Why should the European Union centralise public expenditure at EU level?

By Emmanuel Mourlon-Druol

From major road building projects in disadvantaged parts of the European Union to jobs and facilities for top EU researchers and institutions, public expenditure centralised at EU level has come to be taken for granted. But there have also been many missed opportunities. One of the earliest European integration projects, the failed European Defence Community, involved a common budget for European defence. In the context of the Cold War, several European countries agreed on shared expenditure to defend themselves, until the French Parliament eventually torpedoed the project in 1952. Much later, Scottish economist Donald MacDougall led a group of experts that set out in a 1977 report ambitious plans for a putative European federal budget. The MacDougall Report analysed different scenarios of integration, implying a common budget ranging from 2% to 25%.

Why did EU countries decide to spend in common in the first place? In the past few years, the debate about so-called European public goods has been based on the argument that member states should decide on common spending for reasons of economic efficiency. Spending at European level would provide added value compared to spending confined to the national level alone. Several criteria have been put forward for identification of such situations, which policies would be best allocated to the EU level and which could be left to the national level.  

In this Policy Brief I show that the discussion on European public goods is not new, though it has morphed and been relabelled over time. EU agreements on common spending have relied heavily on political considerations, in addition to, or instead of, carefully crafted analyses of economic efficiency. These precedents should inform today’s discussions and help better realise the limits of decisions on common spending, thus helping attain greater realism in future debates.

Read the policy brief, ‘An uphill struggle: a long-term perspective on the European public goods debate’ by Emmanuel Mourlon-Druol