Wednesday, 31 October 2012

The global reach of the EU

With the EU currently engaged in working out its budget for the coming period (2014-2020), and the British Government apparently resisting proposals for a modest real-terms increase in the budget, it's worth thinking a little about what the EU actually does with all our money. Here I shall mostly focus on some aspects of the EU's external relations.

The first thing to remember, though, is just how small the EU's total budget is. It's actually just under 1.25% of the overall EU Gross Domestic Product (GDP), and most of the spending goes to agriculture and the various structural funds.That doesn't leave much for all the other diverse things the EU does, both in Europe and across the wider world. Again, contrary to what many people tend to think, the EU bureaucracy is also surprisingly small. Given all this, you can see why, as presently constituted, the EU cannot possibly act as a sort of fiscal union for Europe, something that people often say would be needed for the Eurozone to work in the longer term. The EU budget, for instance, is minute as a fraction of Community GDP, compared to the US Federal Government budget in relation to the dollar area (the US and a few other territories).

Moving on to the EU's external relations, it turns out that all my recent and current work is funded by the EU, so I'll sketch a few points through three examples:

When I mentioned to friends a few weeks ago that I was going to spend nine days in Dushanbe, the capital of Tajikistan, the main reactions were: (a) where is Tajikistan? And (b) why is the EU funding projects out there? Good questions, so let me try to explain.

Tajikistan is the smallest and poorest of the Central Asian Republics that were formed when the Soviet Union split up in 1991; it is located just north of Afghanistan. It experienced civil war in the 1990s and a good deal of economic mismanagement since then, though in the last few years the economy has been growing reasonably well and the public finances have returned to quite a healthy state. The EU has provided aid to the country ever since the Soviet Union broke up, and in recent years much of this aid has taken the form of technical assistance projects aimed at improving economic policy.

So my reason for going there was an invitation to contribute to the final stages of two of these projects, one on macroeconomic modelling and forecasting, the other on public financial management. Both projects involved a mix of outside experts and senior officials from the Tajik government working together to come up with solutions to various economic policy problems that fit the prevailing Tajik conditions. Not always an easy task, but an interesting one.

Turks and Caicos Islands (TCI)
These islands are in the Caribbean, and I'll be out there with a colleague from November 4th to 13th (arriving home on the 14th). Back in 2009, the British Government assumed direct control of the islands as a result of the TCI government's perceived corruption and incompetence, resulting in unsustainable budget deficits. The islands are one of the UK's overseas dependent territories, and as such, like the dependent territories of all EU Member States, they are eligible to receive EU aid through the European Development Fund (EDF). In the case of TCI, however, EU funding was suspended when the UK took over running the islands.

Our task for next week, therefore, is to assess the current economic situation of TCI, including the budget, in order to determine whether the islands have restored their economy sufficiently to be eligible for further EU funding. From what we already know, the islands obviously think they've done enough to turn things around, and with luck we'll end up supporting their view, perhaps with one or two added conditions. Also with luck, we might just manage to enjoy a little sunshine while out there, who knows...........

Falkland Islands
These islands are another UK dependent territory eligible for EDF support from the EU. My colleague and I have already almost finalised our report on the Falkland Islands supporting their EDF 10 funding, and proposing how it should be allocated in the next three years. However, the last major stage of the work involves spending two days in Brussels - November 15th and 16th - to discuss detailed points with Commission officials and to make sure we get the final report exactly right to meet EU requirements. As part of this work, I gather that a video link will be set up with the Falklands so that we can discuss some points with officials there, too.

So that gives a little taster about the external activities of the EU. It's surprisingly diverse!

And after all this travel, to work on the above projects, I think that from November 17th I should be home at least until January.


  1. Thanks for sharing such a great and nostalgic post.

  2. great and informative content..
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