The European Commission (EC) has warned current rules for the EU budget make it slow to react to unforeseen events.
 
The EC has published its communication on the budget review, stating that too many complexities hinder its efficiency and transparency.

The Commission said when sudden new circumstances arise, such as food crises and natural disasters, the EU budget is too slow to react. Current rules make shifting funds, even in a very limited way, a long and cumbersome process, the EC stated.

The Commission also stressed that negotiations on budget are too often guided by the need to make everyone feel they got their fair share rather than on giving European priorities the right funding.
 
The EC believes if Europe is to stand up to competition in a globalised world, it needs to foster smart growth. Therefore the EU budget must focus on added-value and must identify where one euro spent at the European level brings more benefit than at the national level.

Costly research and innovation investment as well as key transnational infrastructures should be financed at EU level, the EC said. Pooling our resources together on key issues will help Member States save money and will avoid duplications. The budget must also finance the European economy's drive into greener technologies and services. However instead of a new dedicated programme, this focus should apply across all EU policies, the EC added.

The Common Agricultural Policy's (CAP) also needs to evolve, as reference values for direct payments are now a decade old, the EC warned. It said reforms of varying intensity are possible, from reducing current discrepancies in levels of direct payments to a major shift, away from income support and market measures to environmental and climate change objectives. In 1988, the funding of agriculture amounted to about 65 per cent of the EU budget, these days it is about 40 per cent.
 
Administrative expenditure amounts to 5.7 per cent of the EU budget. Part of the work on the next financial framework will be to search for increased efficiency and performance in administrative resources. The Commission will review its own administrative expenditure to identify ways of meeting new challenges within its existing resources.

Overall, the Commission suggests a strict discipline be pursued by all EU institutions 'to ensure that administrative expenditure is contained in the future'.
 
The EU budget represents only 2.5 per cent of overall public expenditure in Europe. However, by cooperating with partners such as the European Investment Bank and by using financing instruments such as EU project bonds, the EU budget could attract more financial resources without having to increase itself, the EC said.
 
Flexibility could be fostered by agreeing to a 10-year financial framework with a major mid-term review, with important reserves maintained for that purpose, the EC stated. Other tools would provide for reactivity in the face of unforeseen events, such as the possibility to transfer funds and unspent margins more easily, front- or backloading of multiannual programmes, and increasing the size and scope of various existing flexibility instruments.
 
European Commission president Jose Manuel Barroso said it encourages everybody to engage in an open debate without taboos, notably about the principles to underpin the future EU budget beyond 2013.

'At times where public spending is under pressure, we suggest ways to achieve a European budget that is up to the challenges we are facing collectively, not necessarily through increased expenditure, but by focussing on the right priorities, the added value, results and the quality of European spending, he said.