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Europe’s Dysfunctional Growth Compact

BRUSSELS – Recently, a €10 billion ($13 billion) shortfall in this year’s European Union budget came to light. As a result, the EU cannot reimburse member states for recent unexpected expenditures, including emergency outlays, such as aid to Italian earthquake victims, and spending aimed at boosting economic growth and employment, such as the accelerated absorption of unused Structural and Cohesion Funds. Member states have refused the European Commission’s request for extra contributions to cover the shortfall, causing talks over next year’s budget to collapse.

Meanwhile, negotiations over the 2014-2020 Multiannual Financial Framework (MFF), the central-planning instrument for the use of EU funds, have broken down, owing to disagreement over key issues, including the size of the budget and the composition of expenditure. The decision has been postponed until early next year.