EU must spend more on research or ‘backtrack on competition promises’

Date: 02/12/04

By Anna McLauchlin

The economist who caused a political storm with his report on the European economy last year has said that EU ministers will have to spend more on research and development (R&D) in the 2007-13 budget or backtrack on promises to make Europe more competitive.

André Sapir predicts that the current argument over member states' contributions to the EU coffers will see the end figure falling somewhere in between the 1.14% of gross national income (GNI) proposed by the European Commission and the 1% demanded by the biggest paymasters.

That will mean a cut in one area of spending and as it will be difficult to slash the agricultural budget (France would object to this) or regional funds (Spain, Portugal and Greece would be against) R&D is the most likely to suffer. But that would show that the EU leaders are not serious about making Europe more competitive.

“Politicians will be sending the message that all that talk about the Lisbon Agenda being a priority was just lip service,” Sapir said. “They will be contradicting their own position.”

As a result, Sapir said, ministers might end up reopening the debate and cut the budget in other areas to find the extra funds. “The money has to come from somewhere,” he added.

A spokeswoman for the European Commission said that research chief Janez Potocnik backed Sapir's position.

“The EU needs to decide where its priorities are,” she said. “If they are serious about economic growth they will have to invest in knowledge.”

A spokesman for the UK government, which is pushing for a reduced budget, suggests that the EU should divert cash away from the regional funds in order to achieve its competitiveness targets. “The Lisbon Agenda is absolutely critical and when you have a new priority you have to rethink your old ones. For example, is it still reasonable to donate over 50% of the EU's structural funds to member states holding over 90% of the EU's GNI?” he said.

In July 2003 the 'Sapir Report' - ordered by the then president of the Commission Romano Prodi - called for an entire rethink of the EU's economic policy to prevent Europe's growth dying out. It recommended slashing EU agriculture spending to virtually zero and making member states pay for the development of their regions in order to shift the largest proportion of funds into growth-boosting R&D, education and infrastructure.

Produced by an independent group of economists from all over Europe, the report was so controversial that at the time Prodi hurried to distance the Commission from its findings.

But 18 months on and some of the report's recommendations have become a reality. Economic Affairs Commissioner Joaquín Almunia's proposal to make the Stability and Growth Pact more flexible has arguably been influenced by suggestions in the report.

Finance ministers will discuss the latest state of play of the EU budget at their Council meeting on 7 December and the European Parliament is currently working towards its position.

André Sapir, the economist who published a controversial report on the European economy in 2003 said that EU ministers would have to spend more on research and development (R&D) in the 2007-13 budget or backtrack on promises to make Europe more competitive. He predicted that the current argument over Member States' contributions to the EU coffers would see the end figure falling somewhere in between the 1.14% of gross national income (GNI) proposed by the European Commission and the 1% demanded by the net contributors.