the Structural Funds,
have demonstrated the existing and increasing importance of the “North-South” cleavage
between a net-contributing member states (such as Germany, the UK, the Netherlands
and a growing number of relatively wealthy members) seeking austerity, and net
beneficiaries (such as Spain, the southern European members, and increasingly the
eastern European new members) seeking a larger EU budget and greater fiscal
redistribution from rich to poor. Indeed, as I have argued elsewhere, all of the EU’s
landmark spending decisions can be understood as side-payments in larger
intergovernmental “package deals,” in which net-contributing member states agree to the
creation or increase in redistributive spending programs in return for the agreement of net
recipients to institutional or policy priorities such as market integration, economic and
monetary union, and enlargement of the Union (see Table 1).25
----------------------------------------------Insert Table 1 about here
----------------------------------------------Such intergovernmental models go a long way in explaining the landmark
spending decisions of the EU, and they also account for the nature of the EU revenue
system, which despite five decades of European integration continues to be governed by
the decision rules of unanimous, intergovernmental decision-making. Nevertheless, as
noted above, the annual budgetary process features a significant role for the European
Parliament, as well as smaller, supporting roles for the Commission and the ECJ, and
Lindner therefore theorizes about the collective preferences of the Budget Council vis-àvis the EP, the Commission, and the Court. With regard to the first,
The aggregated preferences of the Council in annual budgetary decisionmaking are mainly oriented towards stability in the existing distribution of
expenditure, i.e. compulsory expenditure, while seeking to minimize
expenditure in new policy areas, i.e. non-compulsory expenditure. Among
25
Pollack 1995: Chapter 5.
19
national governments, European own-resources are still largely viewed as
national contributions from national budgets.
Money that is not
committed in the EU budget plans go back into the national coffers; the
Budget Council, composed of national budget ministers, has a general
interest in keeping the budget low.26
Nevertheless, Lindner goes on to note, the preferences of the member governments are
not uniform, and the unity of the Council can be and often is undermined by north-south
distributive conflicts that prevent the Council from reaching a qualified majority to
sustain its own position vis-à-vis the Parliament. Furthermore, while the Budget Council
represents the preferences of national finance ministries in the annual budgetary process,
individual policies with budgetary implications are generally adopted in sectoral Councils
of, say, agriculture ministers, and these “spending ministries” may favor EU expenditures
that will favor their respective constituencies without the finance ministers’ overarching
concern for the public purse.
As for the Parliament, here again Lindner’s discussion is worth quoting at length:
The EP has (1) a direct distributive interest (serving special
constituencies), (2) a long-term systemic interest (strengthening of the
European level in terms of policies delegated from the national level), and
(3) an institutional interest (increasing the power of the EP in terms of
influence in European decision-making). Within budgetary politics these
interests translate into the following objectives: (1) The expansion of the
budget, especially in areas in which the EU has not yet assumed political
responsibility, mainly non-compulsory expenditure. As the EU does not
have direct responsibility for the revenue side and taxpayers’ contributions
are not clearly visible, the EP seeks to increase expenditure. (2) The
increase of the role of the EP in budgetary decision-making, most
importantly in the expansion of the classification of expenditure as noncompulsory and the abolition of the maximum rate of increase. (3) The
26
Lindner 2006: 31.
20
use of the EP’s existing budgetary powers as a lever to influence
legislative politics, as long as the EP’s power in this area is limited.
These aims can be understood both as a general result of the EP’s pro-integration bias,
and as a result of perverse incentives of the Luxembourg and Brussels Treaties, which
gave the EP spending but not taxing powers (increasing the EP’s incentive to spend), and
which granted the EP greater budgetary than legislative powers (giving the EP an
incentive to leverage budgetary power to affect legislative outcomes). The latter feature
of the system would change after 1987 as the EP gained legislative powers that would
eventually eclipse its budgetary role (see below). In general, however, both a general
“pro-integration” assumption, as well as the more specific features of the EU budgetary
procedure, would lead us to predict that the EP would use its budgetary powers to foster
the growth of the EU budget and the creation of new EU policies through the budget.
Complicating this analysis, Lindner notes, is the fact that the EP is not, in
practice, a unitary rational actor, but is rather riven by three sets of internal cleavages:
among different committees (and in particular the powerful Budget Committee vis-à-vis
sectoral committees with interests in spending in particular issue-areas); among different
nationalities (reflecting the different net contributions or benefits of the various member
states); and among different party groups. In order to exert any significant influence on
the budgetary process, MEPs must demonstrate a high degree of unity, reaching the high
thresholds specified in the treaties. In many of the EP’s early conflicts with the Council,
Lindner demonstrates, the EP Budget Committee presented budgetary questions to the
plenary as a defense of the Parliament’s prerogatives, resulting in high levels of unity and
a powerful position vis-à-vis a Council that was often divided over distributive conflicts.
By contrast, he argues, later conflicts saw a partial breakdown in the Parliament’s internal
unity, resulting in a decline in EP influence vis-à-vis the Council.27
Finally, while Lindner and other scholars focus primarily on the Council and the
EP as the two arms of the “budgetary diarchy,” two other supranational actors, the
Commission and the Court of Justice, also play supporting roles, the former as an
informal agenda-setter and potential broker between the Council and Parliament, and the
27
I return to this point in section 3 below.
21
latter as the potential arbiter of legal disputes over the application of the Treaty
provisions in the annual budgetary process. As in the case of the Parliament, we can
question whether the Commission and the Court can and should be treated as a unitary
actor vis-à-vis the other EU institutions; however, given their smaller size and secondary
roles in the budgetary process, we assume for the sake of simplicity that the Commission
and the Court do indeed behave as unitary actors with a common preference for greater
integration.28 As we shall see, this assumption seems amply supported in the case of the
Commission, while the Court has demonstrated greater reticence in its budgetary policy
decisions than a simple principal-agent model might suggest. The analysis below will
concentrate primarily on the EP and the Commission, which play a regular, recurring role
in the annual budgetary process.29
Empirical Analysis: The Impact of Supranational Activism, 1975-1988
The analysis thus far has generated two basic predictions about the behavior and
impact of supranational agents in the budgetary process. First, we predict that the
Commission, the EP, and the ECJ should all demonstrate, in their respective budgetary
roles, a clear preference to maximize European integration as well as their own
competences in the budgetary process. Second, in keeping with the principal-agent
literature, we predict that the impact of each institution on budgetary outcomes will
depend in practice on the decision rules governing the policy process, as well as the
respective preferences of the member states and their supranational agents.
More
concretely, we would expect supranational actors to have little or no influence over the
adoption of the Community’s own resources decision, while we would expect the
28
Similarly, Lindner (2006: 43) assumes that the Commission’s distributive and institutional preferences
“are usually close to the positions advanced by the EP,” although he also notes that the Commission, as the
institution responsible for the implementation of the budget, also has a potentially conflicting incentive to
reduce the level of conflict and produce an uncontested budget for implementation.
29
For reasons of both space and time, I do not undertake here a systematic analysis of the ECJ’s role as the
arbiter of the Treaty provisions governing the budgetary process. Nevertheless, the relatively infrequent
recourse to the Court by both the Council and the EP is striking, as is the Court’s reticence to intervene
forcefully. Studies of ECJ jurisprudence in other areas, such as infringement proceedings (Stone-Sweet
and Brunell 1998) and “legal base games” (Jupille 2004) suggest a strong ECJ bias toward the positions of
the supranational Commission and Parliament. By contrast, the ECJ in its few decisions on the budgetary
process has failed to demonstrate a systematic pro-integration bias, and has emphasized instead the duty of
loyal cooperation among EU institutions; see e.g. the discussions in Corbett 2003: 93-113, and Lindner
2006: 193. This question of ECJ jurisprudence in the budgetary process, understudied to this author’s
knowledge, is ripe for further study.
22
European Parliament to have a real but limited causal impact on the budget, increasing
non-compulsory expenditures and fostering the adoption of new EU policies within the
limits of the “maximum rate of increase” and its “margin of manoeuvre,” and seeking to
increase its own institutional role in the process. We would expect the Commission,
finally, to favor the same integrationist goals as the Parliament, but in doing so it would
have to rely solely on its informal agenda-setting powers, since its formal agenda-setting
role was, in practice, non-existent.
The extant literature on EU budgetary politics in the period from 1970 to 1988
provides ample evidence for these predictions. Throughout this period, many authors
have demonstrated, the Commission consistently presented ambitious, integrationist, or
maximalist “preliminary draft budgets” featuring high levels of spending as well as the
targeting of such spending on new EU policies, some of which had been explicitly
resisted within the legislative process in the Council of Ministers.30 Reflecting the
Commission’s weak agenda-setting powers, however, the Budget Council then typically
adopted “draft budgets” with spending levels substantially below those proposed by the
Commission.
In the next stage of the process, Lindner and others demonstrate, the European
Parliament’s first reading almost invariably proposed modifications and amendments to
dramatically increase spending, particularly in the area of non-compulsory expenditure,
up to and often above the levels proposed by the Commission in its preliminary draft. In
doing so, moreover, the Parliament frequently engaged in “opportunistic interpretation”
of the Treaties, seeking inter alia:
•
to increase overall spending up to and in many instances beyond the “maximum
rate of increase” (despite the fact that the Treaties specified that the EP needed the
agreement of the Council in order to exceed that rate);
•
to classify or reclassify individual budgetary lines as non-compulsory
expenditure, over which the EP had greater leverage; and
30
See e.g. Strasser 1975, 1976, 1977, 1981; Wallace 1983; Shackleton 1990; Laffan 1997; Corbett 2003:
93-113; Laffan and Lindner 2005; and Lindner 2006.
23
•
to use individual budgetary lines to authorize new spending programs for which
the Council had failed to adopt authorizing legislation, and over which the EP had
no legislative authority.
Lindner further demonstrates that, throughout the period from the adoption of the
Luxembourg Treaty through 1988, the Budget Committee of the EP was able to generate
an extraordinary degree of unity within the Parliament, which required – and regularly
summoned – oversized, cross-party majorities of MEPs to defend the spending proposals
and the institutional prerogatives of the Parliament vis-à-vis the Council. During this
period, he argues, “Most MEPs understood themselves as a supranational lobby, charged
with strengthening the European level and the influence of Parliament.”31 Furthermore,
as noted above, MEPs were in the unusual situation of being able to claim credit for
expenditure policies while not being held accountable for raising taxes to increase
revenues, while the EP’s relatively weak role in the consultation procedure meant that
MEPs focused on the budget process as their primary means of affecting policy
outcomes. The EP was encouraged in these tactics, finally, by a European Commission
that generally did not play the role of honest broker, but rather demonstrated a set of
policy preferences close to that of the Parliament, for example by proposing preliminary
draft budgets that frequently exceeded the maximum rate of increase, and by agreeing to
implement budgets that had been adopted by Parliament over the objections of the
Council.32
The Council of Ministers generally opposed the Parliament’s proposed increases
in spending in its second reading, nearly always voting to reject parliament’s
modifications to compulsory expenditure and many of its amendments to noncompulsory expenditure. In some instances, however, a Council that was divided on
North-South lines failed to summon a qualified majority to reject Parliament’s
amendments to NCE. In such cases, the Parliament, possessing agenda-setting power
vis-à-vis the Council, was able to secure sometimes substantial increases in spending at
31
32
Lindner 2006: 50.
Lindner 2006: 51.
24
this stage.33 Furthermore, the Parliament in its second reading enjoyed the “final word” in
the adoption of the budget, and was able to insert regular increases in non-compulsory
expenditure in the final budget, albeit only within the agreed-upon maximum rate of
increase.
The dependent variable of Lindner’s study is the level of conflict in the budgetary
process, and he ably demonstrates that the budgetary system established by the Treaty of
Luxembourg led to extraordinarily high levels of conflict, both among the member
governments in the Council, and between the Council and the European Parliament,
which engaged in both distributive disputes over the level and distribution of
expenditures as well as institutional disputes over the respective powers of the two
institutions. For our purposes here, however, the more important question is not whether
the EP was able to generate conflict – which it clearly was – but whether it was able to
exert an independent causal impact on budgetary outcomes. Empirical evidence here is
mixed, reflecting the many hedges that the member states had placed around
Parliamentary power in the Luxembourg and Brussels Treaties. Two such provisions are
worth emphasizing here. First, the Parliament enjoyed much greater influence over noncompulsory expenditures than over compulsory expenditure, where the Council could
easily reject the EP’s proposed modifications in its second reading, and where the
Parliament could not reintroduce those modifications in its own second and final
reading.34 Secondly, while the Parliament did indeed have real agenda-setting power on
NCE amendments, which were considered adopted in the Council unless rejected by
QMV and which could be reintroduced in the EP’s second reading, the Parliament in the
latter case was limited both by the maximum rate of increase for the budget, and by its
so-called margin of manoeuvre, which placed an upper limit on the size of the
amendments that the EP could reinsert in its second reading.
33
This was the case, for example, in the 1979 budget, when the EP amended the budget to provide for a
substantial increase in European Regional Development Fund spending. A divided Council failed to
summon a qualified majority to reject the amendment, which was therefore adopted as part of the Council’s
second reading. See Corbett 2003: 7-98. More generally, Lindner (2006: 52-3, 89) describes a de facto
alliance between the EP and the southern member states in the Council, which regularly voted in the
Council’s second reading to support Parliament’s amendments to non-compulsory expenditure.
34
Furthermore, the popularity of agricultural spending for many MEPs and their constituencies meant that
the otherwise-unified Parliament was never able to mount a significant challenge to the dominance of the
CAP in the EU budget. Lindner 2006: 62.
25
Despite these limitations, my own and other scholars’ research on budgetary
policy-making during the 1970s and 1980s demonstrates that the EP was able to increase,
albeit by modest sums, the overall size of the budget, as well as to secure the adoption of
dramatic increases in the size of new, non-compulsory budget items including the
European Regional Development Fund (ERDF) and the Structural Funds, as well as
research and development programs (such as Esprit and the later framework programs),
and programs on the environment (e.g. the LIFE program), education (e.g., the Erasmus
and Socrates programs), culture and audiovisual (e.g. the MEDIA program), and
consumer protection. When the new budgetary procedures first took effect, with the
1975 Community budget, the Council generally rejected EP modifications and
amendments, yet the Parliament made frequent use of its powers to reinsert its
amendments to non-compulsory expenditure in its second reading, adding 102.9 million
ecus in new spending to the 1976 budget and 140 million ecus to the 1977 budget,
concentrating the bulk of its amendments on areas such as research and development (32
million ecus extra in 1977), development aid (31 million ecus), and the Social Fund (6
million ecus).35
Parliament also, as noted above, asserted its right to insert new items and new
lines into the budget, even where the Council had passed no enabling legislation, and to
allocate funding to these new budget lines.
In this way, for example, Parliament
allocated some 20,700 ecus in 1976 and 100,000 ecus in 1977 for “pet projects” in the
cultural sector, including preservation of the Community’s architectural heritage and the
creation of a Community Youth Orchestra. Although the initial sums involved were
small, they played an important part in getting new policies underway, and in building up
a Commission bureaucracy to propose and administer additional new programs. Thus,
for example, by the time the EC Ministers for Culture began to hold Council meetings in
1984, the Commission’s Cultural Questions Division had been in existence for almost a
decade, administering a culture budget larger than that of the Council of Europe (which
unlike the Community possessed explicit competence in the area of culture).
This role of the Parliament in fostering the growth of new policies can be seen in
35
For excellent accounts of the budget negotiations during the first few years of the new budget procedure,
see Strasser 1975, 1976, and 1977.
26
Figures 2 through 7, which illustrate graphically the development of specific budgets for
the European Regional Development Fund and for policies relating to research and
development, the environment, education, culture, and consumer protection. The red area
in each graph depicts the amounts allocated to each policy by the Parliament in its second
reading, above and beyond that allocated by the Council. As the figures make clear, the
Parliament has since 1975 concentrated its efforts within its small margin for manoeuvre
on new policy areas, such as culture, consumer protection, and the environment, where
small appropriations might at least have the effect of getting the camel's nose (i.e. new
policies) under the tent of the Council's fiscal austerity. Although the sums are indeed
relatively small, this tendency for Parliament to increase the Council's allocation to new
and emerging policies, and the tendency of the Commission to incorporate these
increases into its preliminary draft budget for the following year, creates an underlying
pattern of incremental growth that I have elsewhere called “Parliamentary creep.”36 In
addition, these graphs, while making explicit the “extra” spending added by the EP in its
second reading, understates the EP’s overall impact, since a divided Council sometimes
accepted the EP’s first-reading amendments in its own second reading.37
----------------------------------------------Insert Figures 2-7 about here
----------------------------------------------Summing up this section, then, the 1970 Treaty of Luxembourg created a hybrid
intergovernmental/supranational
budgetary
system,
one
that
retained
an
intergovernmental, veto player system on the revenue side while injecting an element of
supranationalism on the expenditure side. While the resulting system was often referred
to as a “budgetary diarchy,” however, we should not overstate the supranational elements
of this system, which did not make the Parliament an equal partner in the budgetary
process but hedged in its potential role by denying it any binding role in revenue
decisions, restricting its impact on compulsory expenditures, and limiting its increases in
non-compulsory expenditures to a maximum rate of increase. Hence, despite the very
public disputes between the Council and the EP throughout this period, the actual impact
36
Pollack 1994.
Detailed data covering the five stages of the budgetary process for these six issue-areas, during the years
specified on in the figures, are available from the author.
37
27
of Parliament was marginal, resulting in modest increases in overall spending and
fostering the development of new policies in areas where the Council was unlikely to
legislate or to spend.
III. Supranational Budgetary Influence in the Era of Financial Perspectives,
1988-2008
The adoption of the first financial perspective in 1988, and more generally the
advent of multi-annual financial planning, is often and correctly said to have ushered in
an era of “budgetary peace” between the Council of Ministers and the European
Parliament, which had previously engaged in frequent political and legal battles over both
spending decisions and their respective rights under the Luxembourg and Brussels
Treaties. This transition to multi-annual financial perspectives has been amply analyzed
elsewhere,38 and I limit myself here to analyzing the implications of these developments
for the roles of the Union’s supranational actors, with special attention to the Commission
and the Parliament.
The Financial Perspectives and Inter-Institutional Agreements: Still a Role for
Supranational Actors?
The mid-1980s proved to be a turning point for the budgetary system established
in the 1970s, for several reasons. First, as we have seen, the budgetary system of the
Luxembourg and Brussels Treaties was a severely underspecified incomplete contract,
which encouraged perennial conflicts on two levels, namely intergovernmental disputes
between net contributors and net recipients in the Council, and inter-institutional disputes
between the Council and a European Parliament insisting on its policy priorities and its
limited rights in the process. Second, the combination of out-of-control agricultural
spending and strictly limited revenues had pushed the EU budget up against the limit of
its available resources, requiring a unanimous Council agreement for a new Own
38
The definitive account is Lindner 2006; see also Shackleton 1990, Laffan 1997.
28
Resources Decision.39 Third and finally, the member states had agreed in 1987 to the
new Single European Act, which did not change the annual budgetary procedure but
which did produce demands from southern member states led by Spain for a substantial
increase in the EU Structural Funds as the price for the completion of the Internal Market.
It was in this context that an entrepreneurial Delors Commission formulated and
put forward a series of proposals and a package deal – hence the name pacquet Delors –
that would increase the Community’s own resources with the creation of a few “fourth
resource” that would assess each member state’s contribution based on ability to pay;
introduce stabilizers to bring agricultural spending under control, as demanded by Britain
in particular; and increase Structural Fund spending as demanded by Spain and other net
recipients. Crucially, Delors proposed that, in order to ensure the “budgetary peace” that
had eluded the Community in the past, the member states should adopt a multi-annual
“financial perspective,” with overall ceilings and subceilings (by category) for annual
expenditures, obviating the need for annual battles within the Council, and between the
Council and Parliament, over the precise level of spending for the CAP, the Structural
Funds, etc.
The Delors Proposals therefore include an indicative breakdown of
Community expenditures by category for the five-year period from 1988 to 1992.40
The package of decisions taken by the European Council in February 1988 was
adopted by unanimity, which limited the formal agenda-setting powers of the
Commission. Delors, for example, had suggested that the EU’s own-revenue ceiling
should be raised to 1.4% of Community GNI, but the Brussels agreement reduced this
ceiling to a substantially lower ceiling of 1.2%. Nevertheless, the member states all
agreed to Delors’ proposal for a multi-annual financial perspective that would reflect the
key elements of the grand intergovernmental bargain and fix the upper limits of annual
spending by broad budget headings (CAP, Structural Funds, internal policies, external
policies, and administration, respectively). The Treaties, however, made no provision for
such multi-annual financial planning, which had clear implications for the budgetary
powers of Parliament, and so the German Presidency devoted much time and attention to
39
The Fontainebleau European Council had amended the previous own resources system, principally by
raising the VAT ceiling to 1.4% and creating a rebate system for the United Kingdom; but this new ceiling
quickly proved inadequate to the fiscal demands of the Community budget.
40
For good discussions, see Ross 1995, and Lindner 2006: 75-77.
29
securing an Inter-Institutional Agreement (IIA) with the Parliament and the Commission
on the implementation of the financial perspectives. In the deal, which was finally agreed
in June 1988, the Commission and Parliament agreed to respect the ceilings laid out in
the financial perspective, and the Parliament further secured the Council’s agreement that
any increase in spending beyond the specified ceilings would require the agreement of
both the Parliament and the Council.
The adoption of multi-annual spending ceilings and their attendant IIAs ushered
in an era of budgetary peace. By contrast with the earlier period, budgetary politics since
1998 has been characterized by less frequent conflict within the Council (where the
essential package deals can be taken for granted in the periods between the adoption of
the multiannual financial perspective) and between the Council and the EP (which now
took place in a more stable and unambiguous framework than under the Luxembourg and
Brussels Treaty provisions).41 With regard to the latter, Lindner continues:
The introduction of the financial perspective and the interinstitutional
agreement changed the incentive structure of budgetary actors. It reduced
the scope of interpretation and marginalized the maximum rate of
increase.
Therefore, opportunistic interpretation was no longer
Parliament’s dominant strategy. Distributive demands had to be satisfied
within the existing ceilings of the financial perspective, or through a
consensus with the Council on a revision of the ceilings.42
Reflecting these changed incentives, Lindner finds that, while the EP generally continued
to seek higher expenditures than the Council, these aims were pursued within the ceilings
of the financial perspectives, or through negotiated Council/EP agreements on the
revision of the perspectives.
More importantly for our purposes here, however, the 1998 Delors Package also
introduced a purely intergovernmental, veto-player framework on the expenditure as well
as the revenue side of the budgetary process, giving the member states the dominant role
41
42
Lindner 2006.
Lindner 2006: 96.
30
in fixing EU spending priorities, granting each member state a veto over future spending
decisions, lending the EU budget a powerful element of rigidity and path-dependence,
and seemingly reducing the supranational role in the budgetary process substantially.43
For the Commission, this state of affairs was not a major change relative to the status quo
– indeed, the Commission’s role as the proposer of the multi-annual framework
guaranteed it a continuing informal agenda-setting role44, and the Commission also
gained a right of veto in the adoption of the subsequent IIA.
It is less obvious, however, why the Parliament would agree to such an apparent
diminution of its own rights and prerogatives. Nevertheless, Lindner and others point to
a number of reasons why the new financial perspective system was acceptable to the
Parliament, and indeed an improvement vis-à-vis the status quo.
First, the financial perspective system satisfied many of the core aims of the
Parliament, including not only “budgetary peace” and predictability, but also a spending
ceiling that, for most years of the 1980s and 1990s, exceeded that which could be
achieved using the “maximum rate” of increase. Insofar as MEPs were driven by a
“distributive” desire to increase size of the EU budget as well as specific policies like
structural expenditure, the financial perspectives offered a more reliable way of doing so
than the annual budgetary procedure. This explanation becomes less convincing over
time, Lindner concedes, as subsequent financial perspectives introduced greater fiscal
austerity and produced spending ceilings that were not consistently higher than those
provided by the maximum rate of increase. Rather than abandon the financial perspective
system entirely, however, the EP was able to use a credible threat of noncompliance with
the non-binding IIAs to secure spending and institutional concessions from the Council.45
Second, the introduction of the financial perspective system coincided with the
introduction (by the Single European Act) of the cooperation procedure for internal
market legislation, and more generally of a secular trend over the next two decades in
43
“Decision-making procedures for the EU finances reflect the division of power inside the EU and show
the dominance of a veto players system: the balance of power in the financial decisions is currently in
favour of the Council of Ministers and the European Council, both governed by intergovernmental
procedures, as the main ceilings on revenues and expenditures are decided through negotiation among the
member states, excluding an effective agenda-setter role for the Commission and an effective veto power
for the European Parliament.” Giuriato 2006: 22.
44
Informal because the Council could amend the Commission proposal as easily as it could adopt it.
45
Lindner 2006: 87.
31
which the Parliament’s legislative powers were dramatically increased with the
introduction and extension of the cooperation, assent and cooperation procedures. This
increase in the legislative powers of the EP, eventually culminating in full equality for the
EP and the Council in the revised co-decision procedure, eliminated the previous
imbalance between the EP’s budgetary and legislative powers, and in many issue-areas
tipped that balance in favor of the legislative process.
As a result, the budgetary
procedure lost its salience as a wedge through which a weak EP could influence policy
outcomes, and MEPs increasingly turned their attention to the legislative front. Indeed,
the shift in EP influence can be seen in the Parliament’s attitude toward the use of the
budgetary and legislative powers, respectively. Prior to the introduction of the SEA and
the financial perspective, the EP had insisted on its right to insert budget lines for which
no corresponding legislation had been passed, while the Parliament had resisted any
effort by the Council to specify specific program budgets in legislation, claiming that to
do so would infringe on the budgetary powers of Parliament. After 1988, however,
MEPs agreed to a series of Inter-Institutional Agreements with the Council in which the
EP gave up the right to insert budget lines with no legislative authority46, while accepting
that legislative acts adopted under co-decision could spell out indicative budgets for
multi-annual spending programs.47
This last point raises a third crucial element in the Parliament’s acceptance of the
financial perspectives system. In order to implement the financial perspectives, the
Council accepted that it would need to agree, together with the Commission and the
Parliament, an Inter-Institutional Agreement, and a series of such agreements were
concluded following the adoption of the 1988, 1993, 1999 and 2005 financial
perspectives. In each case, MEPs were able to demand institutional concessions from the
Council in return for their adherence to the member states’ demands for financial
austerity. Over the course of four such IIAs, Parliament secured the adoption of a series
46
The agreement did, however, make exceptions for small-scale pilot programs, preparatory studies, etc.,
for which the EP may still insert budget lines with no accompanying legislation. See Corbett, Jacobs and
Shackleton 2007: 264-265; Lindner 2006: 194.
47
By contrast, legislative acts decided under other legislative procedures may feature only non-binding
indicative budgets, in order to protect the stronger budgetary powers of Parliament in these areas. Lindner
2006: 194.
32
of rules and practices that transformed and increased its own role in the budgetary
process. These changes included, inter alia, the following:
•
An EP role, and a veto, in the revision of the financial perspectives, which could
take place through a joint agreement of the Council (voting by unanimity) and the
EP.
The two bodies agreed to seven such revisions during the 1988-1993
framework (which witnessed a number of unexpected post-Cold War
expenditures), but the number of revisions decreased since the mid-1990s as the
member states increasingly insisted on fiscal austerity. The two sides agreed
further that any revision to the financial perspectives that involved less than
0.03% of Union GNI could be taken by qualified majority in the Council,
lowering the threshold for such minor revisions.
•
The EP also secured the creation of a “flexibility instrument,” in which the EP
and the Council acting jointly could call upon a reserve of up to €200 million to
pay for unexpected expenses. With the decline of revisions to the FP, Parliament
resorted increasingly to the use of this flexibility instrument to finance its
budgetary priorities.
•
The EP made gains on the classification of expenditure as compulsory or noncompulsory, securing, for example, the Council’s agreement to the classification
of some 20% of agricultural spending as NCE.
•
The EP also secured a commitment from the Council to revisit the distinction
between compulsory and non-compulsory expenditure and to consider a revision
of the Treaty’s budgetary provisions accordingly, although in the event the
member states declined to amend the budgetary procedure in either the
Maastricht, Amsterdam or Nice Treaties.48
Fourth and finally, the EP also secured, in the various IIAs and in practice, the use
of extensive informal “trialogue” meetings (among representatives of the Commission,
the EP, and the Presidency of the Council) and conciliation meetings (between the budget
48
For excellent discussions of the various IIAs, and the ways in which they have altered and strengthened
the roles of the EP, see Corbett, Jacobs and Shackleton 2007: 250-265, and Lindner 2006: 188-199.
33
ministers, a delegation from the EP, and the Commission as a broker) at various stages in
the budgetary process, approximating the conciliation reflex that was developing at the
same time in the legislative codecision procedure. By the early 2000s, what had once
been a highly contentious back-and-forth of sharply opposing and poorly coordinated
Council and EP readings had changed in practice to a much more consultative and
conciliatory process (depicted in Figure 8 from Corbett, Jacobs and Shackleton 2007).
As Figure 8 demonstrates, informal trialogues and/or conciliation meetings now precede
every formal stage in the budgetary process, allowing each institution to make its
concerns and priorities known to the other at an early stage. Particularly significant in
this context is the conciliation meeting held before the Council’s second reading. By
contrast with earlier practice, in which the Council’s second reading typically rejected the
bulk of the EP’s first-reading amendments, only to have the EP restore many of these
amendments in its own second reading, the Council and the EP now regularly attempt, in
conciliation, to reach agreement on all aspects of the budget, and an agreed-upon text is
then submitted to the Council and to the EP plenary for approval by their respective
majorities. This conciliation procedure, which closely approximates common practice in
the legislative realm, has increased the quality of the information available to both sides,
facilitated early decision-making in the budgetary process, and reduced in practice the
distinction between compulsory and non-compulsory expenditure, since typically all
expenditures are “on the table” and subject to negotiation in the conciliation meetings.49
----------------------------------------------Insert Figure 8 about here
----------------------------------------------The result of all these changes was a dramatically altered budgetary process, one
in which the Commission and the EP continued to press broadly similar integrative goals
– seeking, for example, to increase spending and to foster the development of new or
politically popular EU policies – but in an institutional context that emphasized
cooperation and conciliation rather than institutional conflict. Both the continuity in
49
Again, see the excellent discussions in Lindner 2006: 108-111, and Corbett, Jacobs and Shackleton 2007:
250-265. See also the case study of the 2008 budget procedure, below.
34
supranational aims, and the changed context within which those aims were pursued, can
be seen in the following brief case study of the 2008 budget process.
The 2008 Budgetary Process: Constant Preferences, New Institutional Context
The 2008 budgetary process formally began on 2 May 2007, with the publication
of the Commission’s preliminary draft budget (PDB).50
The 2008 budget year
represented the second year of the new 2007-2013 financial perspective, and the second
year of the enlarged EU of 27 member states. Proposed within the context and under the
ceilings of the financial perspective, the Commission’s PDB proposed spending €129.2
billion in commitments (up 2% from 2007) and €121.5 billion in payments (up 5.3%
from 2007), the latter corresponding to 0.97% of the Union’s GNI.
The Commission emphasized in its rationale for the PDB that the total
expenditures under Heading 1, Sustainable Growth, would for the first time exceed those
of Heading 2, Preservation of Natural Resources. More concretely, the Commission
proposed a substantial increase of 9.6% for subheading 1a, the “Lisbon” or
competitiveness title, which included research and technological development, and a
smaller increase of 3.1% for subheading 1b, Cohesion. By contrast, Heading 2, devoted
overwhelmingly to the CAP with smaller expenditures on environmental and other
programs, would remain essentially flat relative to 2007. As in the past, these two
headings would constitute the vast majority of total EU expenditures, with 44% and 43%
of the proposed budget, respectively.
The Commission also proposed substantial
increases for Heading 3 (Citizenship, Freedom, Security and Justice) and modest
increases for Heading 4 (the EU as a Global Partner), and Heading 5 (Administrative
Expenditure).51
Meeting in July, the Budget Council adopted an austerity Draft Budget, cutting
Commission expenditures across the board, reducing total commitments to €128.4 billion
and payments to €119.4 billion, or 0.95% of Union GNI.
Major cuts to the
Commission’s PDB included approximately €250 million from the Lisbon subheading
50
This case study discusses only the broad lines and primary disputes over the 2008 budget. For detailed
primary-source documents of the 2008 budget process, see the website of the Budget Committee of the
European Parliament, http://www.europarl.europa.eu/comparl/budg/budg2008/2008_en.htm, accessed on
18 March 2008.
51
Commission of the European Communities 2007a.
35
1a, €498 million from cohesion spending, and substantial cuts to the Commission’s
proposed increases in administrative expenditure, designed largely to meet the needs of
an enlarged EU. Meeting in a trialogue in the days before the Council’s first reading,
representatives from the EP Budget Committee objected to the Council’s proposed cuts,
focusing in particular on cuts to research and other aspects of the Lisbon sub-heading,
and it called on the Council to provide greater funding for the Union’s external activities
in Kosovo and the Palestinian territories, which would later emerge as crucial points of
contention between the Council and the EP.52
In addition to these differences between the Commission, Council and the EP, two
other policy-related expenditures – neither of which had been foreseen in the seven-year
financial perspective – emerged over the course of the summer and fall, and came to
dominate much of the debate over the 2008 budget. The first was the Galileo satellite
navigation system, which had been adopted and authorized by the Council to provide a
European alternative to the US Global Positioning System, in cooperation with the 17member European Space Agency (ESA). The EU’s initial authorization for the project
had provided for €1 billion in funding from the EU budget, with another €2.4 billion to
come from private industry. By the spring of 2007, however, it became clear that the
eight major firms involved in the negotiations could not agree on the financing of the
project, and in May 2007 (soon after the adoption of the PDB), the Commission issued a
report to the Council of Transport Ministers, proposing that the Galileo programme
should be funded fully from the EU budget, which would require an additional €2.4
billion eover the period of the financial perspective.53 This proposal was disputed,
however, by several net-contributing member states, and especially by Germany, which
proposed that the shortfall could be funded wholly or in part from the ESA budget
(thereby guaranteeing a greater share of the project contracts to German firms, as well as
the return of an estimated €500 million in German fourth-resource contributions).54 The
second project was the Commission’s October 2006 proposal for the European Institute
of Technology (EIT), which came up legislative approval by co-decision during 2007.
The Commission’s proposed budget of €308 million euros over the 2007-13 period was
52
European Report 2007a.
Commission of the European Communities 2007b.
54
Reuters 2007.
53
36
accepted within the Council and the EP, but since the EIT had not been included in the
original financial perspective, the institutions entered a new debate over how to fund the
program. Here again, the Council preferred for the EIT to be funded from existing funds
under subheading 1a, while the EP Budget Committee called for new funding for the EIT,
above and beyond the projected R&D expenditures.55
In September, the Commission followed up with a formal proposal to revise the
financial perspectives, retaining the overall ceiling but transferring €2.2 billion in unused
funds from heading 2 (CAP expenditures for 2007-2008, which had declined due to
unexpectedly high world food prices), another €220 million in unused administrative
expenditures from heading 5 for 2007-2008, and €300 million from the planned research
and development expenditures for 2011-2013.56
Under the EU budgetary system,
however, any such unused expenditures would normally revert back to the member
governments, and several of the net-contributing member states resisted the
Commission’s proposals, with Germany continuing to support ESA funding and with the
UK and the Netherlands calling for Galileo and EIT to be funded out of projected
expenditures within heading 1a.57 Parliament’s Budget Committee, by contrast, “fully
supported” the Commission proposal, calling for a revision of the financial perspective
and noting that, according to the terms of the 2006 IIA, no implementing legislation for
the EIT could be adopted until the Council and the EP had agreed to the necessary
revision of the financial perspective.58
The EP’s Budget Committee met over several days in early October, voting on
over 1,600 proposed amendments, and the committee report was then taken up on
October 23rd by the plenary, which adopted the EP’s first reading on October 23rd. In
keeping with historical precedent, Parliament adopted a substantially larger budget than
the Council’s draft, voting for increases under all of the budget headings and proposing
55
European Report 2007b.
Commission of the European Union 2007b. See also European Report 2007c.
57
Weilaard 2007. Meeting in November, the EU Telecommunications Ministers were deeply divided, with
a number of member states supporting the Commission’s proposals with some modifications and
guarantees (including a guarantee that total expenditures would not increase), while other members, mostly
net contributors, preferred to fund Galileo entirely out of existing funds under subheading 1a. European
Report 2007d.
58
European Report 2007e.
56
37
commitment appropriations of €129.7 billion and payment appropriations of €124.2
billion, or 0.99% of GNI. Once again in keeping with tradition, the EP identified a
number of key programs for dramatic increases, while calling for a revision of the
financial perspectives and the use of the so-called flexibility instrument. Highlights of
the proposed changes included:
•
A dramatic increase in spending for Galileo in 2008, from the Council’s proposed
€151 million to €890 million. Such an increase, the EP noted, would breach the
ceilings established in the financial perspective, and it therefore called on the
Council to agree to a revision of the perspective.
•
On the EIT, Parliament voted to retain the Council’s proposed 2.9 million for
2008, while transferring the EIT budget line from the subheading for education
and culture to the subheading for research and innovation.
•
In addition to Galileo, Parliament restored over €1 billion in Council’s cuts from
headings 1a (competitiveness) and 1b (cohesion).
•
Under heading 3, Parliament voted to increase the budget for Frontex, the EU
border-control agency, by €30 million to a total of €70 million, while placing the
extra amount in a reserve pending a report to the EP from the director of Frontex
about its operations.
•
Under heading 4, the EP was concerned primarily to increase funding for EU
actions in Kosovo and Palestine. It therefore proposed a tactical cut of €40
million from the CFSP budget, which would be transferred to those operations. In
addition, Parliament proposed to unlock €87 million through the flexibility
instrument, including €40 million to restore its cuts to CFSP, €40 million for
Kosovo and Palestine, and €7 million for other external expenditures.
As these amendments make clear, the revealed preferences of the Commission and the
Parliament continued to favor higher spending and the adoption of favored new policies,
while the Budget Council, despite its internal disagreements, generally continued to favor
fiscal austerity.
38
By contrast with this continuity in preferences, however, the budgetary process
following Parliament’s first reading was substantially different, and far more cooperative,
than in the past. In keeping with the procedures established by the 1999 and 2006 IIAs,
the Council and the Parliament held a conciliation meeting on 23 November, on the eve
of the Budget Council’s second reading. Much of the disagreement between the two
sides reportedly focused on three issues: 2008 funding and a revision of the financial
perspective to cover the costs of Galileo and the EIT; the total for payment appropriations
for 2008; and the financing for CFSP, Kosovo, and Palestine. On the first issue, the
Council was reportedly split, with Germany alone in opposing exclusive EU public
funding, while the rest of the member states supported EU funding but were divided
between those who favored extensive transfer of funds across headings and those who
preferred to fund Galileo exclusively within the Lisbon heading. Parliament, by contrast,
was united in preferring full EU public funding, extensive transfer of funds across lines,
and a major commitment of expenditures for 2008. On the total volume of payments for
2008, the Council and the EP were far apart, with the former advocating approximately
€124 billion (0.95% of GNI) and the latter pressing for €129 billion (0.99%). On CFSP,
finally, the Council was resisting Parliament’s proposed increases and the use of €87
million from the flexibility reserve for Kosovo and Palestine.59
Despite these differences, the November 23rd conciliation meeting was able to
produce a broad agreement between the two sides which reduced overall payments close
to the Council’s target but granted the Parliament partial victories on the revision of the
financial perspectives, funding for Galileo, and the use of the flexibility reserve. With
regard to the financial perspectives, it was agreed to revise the perspectives to provide for
an extra €2.7 billion for Galileo and the EIT, although the Council did the secure the EP’s
agreement to transfer fewer funds out of heading 2 and rely more heavily on funding
within subheading 1a.60 For the 2008 fiscal year, the Council also agreed to Parliament’s
demands for a major increase in Galileo spending, for a total of €940 million in
commitment appropriations and €300 million in payments. Regarding the total payments
59
European Report 2007f.
More specifically, €1.6 billion would be drawn from Heading 2, €600 million would be transferred from
other expenditures within heading 1a (the Seventh Framework Programme and other programmes), €300
million would be allocated from the margins remaining in subheading 1a for the 2008-2013 period, and
€200 million would be drawn from the flexibility instrument. See European Report 2007g.
60
39
for 2008, the conciliation meeting agreed to a total of €120.347 billion, or about 0.96% of
GNI, closer to the Council’s position. Finally, on external spending, the two sides agreed
to a total of €285 million for CFSP, while increased payments for Kosovo (€162 million)
and Palestine (€317 million) would be funded by the transfer of €70 million (rather than
the EP’s preferred €87 million) from the flexibility reserve. In addition, the Council
accepted several of the EP’s other proposed amendments, including increased funding for
Frontex and for Commission administrative expenditures (both placed in reserve pending
reports from those two institutions to Parliament).
The resulting agreement had strong support among the EP delegation, and was
supported by a large qualified majority in the Council as well. The Agriculture Council
therefore passed the 2008 budget the following week without debate, with only Germany
voting no (over the funding of Galileo) and Spain abstaining (in order to press its demand
to host a control center for the Galileo satellites).61 Within the EP, the Committee on
Budgets and the Plenary both accepted the terms of the conciliation agreement, refraining
from reinserting any of their amendments in second reading, and in fact making minor
cuts in cohesion spending in order to respect the lower payments ceiling agreed with the
Council for 2008.62
Although necessarily brief, this sketch of the 2008 budget process demonstrates
both the essential continuity in supranational (and Council) preferences and the
dramatically different and less confrontational process ushered in by the provisions of the
IIAs and the development of a “culture of conciliation” between the Council and the EP.
Both the Commission and especially the Parliament continued to press for greater
spending than the Council, albeit within the confines of a relatively austere financial
perspectives for 2007-2013, and both institutions continued to press for new or landmark
policies such as Galileo, the EIT, aid to Kosovo and Palestine, and increased spending on
programmes like MEDIA, citizenship, etc. The process through which the various actors
pursue their preferences, however, has changed dramatically, and the informal, nonTreaty-based conciliation procedure has transformed the final stages of the process from
61
62
European Report 2007h. Expansion 2007.
European Report, 2007i, 2007j.
40
the confrontational back-and-forth of the 1970s to something strongly resembling the
legislative co-decision procedure.
A More Divided, Less Influential Parliament?
Despite this continuing evidence of EP activism, and of the EP’s ability to gain
institutional leverage in the revised context of the financial perspective and interinstitutional agreements, several scholars have raised the prospect that the internal unity
of the Parliament – and hence its leverage vis-à-vis the Council – might be threatened by
developments within the budget procedure, or in EU politics more generally. Such EP
unity is vital to Parliamentary influence in the process, insofar as the EP must frequently
summon absolute majorities of its members in order to insert and sustain its
modifications and amendments to the Council’s draft budget.
More concretely, these arguments suggest that the recent developments might
affect either party cohesion or coalition patterns within the EP. In the former case, the
Parliament’s various political groups, such as the center-left Party of European Socialists
(PES) or the center-right European People’s Party (EPP), might experience a decline in
the remarkably high levels of cohesion and discipline demonstrated by their members in
recent years. In the latter, the pattern of coalitions among the Parliament’s political
groups might shift, moving from the oversized, cross-party coalitions that were
frequently mustered by the Parliament in its struggle with the Council in the 1970s and
1980s to smaller, minimum-winning coalitions of party groups along the left-right
continuum.
Consider first Lindner’s analysis, which argues that, “The unity of the EP on
budgetary issues has decreased over the years due to three factors: the influence of
national governments; a shift in majorities in Parliament; and the declining importance of
the Committee on budgets.”63
With regard to the first, Lindner suggests that the
increasing importance of the EP led member states to place greater pressure on MEPs to
vote on national rather than party-group lines, which would have the effect of reducing
party cohesion on budgetary votes. Second, Lindner argues that the victory of the centerright European People’s Party in the 1999 and 2004 elections also augured ill for EP
63
Lindner 2006: 101.
41
unity, since the party sought explicitly to “politicize” the Parliament and break up the
previous tradition of grand coalition votes between the EPP and PES.
On a
programmatic level, moreover, the EPP embraced a platform of budgetary rigor and
“value for money,” undermining Parliament’s traditional preference for higher
spending.64 Third and finally, the EP Budget Committee lost much of its previous
influence over the plenary, as the salience of budgetary politics decreased and MEPs
proved increasingly able to influence policy outcomes through the legislative process.
Taken together, all of these developments suggest a Parliament in which party-group
cohesion decreases over time in favor of national or committee-based cleavages, and in
which the Budget Committee is decreasingly able, over time, to summon the lopsided
majorities of MEPs needed to sustain the EP’s negotiating positions vis-à-vis the Council
of Ministers.
Lindner’s relatively pessimistic analysis of EP unity finds echoes in the growing
literature on voting behavior in the EP legislative process. In their recent study of
“democratic politics in the European Parliament,” for example, Simon Hix, Abdul Noury
and Gérard Roland focus their analysis almost exclusively on the legislative and
supervisory roles of Parliament, devoting only a few paragraphs to the EP’s role in the
budgetary process.65 Nevertheless, their analysis of trends in MEP voting behavior more
generally appear to support some of Lindner’s claims. Regarding party cohesion, for
example, Hix, Noury and Roland find that, contrary to Lindner’s expectations, overall
party-group cohesion has increased over time as the EP has gained greater legislative
powers; by the same token, however, they also find that party-group cohesion is generally
lower in budgetary votes compared to the universe of all EP voting behavior, suggesting
that MEPs are more likely to break with their party groups and vote along other cleavage
lines (e.g., national or committee) on budgetary votes than on legislative or supervisory
64
Despite these developments, however, Lindner argues that “the EP nevertheless insisted on spending
priorities. The EP did not want to lose its ability to imprint a specific emphasis on each year’s budget. For
MEPs it was very important to claim credit for budgetary decisions and to demonstrate their relevance in
the budgetary process.” Lindner 2006: 101. These observations are consistent with the evidence of EP
preferences and behavior in the 2008 budgetary procedure examined above.
65
Hix, Noury and Roland 2007: 19. In this, the authors reflect the broader literature, which has engaged in
systematic modeling and roll-call voting analyses of EP legislative behavior, while largely ignoring the
question of EP voting behavior in the budgetary process.
42
votes.66 Regarding coalition patterns, Hix, Noury and Roland do not examine budgetary
votes in isolation, but their analysis of all roll-call votes taken in the first six directly
elected Parliaments points to a dramatic decrease, over the past decade, in the frequency
of EPP/PES “grand coalition” votes.67 Hix, in a later work, takes this argument further,
suggesting that in a mature European Parliament that is already active across a broad
range of issue-areas, the “integration” dimension of legislative decisions is likely to
decrease in importance, while MEPs and other political actors are likely to focus
increasingly on the left-right aspects of EU politics.68
These analyses by Lindner, Hix and his colleagues, and others suggest a potential
sea-change in EU budgetary politics, one in which an increasingly divided Parliament is
likely to lose influence, ceteris paribus, vis-à-vis the Council of Ministers, and in which
budgetary issues do not unite the EP against a common adversary but increasingly divide
MEPs along party-group, committee, or national lines.69 Nevertheless, we should accept
these claims with caution, for the simple reason that we lack detailed, time-series
analyses of MEP voting behavior on budgetary issues.70 Such studies, which could
examine trends in both EP party cohesion and coalition patterns over time, could tell us a
great deal about the bargaining leverage of the EP and more generally about the nature of
EU budgetary politics in the years to come.
IV. Looking toward Lisbon
Despite the substantial changes described in the previous section, it is striking that
the EU’s member governments resisted for almost three decades modifying the 1970 and
1975 Treaty provisions on the budget, opting instead to implement the financial
perspective and other institutional innovations through the use of IIAs. With the
convening of the EU’s Constitutional Convention, however, the reform of the budgetary
66
Hix, Noury and Roland 2007: 93-95, and 124-25.
Hix, Noury, and Roland 2007: 150-52.
68
Hix 2007: 149-152.
69
Note that the analysis here holds the level of conflict among member states constant. If the Council
should become more divided on budgetary issues, for example as a result of enlargement, this development
might be expected to favor the EP, again ceteris paribus.
70
Personal correspondence with Michael Shackleton, European Parliament Secretariat, and Simon Hix,
London School of Economics.
67
43
provisions received serious consideration, resulting in an ambitious proposal from the
Convention. While the more far-reaching reforms of the Convention were not ultimately
retained in the subsequent Constitutional Treaty (CT), which limited EP influence most
notably by granting the Council a right of veto over the final budget, the CT did put
forward the first Treaty-based changes to the budgetary procedure in over three decades,
and the substance of those changes has been retained in the Treaty of Lisbon currently
awaiting ratification in the EU’s 27 member states. The recent debates over budgetary
reform, and the distinctions between the provisions proposed by the Convention and
those retained by the intergovernmental conferences leading to the CT and the Treaty of
Lisbon, have been expertly examined elsewhere, and will be the subject of other papers at
this conference.71 I therefore limit myself here to a brief characterization of the Treaty of
Lisbon procedures, and the implications of these procedures for the influence of the
supranational EP.
The relevant provisions of the CT, replicated in Articles 258-274 of the Lisbon
Treaty, introduce two primary changes to the Treaty: the integration, for the first time, of
the financial perspectives (now dubbed the “multiannual financial framework”), and the
creation of a modified co-decision procedure for the annual budget process. With regard
to the former, the Treaty inserts a new Article 270a, providing for the Council to adopt,
by unanimous agreement with the consent of the European Parliament, a multiannual
financial framework establishing binding ceilings for the Union’s overall expenditures
and for the various headings of the budget, for a period of no less than five years. These
provisions correspond closely to current practice, although the new text does introduce
some minor changes.
The new provisions do not mention the possibility of inter-
institutional agreements, which have been crucial in establishing the respective rights and
powers of the Council and the EP; the Commission thereby loses its veto power over the
adoption of inter-institutional agreements, while the EP gains a power of consent that
71
See Eberlein et al. 2005; Eijsbouts 2005; Guiriato 2006; and Benedetto and Hoyland 2007. Eberlein et
al. provide a particularly thorough analysis of the various proposals for the reform of the system, arguing
that the current system remains a stable equilibrium that balances the dual aims of efficiency and
legitimacy. Benedetto and Hoyland provide the most rigorous comparison of the Convention and CT
provisions for the annual budgetary procedure, arguing that (a) the Parliament stood to gain greater
influence from the Convention draft, which was amended to the benefit of Council by the IGC, and that (b)
the CT provisions produce only a minor change in the balance of powers between the EP with respect to
increases or shifts in non-compulsory expenditure.
44
should provide leverage to secure consideration of its institutional and/or spending
priorities similar to that of the current IIAs.
The financial framework also becomes
legally binding on all of the institutions, removing the EP’s implicit threat to abandon the
financial perspectives and the IIA (which possessed only the status of a gentlemen’s
agreement) if and insofar as the annual budgetary procedure provided a better set of
outcomes for the Parliament. The European Council also gains the right to adopt future
multiannual frameworks by qualified majority, but such a decision can be taken only by
unanimous agreement of the member states, making any transition to QMV decisionmaking highly unlikely. Failing agreement on a new multiannual framework, finally, the
Treaty provides for “the ceilings and other provisions corresponding to the last year of
that framework shall be extended until such time as that act is adopted.” As compared to
the current procedure, this new provision arguably increases the path-dependent nature of
EU budgetary expenditures, which will henceforth continue unchanged in the absence of
a unanimous member-state agreement on a new financial framework.
The other major change to the Treaty is the establishment of a revised annual
budgetary procedure, which removes the long-standing distinction between compulsory
and non-compulsory expenditure; introduces a formal conciliation procedure in the event
of any disagreement between the EP and the Council following the Council’s second
reading; and provides the Council, as well as the EP, the power to veto any agreement in
or following conciliation, thereby triggering the provisional-twelfths system and a new
proposal from the Commission. In addition, the Commission gains a more active role in
the process, akin to what it enjoys in the legislative co-decision procedure, since it now
proposes a “draft budget” which it may amend “until such time as the Conciliation
Committee … is convened.” As with the co-decision procedure itself, however, the
Commission’s formal agenda-setting power is effectively lost in conciliation, where the
Council and the EP may amend the draft budget freely without the Commission’s
agreement. The new procedure is summarized in Figure 9, taken from Benedetto and
Hoyland.
----------------------------------------------Insert Figure 9 about here
-----------------------------------------------
45
This new annual budgetary procedure, which achieves Parliament’s longtime goal
of eliminating the CE/NCE distinction and achieving genuine co-decision with the
Council in the annual budget process, appears at first blush to be a major reform, and a
major advance for the Parliament. The real impact of the new procedures on the EP’s
budgetary influence, however, is likely to be minimal in practice, for three reasons.
First, as Benedetto and Hoyland demonstrate in their comparison of the annual
budgetary procedure under the existing Treaties and the changes proposed by the CT and
the Treaty of Lisbon, the revised annual budgetary process would slightly enhance the
power of Parliament, but only with respect to any increase in compulsory expenditure72;
it would, moreover, arguably weaken the EP with respect to the former NCE, which it can
no longer re-insert over the Council’s objections in its second reading. The CT and
Lisbon provisions, therefore, can be seen as conservative, particularly by comparison to
the more far-reaching procedure proposed by the Convention.
Second, as Eberlein et al. argue, “the main innovations that the ‘new’ budgetary
procedure entails are taken from the rules and procedures that are currently laid down in
the Interinstitutional Agreement.
Thus, it simply institutionalizes existing informal
arrangements and does not enact institutional change.”73 The CE/NCE distinction, the
authors argue, has already “lost its relevance,” since the conciliation procedure that has
evolved over time allows the EP to bargain over both types of expenditure with the
Council. The conciliation procedure, they continue, has already been put into place by
the recent IIAs, and has operated in practice in much the same way as the proposed
Treaty of Lisbon procedures (see the 2008 case study above). The Council’s new right of
veto, finally, confirms what had become a de facto right of rejection for both arms of the
budgetary authority.74
72
Benedetto and Hoyland 2007: 583-85. As the authors note, however, the EP already had strong agendasetting powers vis-à-vis the Council for reductions or reallocations of CE. Furthermore, since the EP has
historically sought to decrease rather than increase compulsory expenditures such as the CAP (see Corbett
2003: 93-113), the practical relevance of this increased power is open to question.
73
Eberlein et al. 2005: 22.
74
“… [G]iven that negotiations at the conciliation meeting cover all areas of the budget, the exclusive
budgetary powers over the non-compulsory expenditure for the Parliament and over compulsory
expenditure for the Council have de facto amounted to a right of rejection for both arms of the budgetary
authority. Both the Council and the European Parliament use their budgetary powers as bargaining chips to
strike deals over the different parts of the budget. Under the new procedure, the Council will be able to
prevent an agreement in the Conciliation Committee and thus trigger a new budget proposal from the
46
The proposed Treaty provisions do indeed reflect current practice, as Eberlein et
al. argue, particularly with respect to the use of conciliation prior to the Council’s and
EP’s second readings.
Nevertheless, one may argue, together with Hoyland and
Benedetto, that these procedures represent a small step backwards with respect to the
EP’s current rights under the Treaties, at least with respect to NCE. While the EP has
seen it as advantageous in practice to engage in close cooperation and conciliation with
the Council, under existing Treaty provisions it retains the option of abandoning both the
IIA and the conciliation procedure in favor of its Treaty-based powers to increase NCE
within the maximum rate of increase. This threat to resort to its Treaty-based powers has
arguably provided Parliament with some bargaining leverage vis-à-vis the Council75, as
well as a guarantee against a Council whose growing preference for fiscal austerity has
increasingly clashed with Parliament’s in-built incentive to spend. As with the financial
framework, therefore, we should distinguish between changes to current practice, which
are minimal, and changes to the Treaty-based rights of the various institutions, which are
somewhat more substantial.
Thirdly, however, stepping back from the details of the annual budgetary
procedure, Guiriato argues convincingly that the supranational powers of both the
Commission and the EP will continue to operate only within the framework of an ownresources ceiling that continues to be established through the “double-unanimity”
procedure of Article 269, requiring both unanimous agreement of the Council and
ratification by all the member states in accordance with their respective constitutional
requirements, and with no agenda-setting powers for the Commission and only a nonbinding right of consultation for the EP. Giuriato also argues, more contentiously, that
the new multiannual financial framework process reproduces this intergovernmental,
unanimous decision-making process on the expenditure side, since the passerelle to
QMV is unlikely to be used, and “the Parliament’s consent does not imply a real
departure from intergovernmentalism, while the disappearance of the Interinstitutional
Agreement deprives all EU institutions of a devise whose voluntary nature had proved
Commission. The granting of the right of rejection to the Council simply maintains the current balance.”
Eberlein et al. 2005: 25.
75
Lindner 2006.
47
successful in sustaining repeated cooperation.”76 One could in fact question whether the
requirement of consent for the multiannual framework is as insignificant as Guiriato
claims; indeed, it seems likely that the EP will attempt to use its power of consent to
secure concessions from the Council comparable to those under existing IIAs.
Nevertheless, it is clear that both the Commission and the EP remain effectively frozen
out of future own-resources decisions, and their influence will remain limited to the
expenditure side of the budgetary process.
Once again, therefore, as in the adoption of the previous Treaty provisions in
Luxembourg in 1970, the EU’s member governments have designed a budgetary system
motivated both by a strong normative concern for democratic legitimacy, which has led
them to delegate increasing powers to the European Parliament (and far less to the
executive Commission), and by a careful calculation of the likely consequences of any
such delegation, which remains hedged in by a number of safeguards over the
fundamental budgetary interests of the member states.
Conclusions
This paper has examined the delegation of powers to supranational organizations
in the EU budgetary process and the agency and agenda-setting powers of the European
Commission and the European Parliament in that process.
In the first section, I
demonstrated that the EU’s member states, while motivated in large part by democratic
ideology to incorporated the European Parliament in the budgetary process, designed a
process that in practice limited Parliamentary influence to the margins of the annual
budgetary process, while leaving key revenue decisions as well as agricultural spending
under firm intergovernmental control. The second section of the paper then analyzed the
further development of the budgetary process during the era of the financial perspectives,
suggesting that while the multi-annual budgeting system introduced an explicitly
intergovernmental, veto-player element into the expenditure side of the budget, it also
allowed for the EP to continue to play a causally important role in a budgetary process
reconfigured by inter-institutional agreements and new informal practices of consultation
76
Guiriato 2006: 22.
48
and conciliation. The third section, finally, surveyed the changes introduced by the
proposed Lisbon Treaty, arguing that most of the changes reflect a codification of current
practices, with a few substantive changes which may affect the rights and powers of the
Commission and Parliament in practice.
I conclude with three overarching observations, on delegation, agency and agenda
setting, and the agenda for future research, respectively.
First, with regard to delegation, the case of the budget is a striking demonstration
of the significance, and the limits, of normative or ideological concerns in political
delegation.
The budgetary system, like the delegation of legislative powers to the
European Parliament, demonstrates a clear role for normative concerns in delegation
decisions – indeed, it is evident from the historical record that concerns for democratic
legitimacy played a significant role in the creation of the annual budgetary procedure in
Luxembourg in 1970, as well as the reform of that procedure in the CT and the Treaty of
Lisbon. By the same token, however, EU member states in both cases had the ability and
the incentive to calculate the likely consequences of supranational delegation, and in both
instances designed a system that limited supranational participation to the implementation
of a framework that would be made – and will continue to be made – through an
intergovernmental, veto-player process.
In the budgetary realm, as in the realm of
legislative politics, governments with normative concerns retain the ability to calculate
the consequences of their actions, and tailor their acts of delegation accordingly.
Second, moving from delegation to the agency and agenda-setting activities of
supranational agents, I have argued that the revealed preferences of both the Commission
and the European Parliament conform broadly to the standard, one-dimensional
assumptions of integration theory, in which the Commission and EP are assumed to be
outliers in favor of maximizing both EU competences and their own competences. The
ability of these agents to influence budgetary outcomes, however, has varied as a function
of the changing institutional rules established at Luxembourg and subsequently altered
through a series of inter-institutional agreements. The Commission, I have argued, has at
best a weak agenda-setting function in the budgetary process, since member governments
can amend Commission proposals as easily as adopt them, and those governments have a
clear incentive to analyze and negotiate over the distributive implications of Commission
49
proposals. Nevertheless, we do find some evidence of sporadic, informal agenda-setting
by the Commission, most strikingly in the adoption of the Delors I and II financial
perspectives and, to a lesser extent, in the annual budget process.
The European
Parliament, by contrast, has been delegated greater and more binding budgetary powers,
including a limited agenda-setting function vis-à-vis the Council (particularly for NCE)
and the “last word” on overall spending within the changing limits of the maximum rate
of increase (from 1975 through 1988) and the ceilings of the financial perspective (1988present). In the period since the introduction of the financial perspectives, the Parliament
has accepted to operate within the framework of an a financial perspective decided by
unanimous agreement of the member governments, but it has retained its rights within the
annual budgetary procedure (up to the ceilings specified in the financial perspectives),
while gaining new formal powers (e.g., to agree to any revisions to the perspectives) and
informal practices such as the now standard use of a conciliation procedure. Hence,
while the EP remains far short of an equal partner in the determination of either revenues
(from which it remains effectively locked out) or expenditures, the Parliament can and
does succeed in pressing its budgetary priorities at the margins, as we saw in the case
study of the 2008 budget.
Third and finally, however, it is clear that the political science literature on EU
budgetary politics remains in its infancy, particularly by comparison with the
theoretically and empirically rich study of EU legislative politics. Future studies of the
EU budget, I suggest, should focus on two primary areas of research. We currently lack
systematic data on the changing internal politics of the budget inside the European
Parliament. Is there a secular trend toward less unity in the Parliament on budgetary
issues as these issues have receded in salience vis-à-vis legislative politics? Are political
party groups less cohesive than in the past, splintered by conflicting national or
committee loyalties? Are budgetary decisions still taken by large, cross-party majorities
with a strong preference for further integration, or are we witnessing the emergence of
greater left-right contestation over the budget, and a move toward more partisan,
minimum-winning coalitions on budgetary issues? We simply do not know the answers
to these questions, which will require extensive and patient data collection and analysis.
Second, the coming years offer a promising laboratory for the study of institutional
50
change, when and if the Lisbon Treaty is ratified and enters into force. Only then will be
we able to assess whether and how, in practice, the new Treaty provisions eliminating the
CE/NCE distinction, or making the financial perspectives legally binding and eliminating
the requirement of an inter-institutional agreement, affect the roles of the Commission
and the Parliament in the budgetary process and the outcomes of that process.
51
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Box 1: Article 272 – The Formal Rules for Establishing the Budget
Before July the Commission presents its estimates of its own spending (along with
that of the other institutions) in the form of a preliminary draft budget, which it must
forward to the Council. Council, acting by a qualified majority, adopts a draft budget,
which it must forward to Parliament by October 5th at the latest.
Parliament has 45 days in which to act. If it fails to do so or if it approves the
Council draft, the draft stands as finally adopted. Otherwise, the Parliament has the right
to:
- Adopt “modifications” to “compulsory expenditure” (CE) by a simple majority of
those voting;
- Adopt “amendments” to “non-compulsory exenditure” (NCE) by a majority of its
members.
The budget is then referred back to Council, which has 15 days in which to complete a
second reading. If it does not do so, the Parliament version is deemed adopted. To amend
Parliament’s “modifications” to compulsory expenditure, the Council needs:
- A qualified majority to approve any modification that increases expenditure;
- A qualified majority to overrule any modification that does not increase
expenditure (reductions or transfers from one area to another).
Council may also modified Parliament’s “amendments” to non-compulsory
expenditure, but only by a qualified majority. Such modifications are referred back to
Parliament, which has 15 days to amend them at its second reading. To do so it requires
three-fifths of the votes cast and at least a majority of members.
For NCE, the institutions are obliged to respect a maximum rate of increase fixed
annual in light of the growth of the Member States’ GNPs, the variation in national
budgets and the trend in the cost of living. Regardless of the level of NCE in the draft
budget of the Council, Parliament retains the right to increase NCE beyond the figure in
the Council’s draft budget by half the maximum rate. The level of the maximum rate
itself can be increased if there is agreement between Council, acting by qualified majority,
and Parliament, acting by a majority of its members and three fifths of the votes cast.
Parliament may also by a two thirds majority reject the draft budget as a whole, in
which case the whole procedure must start again, Community expenditure in the
meantime being frozen at the previous year’s level on a month-by-month basis, a system
known as “provisional twelfths.”
Finally, it is up to the President of the Parliament to sign the budget into law when
all the procedures have been completed.
Source: Corbett, Jacobs and Shackleton 2007: 249.
56
Table 1: Chart of Major Redistributive Bargains, 1957-1992
Year
Event
Core Issue
1957
196970
1972
Treaties of Rome
Hague Summit
Paris Summit
Common Market
UK Enlargement/Own
Resources
EMU
Redistributive
Side-Payment
CAP/Social Fund
Guarantee financing
for CAP
ERDF
Paris Summit
European Council
ERDF Budget
Brussels
European Council
30 May Council
of Ministers
25 May Council
of Ministers
Fontainebleau
European Council
Brussels
European Council
Single European
Act
EMS
Own Resources
New Community
Instrument
British rebate, 198081
British rebate 1982
Own Resources
British rebate, 1984-
UK
Iberian Enlargement
IMPs
Internal Market
Cohesion in Treaty
1988
Brussels
European Council
Doubling of
Structural Funds
1991
Maastricht Treaty
Delors I Package: Internal
Market/
Own Resources/CAP
Reform
EMU
1992
Edinburgh
European Council
Delors II Package: Own
Resources, EFTA
Enlargement
Doubling of
Cohesion, Structural
Funds
Italy, France,
Greece
Spain,
Portugal,
Greece,
Ireland
Spain,
Portugal,
Greece,
Ireland
Spain,
Portugal,
Greece,
Ireland
Spain,
Portugal,
Greece,
Ireland
197475
1978
1980
1982
1984
1985
1986
Own Resources
57
Cohesion Fund
Recipient
State(s)
France, Italy
France
Italy, Ireland,
UK
Italy, Ireland,
UK
Italy, Ireland
UK
UK
Figure 1: Member-State Principals and Supranational Agents
in a One-Dimensional Political Space
Source: Tsebelis and Garrett 2001: 16.
58
Source: Procédure Budgétaire (Recueil des principales données chifrées), annual.
59
Source: Procédure Budgétaire (Recueil des principales données chifrées), annual.
60
Source: Procédure Budgétaire (Recueil des principales données chifrées), annual.
61
Source: Procédure Budgétaire (Recueil des principales données chifrées), annual.
62
Source: Procédure Budgétaire (Recueil des principales données chifrées), annual.
63
Source: Procédure Budgétaire (Recueil des principales données chifrées), annual.
64
Figure 8: The Annual Budgetary Process under the IIAs
Source: Corbett, Jacobs and Shackleton 2007: 257.
65
Figure 9: The Annual Budgetary Procedure
Under the CT/Treaty of Lisbon
Source: Benedetto and Hoyland 2007: 582.
66