Performance budgeting: A means to improve EU spending

Written by Magdalena Sapała,

performance conceptual meter indicate maximum, isolated on white background

© fontriel / Fotolia

In 2015, the European Commission launched an initiative entitled, ‘The EU budget focused on results’. The initiative is aimed at changing spending culture and making results a horizontal priority for the EU budget, by paying as much attention to funds’ performance, efficiency and effectiveness as to their absorption and compliance with financial rules. The initiative builds on earlier EU efforts in this respect, but also takes a more consistent and coordinated approach to results-oriented spending.

The actions encompassed in the initiative are based on the concept of performance budgeting. This budgetary method considers what can be achieved with the funds available, seeks to measure the results of spending, and links the results to budgetary decision-making. The concept has a long history and is complex in nature, but it is still seen as a promising budgetary innovation and attractive to many countries and organisations around the world, including most EU Member States and the EU itself.

The method is especially appealing at times of economic crisis and constraints on public spending, as it promises to increase value for money (i.e. the efficiency, effectiveness and performance of public expenditure) and to enhance the transparency and democratic accountability of the budget. It is perceived not only as a useful method to improve budgetary management, but also as a way to strengthen the performance orientation of other aspects of management of the public sphere.

Numerous examples from literature, however, indicate that performance budgeting is not easy to implement, and requires extensive preparation, the right strategy, and determination from the authority that tries to apply it. In the context of the EU budget, there are additional challenges. The significant complexity of the EU budgetary system, multiplicity of entities responsible for budget implementation at different levels, profusion of strategies and programmes with different time perspectives, and relative rigidity of financial planning do not favour the comprehensive and smooth implementation of performance budgeting. Although much has been done to make the EU budgetary system performance-oriented, there remains much room for improvement. This concerns, in particular, the quality and quantity of performance information and its role in budgetary decision-making.

The EU institutions’ support for the idea gives grounds to believe that efforts will continue. The circumstances will be particularly conducive to making changes in the coming months. The principles of performance budgeting can be enhanced in the EU’s new financial architecture, which consists of the revised Financial Regulation, the post-2020 Multiannual Financial Framework and a reformed system of own resources, as well as the new generation legislative framework for EU spending programmes. A solid understanding of performance budgeting is, therefore, needed, as it could increase the chances of successful reform. This paper thus aims to improve understanding of performance budgeting. It presents the origins and evolution of the concept, and seeks to clarify the terminology and the main models applied. It also considers the benefits, challenges and typical problems encountered in its implementation, with reference to the example of the EU budget.

Read the complete in-depth analysis on ‘Performance budgeting: A means to improve EU spending‘ in PDF.

Figure 2 – OECD index of performance budgeting practices

OECD index of performance budgeting practices

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Trump, trade and tariffs [What Think Tanks are thinking]

Written by Marcin Grajewski,

© Stephen Finn / Fotolia

U.S. President Donald Trump has imposed tariffs on steel and aluminium imports, raising fears of a trade war with other countries. He has argued that the levies, of 25 percent on steel and 10 percent on aluminium, are needed to protect U.S. national security. But many analysts and politicians believe that they are actually meant to protect domestic producers and meet Trump’s pre-election promise to return manufacturing jobs to the U.S. The European Union is seeking an exemption from the tariffs, which has already been granted in principle to Canada and Mexico. If this does not happen, the EU could respond in several ways, including by imposing its own tariffs on U.S. products.

This note offers links to a series of recent commentaries and reports from major international think tanks and research institutes in reaction to Trump’s decision. More reports on international trade can be found in a previous edition of ‘What Think Tanks are thinking’ published in June 2017

The Trump tariffs on steel and aluminium: The end of the WTO?
European Centre for International Political Economy, March 2018

Are we steel friends?
Bruegel, March 2018

Trump has shown how dangerous he is to the global trading system
Chatham House, March 2018

U.S. steel and aluminium tariffs: How should the EU respond?
Bruegel, March 2018

How Trump’s steel and aluminum tariffs could affect state economies
Brookings Institution, March 2018

Trump’s trade policy turns destructive
Centre for European Policy Studies, March 2018

The risks of U.S. steel and aluminum tariffs
Council on Foreign Relations, March 2018

What we do and don’t know after Trump’s tariff announcement
Peterson Institute for International Economics, March 2018

Trade policy-making under irrationality
Centre for European Policy Studies, March 2018

How imports helped the American steel industry
Brookings Institution, March 2018

A trade war on the poor: How a collapse of the WTO would hurt the worst off
Council on Foreign Relations, March 2018

Tariffs open can of worms Trump won’t be able to get back on
American Enterprise Institute, March 2018

Trump’s steel and aluminum tariffs: How WTO retaliation typically works
Peterson Institute for International Economics, March 2018

Trump, China, and steel tariffs: The day the WTO died
Council on Foreign Relations, March 2018

Trade talks episode 29. After Trump’s tariffs: Retaliation, negotiation, and litigation
Peterson Institute for International Economics, March 2018

Shots fired: EU takes aim at peanut butter as Trump targets steel
Atlantic Council, March 2018

Are Trump’s tariffs aimed at the WTO?
Atlantic Council, March 2018

Trump steel tariffs could kill up to 40,000 auto jobs, equal to nearly one-third of steel workforce
Council on Foreign Relations, March 2018

Donald Trump, steel tariffs, and the costs of chaos
Council on Foreign Relations, March 2018

Public comment on Trump administration report on significant trade deficits
Peterson Institute for International Economics, March 2018

Trump’s tariffs will hurt the economy: Congress should reassert its constitutional authority on trade
Heritage Foundation, March 2018

Trump’s tariffs would be a massive, self-Inflicted wound
Heritage Foundation, March 2018

This threat of a trade war is the opposite of “Drain the Swamp”
Cato Institute, March 2018

Trump is serious about tariffs
Hudson Institute, March 2018

Trump’s steel and aluminum tariffs are counterproductive: Here are 5 more things you need to know
Peterson Institute for International Economics, March 2018

Potential fallout of misguided steel and aluminum tariffs
Manhattan Institute for Policy Research, March 2018

Trade remedies for steel and aluminum were long overdue
Economic Policy Institute, March 2018

5 times US tariffs have made matters worse
Foundation for Economic Education, March 2018


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Plenary round-up – Strasbourg, March 2018

European Parliament Spring

© European Parliament / P.Naj-Oleari

Written by Katarzyna Sochacka and Clare Ferguson

Highlights of the session included a debate on the future of Europe with Portuguese Prime Minister, Antonio Costa; and debates on preparation of the 22-23 March European Council meeting; on the appointment of the European Commission Secretary-General; on the US decision to impose tariffs on steel and aluminium; on corporate social responsibility; on conflict minerals; and on protection of investigative journalists, following the deaths of Jan Kuciak and Martina Kusnirova in Slovakia. High Representative, Federica Mogherini, made statements on Syria, the EU-Cuba Joint Council, and EU-Central Asia relations, followed by debates. Parliament adopted, inter alia, resolutions on the post-2020 future multiannual financial framework and own-resources reform; and legislative positions on the common (consolidated) corporate tax; regulation of cross-border parcel delivery; training of professional drivers; and Europass.

Combating violence against women and girls and Istanbul Convention ratification

The March session followed International Women’s Day. Parliament debated with the Commission the current tension regarding ratification of the Istanbul Convention on preventing and combating violence against women. Although all EU Member States, and the EU itself, have signed, only 17 have ratified the convention to date.

Guidelines on the framework of future EU-UK relations

Members debated and adopted, by a large majority, a resolution setting out the EP’s proposals on the future relationship with the United Kingdom after Brexit. Parliament’s position aims to feed into the guidelines the European Council is expected to adopt on 22 March, on opening exploratory discussions.

Action plan on alternative fuels infrastructure

Members debated possible investment solutions to achieve the trans-European deployment of alternative fuels infrastructure action plan adopted by the Commission in December 2017, as part of the clean mobility package, alongside legislative proposals to accelerate the transition to low and zero-emission vehicles.

MFF and own resources post-2020

Parliament adopted two own-initiative resolutions, closely following the texts adopted by the Budgets Committee, on the post-2020 multiannual financial framework (MFF) and on the reform of the EU own resources system, to include, inter alia, the creation of carbon, plastics and digital taxation. Members called for spending limits to be increased to 1.3 % of GNI, to pay for new political priorities (innovation, security, migration) without sacrificing traditional policies, such as the common agriculture policy and territorial cohesion. Programmes for research and innovation, mobility (Erasmus+), the youth employment initiative, support for SMEs and investment in infrastructure in the framework of the Connecting Europe Facility should also be reinforced. Members called upon the Commission to create a sanctions mechanism for Member States that breach the rule of law, but not directly the beneficiaries of European co-funding. Members are against any changes in the structure of the budget. Introducing new EU budget resources should allow reductions in the share of national contributions to 40 %. Parliament also sees Brexit as an opportunity to cancel all Member State rebates. Commission proposals for a post-2020 MFF are due to be presented on 2 May 2018.

European Semester

Following a joint debate on the European Semester, considering two reports on the Annual Growth Survey 2018 that feeds into the economic and budgetary outlook for 2018, MEPs broadly approved the consensual own-initiative report on the ‘annual growth review’ document, which kicks off the European Semester process. Although the report takes a position in favour of deepening economic and monetary union (EMU), it stresses that the role of the European Parliament and the national parliaments should be reinforced.

Common corporate tax base

Parliament debated and adopted two legislative resolutions on a common (consolidated) corporate tax base, building on the previous proposal for a common corporate tax base. The proposals aim at setting simpler EU tax rules for computing cross-border taxable income for companies, to replace varying national rules.

Fisheries agreement with Comoros

Parliament gave its consent for the termination of the EU-Comoros fisheries agreement, on the grounds that the country has not upheld its responsibilities in the fight against illegal, unreported and unregulated fishing.

Cross-border parcel delivery services

Sending or receiving a parcel delivery from another EU country costs up to five times more than domestic deliveries. Parliament adopted the regulation on making cross-border parcel delivery services more transparent, in line with the text agreed with the Council in trilogue. The new rules require maximum transparency in service provision and allow consumers and small businesses, who may lack bargaining power to negotiate reduced tariffs, to find the best deals via a dedicated website.

Training of professional drivers

Recent extreme weather conditions in Europe highlighted the tough conditions under which professional drivers have to work. The EU is updating the rules on training for lorry and bus drivers and Parliament overwhelmingly approved (604 votes for, 80 against, with 7 abstentions) the trilogue agreement reached in December 2017 on modernising this training, ensuring that qualifications are recognised throughout the EU, and setting up a register to help enforcement authorities end trade in fake licences.

Europass: framework for skills and qualifications

Parliament adopted the proposed revision of Europass framework with a large majority, approving the text agreed in trilogue. The revisions seek to benefit EU job-seekers and employers through improved services for documenting skills, qualifications and professional experience. Parliament highlighted the importance of the voluntary aspect of the Europass portal and its links to other tools in the field of education and training. Furthermore, it emphasised the importance of the national centres and of respecting the requirements and expectations of all users and providers. The objective is to ensure the tool’s full potential and flexibility to meet ever-shifting requirements.

Gender equality in EU trade agreements

Parliament adopted, by a large majority, a resolution prepared by the International Trade, and Women’s Rights and Gender Equality committees on reinforcing gender equality measures in EU trade. Although liberalisation boosts employment in the export sector, not everyone benefits equally from international trade. Conscious of the impact of trade liberalisation on women, the EU includes measures aimed at defending women’s labour rights in trade agreements. To combat the exploitation of women in export-oriented industries and support those running small businesses, the EU insists on trade and sustainable development chapters in all its trade agreements with third countries, to ensure fair work and remuneration, as well as human rights protections.

Opening of trilogue negotiations

Decisions on entering into interinstitutional negotiations for three committees: the Internal Market and Consumer Protection Committee on a single digital gateway; the Culture and Education Committee on the European solidarity corps; and the Economic and Monetary Affairs Committee on empowering Member States’ competition authorities to be more effective enforcers and to ensure the proper functioning of the internal market, were confirmed unopposed. Following a vote, Parliament approved the start of negotiations on an Industry, Research and Energy Committee report on a European programme for defence-related industrial development, on the basis of a request made during the February II plenary session.

This ‘at a glance’ note is intended to review some of the highlights of the plenary part-session, and notably to follow up on key dossiers identified by EPRS. It does not aim to be exhaustive. For more detailed information on specific files, please see other EPRS products, notably our ‘EU legislation in progress’ briefings, and the plenary minutes.

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New US tariffs: Potential impact on the WTO

Written by Roderick Harte,

Steelmaking workshop,sparks fly, very beautiful

© zhengzaishanchu / Fotolia

On 8 March 2018, US President Donald Trump signed orders imposing tariffs of 25 % on steel imports and 10 % on aluminium imports. These tariffs will apply to all countries, except Canada and Mexico (and possibly also Australia). President Trump has expressed a willingness to discuss the measures with individual countries and make additional exceptions if US (security) concerns are addressed. The European Commission and other US trading partners have expressed their concern at the measures, fearing that they could lead to a wider trade dispute. The Trump administration’s justification of the tariffs on national security grounds is also viewed as a threat to the multilateral trading system.


In April 2017, US Secretary of Commerce Wilbur Ross initiated Section 232 investigations into US imports of steel and aluminium (Box 1). In his January 2018 reports on both investigations, Secretary Ross concluded that current US imports of steel and aluminium threatened to impair US national security (Box 2 provides figures on US imports in 2017). He therefore recommended action to reduce US imports of both materials, through the introduction of trade restrictions, and proposed several alternative remedies to President Trump (including tariffs, quotas, and a combination of the two, aimed at different groups of countries).

President Trump’s tariffs orders

On 8 March, President Trump ordered the imposition of a 25 % ad valorem tariff on imports of steel and a 10 % ad valorem tariff on imports of aluminium. The tariffs will take effect after 15 days, namely on 23 March. President Trump decided to exclude Canada and Mexico for now, choosing instead to continue discussing US concerns with them in the framework of the ongoing renegotiation of the North American Free Trade Agreement. The orders indicate that President Trump might also remove or modify the tariffs on imports from other countries, provided that they find alternative ways of addressing US national security concerns. One country that reportedly will be granted an exemption is Australia. Parties located in the USA that are directly affected by the tariffs will, in certain cases, be able to request exclusions (e.g. limited domestic supply of an article). President Trump’s controversial decision led to the resignation of his top economic advisor, Gary Cohn.

Box 2: Selected figures on US imports of steel and aluminium

According to the Section 232 investigations, the US imported around 30 % of its steel in 2017, and 64 % of its aluminium in 2016 (this figure rises to 89 % for primary aluminium, i.e. not recycled).

The Peterson Institute for International Economics (PIIE) has calculated the size and origin of US imports of steel and aluminium for 2017 (in terms of value). In the case of steel, total US imports amounted to US$29 billion, and the top 5 foreign sources were the EU (US$6.2 billion), Canada (US$5.1 billion), South Korea (US$2.8 billion), Mexico (US$2.5 billion) and Brazil (US$2.4 billion). For aluminium, total US imports amounted to US$17 billion, and the top 5 sources foreign sources were Canada (US$6.9 billion), China (US$1.8 billion), Russia (US$1.6 billion), the United Arab Emirates (UAE) (US$1.3 billion) and the EU (US$1.1 billion).

Initial responses from US trading partners

Since President Trump first announced his intention to impose tariffs, on 1 March, the European Commission and key US trading partners have expressed their concern over and, in some cases, readiness to respond to the measures. The Commission stated that it would ‘react firmly and commensurately to defend [EU] interests’ (see Box 3). It also expressed doubt about the pretext of national security, arguing that the EU is a traditional US ally. China responded to President Trump’s initial announcement by saying that it ‘would have to make a justified and necessary response’ should the US decide to proceed. Japan has stated that the US measure would have a ‘big impact’ on bilateral ties, and South Korea indicated that it might file a complaint at the World Trade Organization (WTO).

A major concern across the globe is that the US tariffs could result in tit-for-tat trade measures from US trading partners, which in turn could trigger a new response from the Trump administration resulting in further escalation. The ensuing downward spiral could give rise to a broad trade dispute that would harm economic growth. On 3 March, President Trump showed how such a scenario could unfold, by suggesting that he would respond to any new EU tariffs by putting a tax on imports of European cars. At the same time, some commentators have pointed out that Trump’s final decision signals a willingness to discuss the tariffs and apply additional exceptions if certain US conditions are met. That might reduce the risk of immediate escalation.

Security exceptions and the multilateral trading system

The Trump administration bases its decision to impose tariffs on steel and aluminium imports on national security concerns. Under WTO law, countries can indeed invoke national security to justify trade restrictions: the General Agreement on Tariffs and Trade (GATT) contains security exceptions in Article XXI that permit WTO members to deviate from the agreement’s rules in specific cases. So far, countries have rarely invoked these exceptions and the WTO has never had to make a ruling on it (though recently there have been a few instances in which Article XXI GATT was brought up, including a dispute between Qatar and the UAE).

If the US tariffs are challenged in Geneva (as has happened before, see Box 4), WTO judges will likely have to rule on the question of whether these measures constitute a violation of WTO rules. Given the fact that the Trump administration is widely expected to invoke Article XXI GATT in its defence, such a case would probably involve an assessment of the applicability of security exceptions. That would make it an extremely sensitive matter to adjudicate, since it would touch directly on US national sovereignty. Article XXI GATT is also often read as saying that it is up to the member invoking it to judge if a measure is in its national security interests. Some experts therefore consider it unlikely that the WTO would rule against the Trump administration on this issue.

Irrespective of the outcome, however, a WTO ruling on these tariffs could have a profound impact on the multilateral trading system. If, on the one hand, the Trump administration were to win a dispute, its successful invocation of a security exception at the WTO would create a precedent for other countries to follow. That could ultimately lead to the hollowing out of existing multilateral trade rules. A ruling against the Trump administration, on the other hand, could severely reduce US commitment to the WTO. Given the political and economic importance of the USA, that would also seriously undermine the multilateral trading system.

Read this At a glance note on ‘New US tariffs: Potential impact on the WTO‘ on the Think Tank pages of the European Parliament.

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Western Balkans: Enlargement strategy 2018

Written by Velina Lilyanova,

Map Balkans and Pins

© Željko Radojko / Fotolia

With a resolute tone and a sense of urgency, the European Commission’s new enlargement strategy for the Western Balkans sets a clear direction for the region’s six countries: it offers them a credible enlargement perspective and pledges enhanced EU engagement. It indicates 2025 as a possible enlargement date. However, seizing this opportunity remains a challenge, as the aspirants must each deliver on difficult, key reforms, and solve all outstanding bilateral disputes.

The strategy’s main messages

On 6 February 2018, as a follow-up to Commission President Juncker’s letter of intent to the European Parliament, the Commission published its new enlargement strategy for the Western Balkans (WB). It comes at a time of growing attention to the region and aims to breathe life into the enlargement process, by renewing EU engagement and launching a series of specific initiatives designed to bring tangible benefits to citizens. The strategy acknowledges the WB as a part of Europe that shares history, cultural heritage, challenges and opportunities with the EU, and also the same future. It confirms that a credible accession perspective is a key driver of transformation, and offers the WB a historic window of opportunity, while underscoring the responsibility of the region’s leaders for making a choice and turning it into reality. For the first time, an indicative date for the possible accession of Serbia and Montenegro (as technically most advanced in the process) is set: 2025. The Commission, however, emphasises that this is a target, not a promise, and that the other aspirants could catch up depending on their own merits and rate of progress.

Priority reform areas for the Western Balkan countries

The criteria for EU membership are well established, and while the reform priorities highlighted are not new, the strategy puts them squarely in focus. It outlines three main areas where action needs to be taken without delay. The first is the rule of law: the strategy is explicit when pointing to ‘clear elements of state capture’, ‘links with organised crime and corruption at all levels of government and administration’ and controlled media, among other things. As none of the WB six is considered a functioning market economy, the second area includes addressing structural weaknesses, low competitiveness and high unemployment. As a third area of action the strategy calls for unequivocal commitment to overcoming the legacy of the past through reconciliation and the adoption of definitive binding solutions to all bilateral disputes prior to accession. The stumbling blocks include statehood disputes, and unresolved border, property and social issues. This focus comes at a time when the long (now internal to the EU) dispute between Croatia and Slovenia is again alight.

Montenegro and Serbia are expected to step up efforts to meet the interim benchmarks. For Serbia, forging an agreement with Kosovo and fully aligning with EU foreign policy are key requirements. Albania and the former Yugoslav Republic of Macedonia, commended for their alignment with EU foreign policy and their overall progress, expect to open accession talks in 2018. For FYR Macedonia, the main obstacle remains the name issue with Greece, but hopes for resolving it are high. Bosnia and Herzegovina has just submitted its answers to the EU questionnaire aimed at assessing its readiness, and hopes to get candidate status. The strategy is less specific about Kosovo: the country can make sustainable progress by implementing its stabilisation and association agreement, and then forge ahead ‘once objective circumstances allow’.

What the EU has to do

While it is true that the WB carry the burden of the reforms, EU readiness is no less of a challenge. Enlargement would entail costs, have an impact on institutional arrangements and require public support. Hence, the strategy includes a set of actions to be taken later in 2018: launching an initiative to strengthen enforcement of the rule of law; adopting communications on the possibility to enhance the use of qualified majority voting; and stepping up strategic communication. As regards funding, specific provisions for enlargement are to be reflected in the Commission’s proposals for the EU budget after 2020. Special arrangements on the national languages of future EU Member States and irrevocable commitments ensuring that new Member States will not be in a position to block subsequent WB accession, are also planned.

New initiatives and specific measures foreseen

flagship initiative

Figure 1 – Flagship initiatives.

To deliver on the EU’s pledge for greater engagement in the region, the annex to the strategy, an ‘Action Plan in support of the transformation of the WB’, includes six flagship initiatives (Figure 1). Each targets a specific area of mutual interest for the EU and the WB, and envisages concrete actions to be taken between 2018 and 2020. On the rule of law, the Commission plans to enhance the assessment of reform implementation, including through new advisory missions on the ground. On security and migration, it proposes stepping up joint cooperation in fighting organised crime, countering terrorism and violent extremism, and improving border security and migration management.

Socio-economic development would be encouraged by boosting private investment, supporting start-ups, SMEs and facilitating trade, as well as providing more funds for education and health, among other things. More investment is also envisaged for transport and energy connectivity. The digital agenda includes a roadmap to lower roaming costs and to support the deployment of broadband and the improvement of digital skills. The initiative on reconciliation aims to support the fight against impunity and transitional justice, including through setting up a regional commission to establish facts about war crimes. Increasing cooperation in education, culture, youth and sport is also planned. To help implement these initiatives, the Commission has proposed a gradual increase of funds under IPA II until 2020, as far as reallocations within the existing envelope allow.

Reactions to the new strategy

The new strategy was long anticipated and its messages widely welcomed. It has also sparked debate and raised questions both across the WB and the EU. Serbia and Montenegro, singled out as the most advanced in the process, welcomed the document. Serbia defined it as an encouraging message, although President Vučić acknowledged that ‘mountains of obstacles’ lie ahead, most notably the Kosovo issue and border disputes with neighbours. Montenegro, commended for its ‘most notable progress’, also welcomed the document; its prime minister even voiced confidence that it could join the EU ahead of 2025. Albania and FYR Macedonia hailed the positive assessment of their countries’ progress on the European path, and the Commission’s readiness to recommend opening accession negotiations with them shortly. The response from Kosovo has been mixed. While hailing the strategy for treating Kosovo as an integral part of the enlargement plans of the EU, President Thaçi expressed dissatisfaction with it, as, for ‘known political reasons‘ (referring to the non-recognition by five EU Member States), it gives no specific timeframe and clarity on the next steps.

The EU itself is divided over the issue: at the February informal foreign ministers’ meeting, diverging views were expressed on the timetable, either favouring swifter integration or questioning the 2025 perspective. EU leaders are expected to endorse the strategy at the May summit in Sofia and at the June European Council.

Experts welcome the strategy for its clear language and for being more explicit in identifying problems. However, they also point to some gaps and ambiguities that raise questions as to whether the strategy ‘would do enough to change the dynamics in the region’. They commend the strategy for giving bilateral disputes a central place, but less so for remaining vague about possible solutions or about preventing a future veto on enlargement by individual Member States. The highlight of reconciliation, another ‘critically important element‘ of the strategy, is also welcome. In that respect, concerns have been expressed that the strategy is rather ‘aspirational’ and fails to concretely address past grievances still undermining the prospects for peace.

Read this At a glance note on ‘Western Balkans: Enlargement strategy 2018‘ on the Think Tank pages of the European Parliament.

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The long-term EU budget [What Think Tanks are thinking]

Written by Marcin Grajewski,

Europe finance, economic, money squeezing idea, colorful alphabet word BUDGET using red clamp as G letter on Euro banknotes on wooden table, crisis and world depression.

© Nuthawut / Fotolia

European Union leaders agreed at their informal meeting on 23 February that the EU should spend more after 2020 on curbing illegal migration, on defence and security, and on the Erasmus+ student-exchange programme. The summit marked a preparatory stage in negotiations on the EU’s next long-term budget, known as the Multiannual Financial Framework (MFF), which will span a period of five or seven years, starting in January 2021.

There was no agreement on how to plug the hole in the budget resulting from the United Kingdom’s withdrawal from the EU in 2019. Some net-paying countries argued that EU spending should remain at the current level of approximately 1 % of EU gross national income, despite new priorities. That could mean cuts in funding available for cohesion and agricultural policies. Another dispute concerned the possibility of linking the receipt of EU funds to respect of EU fundamental values. The Commission is due to make a detailed post-2020 MFF proposal in May 2018.

This note offers links to a selection of recent commentaries, studies and reports from some of the major international think tanks and research institutes, which discuss the EU’s long-term budget and related reforms. It updates a previous edition published in January 2018.

The EU’s seven-year budget itch
Bruegel, March 2018

Squaring the MFF circle: How match funding can deliver the EU’s new priorities
European Policy Centre, February 2018

Expanding the reach of the EU budget via financial instruments
Centre for European Policy Studies, February 2018

EU budget, Common Agricultural Policy and Regional Policy: En route to reform?
Bruegel, February 2018

Financial Instruments: Defining the rationale for triggering their use
Centre for European Policy Studies, February 2018

Reinforcing the EU budget with a fossil-fuel contribution
Notre Europe, February 2018

EU budget: Expectations vs reality
Bruegel, January 2018

Der nächste Mehrjährige Finanzrahmen
Konrad Adenauer Stiftung, January 2018

Earmarked revenues: How the European Union can learn from US budgeting experience
Peterson Institute for International Economics, January 2018

Squaring the circle? EU budget negotiations after Brexit: Considering CEE perspective
Bertelsmann Stiftung, Institute of Public Affairs, January 2018

Let Europe’s citizens decide on the EU budget
Friends of Europe, December 2017

Prospects for a euro-area budget: An analytical outline
Martens Centre for European Studies, December 2017

EU budget: What’s the cost of Europe?
Jacques Delors Institute Berlin, November 2017

European financial outlook 2021-2027: Which budget for which Europe?
Fondation Robert Schuman, November 2017

Policy conditionality: A new instrument in the EU budget post-2020?
Swedish Institute for European Policy Studies, November 2017

The next Multiannual Financial Framework and the unity of the budget
Stiftung Wissenschaft und Politik, November 2017

Climate risk and the EU budget: Investing in resilience
E3G, November 2017

Can the EU structural funds reconcile growth, solidarity and stability objectives?
European Policy Centre, October 2017

Strategically financing an effective role for the EU in the world: First reflections on the next EU budget
European Centre for Development Policy Management, September 2017

Climate mainstreaming in the EU budget: Preparing for the next MFF
Institute for European Environmental Policy, October 2017

The EU budget after 2020
Swedish Institute for European Policy Studies, September 2017

The future of the EU budget: Perspectives for the funding of growth-oriented policies post-2020
Swedish Institute for European Policy Studies, September 2017

El futuro de las finanzas de la UE: el largo camino hacia una reforma del Marco Financiero Plurianual de la UE más allá de 2020
Elcano Royal Institute, July 2017

Transparency and oversight of the Council’s budget: Council executive powers
Centre for European Policy Studies, July 2017

The future of the European budget: What does the Commission’s white paper mean for EU finances?
Notre Europe, June 2017

Key challenges and opportunities for cities and regions and MFF post 2020
Centre for European Policy Studies, June 2017

Eurozone or EU budget? Confronting a complex political question
Bruegel, June 2017

The Common Agricultural Policy and the next EU budget
Bertelsmann Stiftung, June 2017

The right moment to reform the EU budget
Stiftung Wissenschaft und Politik, March 2017

How to make the most of the EU’s financial potential?
Egmont, March 2017

EU budget post-Brexit: Confronting reality, exploring viable solutions
European Policy Centre, March 2017

European Added Value narrows EU budgetary reform discussions
Clingendael, March 2017

The Instruments providing Macro-Financial Support to EU Member States
Centre for European Policy Studies, March 2017

The €60 billion Brexit bill: How to disentangle Britain from the EU budget
Centre for European Reform, February 2017

Returning meaning to the Common Agricultural Policy
Fondation Robert Schuman, February 2017

Brexit and the EU budget: Threat or opportunity?
Bertelsmann Stiftung, Jacques Delors Institute Berlin, January 2017

Read this briefing on ‘The long-term EU budget‘ on the Think Tank pages of the European Parliament.

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Looking for new ways to finance transport infrastructure projects in cross-border regions

Written by Mihalis Kritikos,

asphalted road on white. Isolated 3D image

© Ilin Sergey / Shutterstock

Meeting large infrastructure needs – including proper maintenance and operation – is and will remain a major challenge for the European Union (EU) in the coming years, requiring targeted innovative financing mechanisms. A range of mechanisms to finance transport infrastructure projects in cross-border regions, and the strategic role that the European Groupings of Territorial Cooperation (EGTC) could play in the planning and implementation of cross-border investments, notably for small-scale projects, were the focus of the STOA (Science and Technology Options Assessment) study entitled ‘New ways of financing transport infrastructure projects in Europe’, published last week.

The study was requested by Paul Rübig, (EPP, Austria), First Vice-Chair of the STOA Panel, Boguslaw Liberadzski (S&D, Poland) and Claudia Schmidt (EPP, Austria), and carried out by (Consultores em Transportes Inovação e Sistemas), under Scientific Foresight Unit (STOA) management.

This study assessed a range of mechanisms to finance transport infrastructure projects in cross-border regions, and analysed the strategic role that the European Groupings of Territorial Cohesion (EGTC) could play in the planning and implementation of cross-border investments. Special attention was paid to often neglected small-scale projects that have an investment ceiling of €1 million. Building on an in-depth literature review, and supported by interviews with various regional cooperation structures, the study analysed the current situation regarding the availability of financing tools for new technologies that enhance transport infrastructure in cross-border regions. It also outlined sources of financial support that could meet investment needs and assessed technological challenges and trends in the intelligent transport systems field, with a focus on regional interoperability.

As part of this project, STOA organised a workshop on 6 June 2017, chaired by Claudia Schmidt. The workshop provided additional input for the study and served as a forum between policy-makers, experts and the public, focusing on the discussion of possible approaches to improve the financing of new technologies that could enhance transport infrastructure in border areas. Key expert speakers shared their views on the changes that are needed to enhance the role of cross-border financing, with stakeholders being invited to share their own experiences.

The study reveals several categories of missing cross-border links, including those related to transport networks, operations or services and technology. The authors identified the main reasons for the presence of missing links in cross-border regions. These concern the scarcity of data on cross-border mobility patterns; the low political visibility of local and regional authorities at the political decision-making centres; the excessive EU focus on specific corridors; cultural differences; the adjustment of financing mechanisms and regulations to the specificities of large-scale projects; the limited attractiveness of small-scale cross-border investment (SSCBI) projects for private investors; and the technological focus on cities and other densely populated regions, rather than on cross border regions.

The study puts forward a number of policy options for facilitating and accelerating cross border transport infrastructure projects, including the need to establish an EU observatory on cross-border transport and mobility dynamics that could overcome several data-collection limitations; raising the political visibility of small-scale cross-border projects at the EU level; developing new project assessment and evaluation guidelines for small-scale cross-border projects; establishing new funding mechanisms that are tailored to small-scale cross-border projects; strengthening the INTERREG programme as the chief financing instrument for cross-border regions; drafting new legislation that could facilitate the implementation of cross-border projects; and creating a new instrument to finance technological solutions for tackling small-scale missing links. The policy options are summarised in the Options Brief.

Your opinion counts for us. To let us know what you think, get in touch via email or complete a survey. Surveys are available for all STOA studies (click on the title and follow the link).

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The future of employment: can we be optimistic about the impact of new technologies?

Written by Mihalis Kritikos,

competition of people and robots for jobs. technological revolution. Unemployment in the digital world

© studiostoks / Shutterstock

The relationship between new technologies, employment and inequality has gained a lot of attention recently. One reason for this interest is alarming reports about the possible negative consequences for employment of the widespread use of new information and communication technologies (ICTs), including machine learning, digitalisation of production, robotics and automated vehicles. What policy responses could answer this challenge?

Last week, the European Parliament’s STOA (Science and Technology Options Assessment) Panel published the results of its study on ‘The impact of new technologies on the labour market and the social economy’. The study was requested by Georgi Pirinski (S&D, Bulgaria) and carried out by the Austrian Institute of Technology (AIT), under the management of the Scientific Foresight Unit (STOA).

The study investigated the relationship between innovation, new technologies, employment and inequality. Drawing on the existing literature, as well as experience from previous technological revolutions, the author concludes that we can be optimistic about the future. Innovation is labour-friendly: it destroys, but also creates employment.

As part of this project, STOA organised a workshop on 11 October 2016, chaired by Georgi Pirinski. The workshop provided additional input and discussed the topics and findings of the report with the audience. The race between job creation through product innovation and job destruction through process innovation was won in the past by the job-creating effects of innovation. The study does not envisage that digitalisation will lead to mass unemployment; however, it points out that, because of the skill-biased nature of technological change, the costs of digitalisation are unevenly distributed and are borne in particular by low-skilled workers, who face a higher risk of job displacement. Occupations with a high share of routine tasks, particularly in the service industries, are also at risk. Therefore, the challenge of the future lies in coping with rising inequality as a result of technological change.

The study proposes seven policy options, each expected to contribute to alleviating at least one challenge or barrier. Among them, the need to invest in digital education; in non-routine skills; in R&D at all levels in areas, such as ICTs, including measures to increase the available amount of venture capital, as well as in upgrading Europe’s internet infrastructure so as to maintain a balance between cities and rural areas, which may lag behind in terms of infrastructure. Moreover, ensuring equal access to connectivity and launching a European Union (EU) programme for broadband on a European scale could be a first step in that direction. The study also highlights ‘flexicurity’ as an important part of the European employment strategy, which is essential in helping future labour market policies cope with technological changes and the rise of new types of self-employment, such as platform work or ‘gigs’ that also call for new employment regulations. Finally, the study proposes reducing working time and strengthening EU and international cooperation on achieving some convergence on taxing the super-rich by imposing higher income taxes and introducing a stronger progression in income taxes or wealth taxes. The policy options are summarised in the Options Brief.

To summarise, it is neither desirable nor feasible to stop digitalisation, but many policy options are available to influence and steer the process by investing in education, infrastructure and R&D, and adapting labour legislation and tax and social-security policies to digitalisation. Perhaps most important is to think of digitalisation not as a threat, but as a chance to increase welfare, opportunities and social cohesion for all Europeans.

Your opinion counts for us. To let us know what you think, get in touch via email or complete a survey. Surveys are available for all STOA studies (click on the title and follow the link).

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Removing CO2 from the air – golden opportunity or dangerous fantasy?

Written by Gregor Erbach,

Negative greenhouse gas emission technologies:  Potential, limitations and risks

Negative greenhouse gas emission technologies:
Potential, limitations and risks

There is a growing consensus that the emissions of greenhouse gases cannot be reduced fast enough to achieve the targets of the Paris Agreement. Most climate models show that CO2 must be actively removed from the atmosphere in order to keep global warming well below 2 degrees. Staying below 1.5 degrees would require even more removals.

How can CO2 be taken out of the air? Will the technologies be ready? How much would it cost? How much CO2 could be removed? What are the risks?

These questions were discussed on 8 March 2018 in the European Parliament, at an event co-organised by the European Science Academies’ Advisory Council (EASAC) and the European Parliament Research Service (EPRS). EASAC (comprising the national science academies of the EU Member States plus Norway and Switzerland), was established to provide independent science advice to European policymakers. So far, EASAC has published 35 reports. Its latest report, published in February 2018, concerns negative greenhouse gas emission technologies.

Negative greenhouse gas emission technologies:  Potential, limitations and risks

Professor Michael Norton, Director of the EASAC environment programme

Professor Michael Norton, Director of the EASAC environment programme, presented the main conclusions of the EASAC report: There are a number of promising technologies, ranging from forests and soils to machines that capture CO2 from the air, each of which has limits, costs and risks. For example, bio-energy with carbon capture and storage (CCS), a widely assumed negative emissions technology, competes for available land with agriculture, biodiversity and using forests as a carbon store. Moreover, its effectiveness in reducing emissions may be lower than commonly assumed. It depends on the availability of sites and infrastructure for storing the captured carbon, which the report identifies as one of the main bottlenecks, also for direct air capture technologies. The scale of the required CO2 removals is huge, and has been compared with the size of the global automobile industry. Enhancement of carbon in soils was also identified as a promising low-risk technology.

Negative greenhouse gas emission technologies:  Potential, limitations and risks

Kirsty Anderson (Global CCS Institute) and Maria Velkova (European Commission)

In the roundtable discussion, Hanna Aho of Fern, an NGO focused on forests and peoples’ rights, highlighted the need to balance the multiple functions of forests, and to protect and restore them with the help of local people. Maria Velkova, responsible for European Commission programmes that finance low-carbon technologies, presented the Commission’s existing initiatives for financing CCS (which have so far not resulted in large-scale projects) and the planned Innovation Fund. Kirsty Anderson of the Global CCS Institute emphasised the critical importance of investment in CCS infrastructure to support both mitigation and future negative emissions processes, and discussed the need to improve public awareness of these technologies and their role in reducing emissions. In his closing remarks, professor Thierry Courvoisier, president of EASAC, stressed that negative emission technologies cannot substitute for inadequate emission reductions and warned that markets are unlikely to deliver the needed solutions.

Negative greenhouse gas emission technologies:  Potential, limitations and risks

Professor Thierry Courvoisier, president of EASAC

The EASAC report warns that negative emission technologies have only limited realistic potential to remove carbon from the atmosphere, and recommends deep emission reductions, a stop and reversal of deforestation and soil degradation, a way forward for CCS, and further research and development on the other negative emission technologies, as there is no time to lose. How can you get involved? It will be a while before you can have a direct air capture machine to remove your unavoidable emissions. In the meanwhile, planting a couple of trees seems like a good idea!


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The global state of democracy as seen by citizens

Written by Ionel Zamfir,

EPRS Policy Roundtable 'Declining commitment to democracy : What's going on around the world ?'

EPRS Policy Roundtable ‘Declining commitment to democracy : What’s going on around the world ?’

On 7 March 2018, the EPRS Members’ Research Service organised a roundtable on the global state of democracy as seen by citizens. The main questions addressed were: do citizens still trust democratic forms of governance? Are they still committed to the model, and can such commitment be boosted? What factors drive public preference for representative democracy over non-democratic options? These are vital questions to answer if there is to be a future for democracy in Europe and in the world.

Opening the event, Etienne Bassot, Director of the Members’ Research Service, highlighted the importance of the topic, particularly with the approaching elections for the European Parliament.

EPRS Policy Roundtable 'Declining commitment to democracy : What's going on around the world ?'


Warning that the failures of our democratic systems weaken citizens’ trust and embolden the enemies of democracies, the first speaker, Ana Gomes (S&D, Portugal), said we must learn the lessons of history and address these failures with courage. For example, the failure of our governments to uphold their legal and moral obligations towards those who need protection, such as refugees, has fuelled extremism and radicalisation. Complacency towards the rise of illiberal democracy in Europe is unacceptable. In fact, there is no such thing as an illiberal democracy, a democracy which does not respect human rights is not a democracy. Furthermore, democracies’ weaknesses in the face of corruption and criminal activities have to be addressed. Much of the deregulation associated with the supposedly liberal economy is deliberately encouraged for the benefit of certain groups, sometimes criminal organisations, such as terrorist groups that have taken advantage of the VAT fraud system. Our governments and the EU have not responded adequately. Populists therefore build on citizens’ justified mistrust towards government. We should not allow democracy’s enemies to exploit the weaknesses of our governments to interfere with public perceptions and capture people’s support. While it is not easy to find a solution, according to Ana Gomes we cannot remain idle. It takes courage to address the faults of our political systems, but it has to be done.

Monika Nogaj, Head of the Members’ Research Service External Policies Unit moderated the debate, during which Bruce Stokes, Director of Global Economic Attitudes at the Pew Research Center in Washington DC, presented a recent 38-nation Pew Research Center survey, which has found that there are reasons for calm as well as concern when it comes to democracy’s future. People still do be believe in democracy. More than half of respondents in each of the nations polled consider representative democracy a ‘very’ or ‘somewhat good’ way to govern their country. In all countries, pro-democracy attitudes coexist however, to varying degrees, with openness to non-democratic forms of governance, including rule by experts, a strong leader or the military.

EPRS Policy Roundtable 'Declining commitment to democracy : What's going on around the world ?'

Bruce STOKES, the director of Global Economic Attitudes at the Pew Research Center in Washington DC

Bruce Stokes focused on the survey’s European findings. Europeans are equally divided on the question whether they are satisfied with their democracy, which places them among the least satisfied in the world. Regional divides are important: Northern Europeans are quite satisfied with their democracy, while Southern Europeans are not. Europeans’ trust in their government is also lower than in other parts of the world, although it is stronger in some countries, such as the Netherlands and Germany. Despite their dissatisfaction with the way their government works, Europeans overwhelmingly support representative democracy as a government model. A majority of Europeans reject rule by experts. Europeans also overwhelmingly reject rule by a strong ruler. A striking outcome of the survey is the people’s desire to be more directly involved in political decisions. Some 70 % of Europeans want major issues to be put to a popular vote in their countries. Populist party supporters are even more supportive of direct democracy – likely one of the reasons some people prefer these parties.

EPRS Policy Roundtable 'Declining commitment to democracy : What's going on around the world ?'

EPRS Policy Roundtable ‘Declining commitment to democracy : What’s going on around the world ?’

Andrew Bradley, Director of the International IDEA office to the EU, presented the IDEA 2017 Report on the Global State of Democracy. The report, the first edition of the publication, focuses on exploring the resilience of democracy and analyses a set of key challenges to democracy. Bradley highlighted that democracy is at a cross-roads, facing serious challenges. Taking a longer and global perspective, however, reasons to be optimistic exist: global progress has been made in all aspects of democracy since 1975, based on the indices selected by IDEA. However, during recent years, threats have arisen which cannot be ignored. We should not therefore take democracy for granted.

The main challenges include backsliding and shrinking democratic space (more specifically constitutional amendments; concentration of power in the executive; undermined judicial independence; media restrictions; restrictions on opposition parties and civil society); rising populism and nationalism; spreading of fake news and disinformation; decreasing trust in political parties and elites; state capture and corruption, such as unchecked inflows of money into politics; spill-overs from regional conflicts, such as migration and refugee flows, that fuel populism in Europe.

Democracy is undergoing a crisis of political representation, which has to be addressed. IDEA makes a series of recommendations in this respect. Political parties have to remain responsive to the electorate’s needs during the entire electorate cycle, to address policy challenges without compromising ideology, to communicate political vision, and to outline innovative programmes. They have to be democratic, transparent, based on fair processes, open to pluralism, inclusive – particularly of young people and women, ready to engage with citizens, open to alternative forms of membership, able to restore trust (through anti-corruption measures and internal democracy), and open to alternative means of communication (ICT).

EPRS Policy Roundtable 'Declining commitment to democracy : What's going on around the world ?'

EPRS Policy Roundtable ‘Declining commitment to democracy : What’s going on around the world ?’

Commenting on the findings presented, Ionel Zamfir, policy analyst at EPRS, welcomed the distinction the Pew Survey drew between people’s trust in democracy as a form of government and their attitudes towards their existing government. Sometimes, there are positive reasons as to why people have become wary of the way their democracy functions, such as better access to information (including on corruption cases) and setting of higher standards, particularly by the young. Dissatisfaction with the way democracy works in practice does not necessarily represent a rejection of democratic principles as such. The popularity of direct democracy, as shown in the Pew Survey, clearly illustrates this distinction. Furthermore, the IDEA report’s findings that, taking a longer-term perspective, democracy is progressing in the world, despite current challenges, is important. Even if democratic progress is not linear, democracies are particularly fit to overcome crises, as they are flexible and able to adapt and reinvent themselves. The survey also provides some interesting insights for EU democracy support – a subject on which the EPRS has recently published a briefing. The EU is at the forefront of efforts to support democracy in third countries in the world. As the Pew Survey shows, people expect democratic systems to deliver, and the state of the economy and the effectiveness of the government are strong drivers of citizens’ trust in democracy. These findings legitimate the approach taken by the EU with regard to democracy support since the Lisbon Treaty, according to which consistency and coherence with other external policy must be assured and strengthened. Economic success and good governance (and EU aid can play an important supportive role) is important for the strength and resilience of democracies. In this respect, EU development aid, as well as the human rights and democracy conditionality enshrined in many of its bilateral relations, can ensure that democratic and economic progress go hand in hand.

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