Brussels Fails to Control State Spending

The Brussels bureaucracy of the European Union is looking increasingly ineffective and bloated. The need for a sleeker alternative is growing more stark.

In the latest example, reports this week showed Brussels unable to prevent EU member states from subsidizing the private sector. The European Commission has been trying to limit such payments, arguing that they distort competition by supporting one company or industry against others. Nevertheless, this week the Commission reported that €64 billion (us$84 billion) was spent in 2005 on “helping troubled companies and supporting industries and initiatives”—only $1 billion down from 2004, despite repeated commitments for cutbacks. Germany is at the top of the list of offenders, having given €20 billion in state aid—double the next-highest-spending country, France.

This reemphasizes—like the failure of the EU constitution—how powerless Brussels is becoming in some areas. The Financial Timespoints out that the Commission failed to remove special protections for the publicly owned German bank Landesbanken, and also failed to prevent the French bailout of the Alstom engineering group. Germany in particular does an excellent job of winning its encounters with the bloated machine in Brussels. If Germany should happen to meet EU limits for its public deficit this year, it will be the first time in four years.

The shortcomings of the Brussels government presents Germany with an opportunity: With the German government on the verge of assuming its six-month turn at the EU presidency, it has an ideal opportunity to undermine the Brussels bureaucracy.

Having seen that Brussels cannot expeditiously carry out its plans, the current German strategy, articulated by Germany’s ambassador to the EU, Wilhelm Schönfelder, is to simply avoid Brussels altogether in its discussions regarding the EU constitution—probably a model that will be followed anywhere German efficiency can be effectively applied: “We will keep it out of the Brussels machinery,” because otherwise “you will never come up with a solution,” Schönfelder stated.

After establishing a more efficient process for the EU during its six-month presidency, Germany will, as Chancellor Angela Merkel stated, “set a roadmap” for those nations that follow. The Brussels government may well find that, at the end of June 2007, much of the groundwork for a transition of power from Brussels to Berlin is done, a shift that has already begun.