Market pressures on ailing Euro-zone countries persist and the Merkels and Sarkozys struggle to find an answer. The latest hype gaining ground is the idea of Eurobonds. These would be jointly issued bonds by all Euro-zone (or even EU) governments to finance government debt by national (or sub-national) governments.
Ironically, I remember several interesting discussions with my Italian federalist friends who have always lobbied within JEF and UEF to support the introduction of Eurobonds – to allow the EU (budget) to run deficits primarily for EU-wide infrastructure projects. I have always (and continue to) oppose this idea because I think we do not need another layer of debt in the EU while there is sufficient room for mobilising funds to invest in EU-wide infrastructure projects from the ineffective CAP and structural policy – and where necessary also from national coffers. While the financing mechanism for these Eurobonds would be the same, the current discussion is promoting Eurobonds on a very different level.
Eurobonds to solve the debt crisis
Eurobonds as advocated these days are seen as a tool to lower borrowing costs for peripheral Eurozone countries (Greece, Ireland etc.) who struggle with run-away interest rates on newly issued debt. They are practically cut off from the market, hence EU intervention mechanisms like the EFSF are now used to finance their debt. In some ways the EFSF is not so much different from the Eurobonds discussed today except the fact that the EFSF is primarily seen as a crisis intervention – and not a permanent – vehicle. Because (just like with the EFSF) Eurobond debt is guaranteed by countries like Germany or the Nordics borrowing is cheaper for such jointly guaranteed Eurobonds. So, why should we not issue Eurobonds Continue reading →
Over the last year I have been working on one of the most interesting global transparency projects – the Open Budget Index. A few weeks back the final results have finally been published after our lengthy review process. Unfortunately, these results shed a disappointing light on government approaches around the globe: 74 of our 94 countries surveyed fail to meet basic transparency standards! This means that normal citizens cannot obtain even the most basic information on their national budgets. Find more information on the findings on the project website.
With the index we look at 123 indicators in public budgets and primarily check the availability of key budget documents like the executive’s annual budget proposal as well as the quality of the data they include. Other questions are concerned with access to documents, the openness and involvement of legislatures or the quality of other budget institutions like auditors. 91 of these indicators make it into the final score. You can find the ranking of all 94 countries here.
Three findings are particularly interesting I think: Firstly, the state of budget transparency does not rely on a country’s state of economic development. South Africa as the overall top scorer illustrates this best. Secondly, the ‘resource curse’ is a phenomenon we tend to support with our findings. Countries highly dependent on hydrocarbons also have lower scores in our index. Thirdly, with data over three periods now (2006, 2008, 2010 – and 2012 beginning to be in the making) we can observe that budget transparency is not a static process and that in particularly countries with poor or mediocre performances do start to move. Countries like Liberia or Mongolia have shown a positive and strong upward trend thanks to clear political leadership. Others like Fiji, following a coup, show a downward trend. This, if nothing else, shows very clearly, how budget transparency is a political process and many governments around the world can and need to do much more to empower their citizens when it comes to the most important policy document of any country – its budget.
Rich data sets with answers to all questions are available for further research. You can obtain them either from the website or through me or the facilitators at IBP in Washington DC. We are grateful for any hints on anyone who researches or works on budget transparency. Do get in touch!
The Green Alliance, a leading environmental think tank in the UK has recently published “unlocking a low-carbon Europe“, an excellent collection of articles about a climate-friendly budget for the EU. I had the chance to contribute with my article “Winning the Budget Battles” lining out (institutional) strategies to achieve a more friendly outcome for our climate.
Reform of the EU budget matters deeply for the pursuit of the low-carbon economy. For there is arguably no policy lever as important as the EU budget for setting the direction of EU action. While the size of the budget remains close to just one per cent of EU’s Gross National Income, it has the ability to lever additional spending by member states and the private sector. However, it is perhaps its political value that is of most influence. For the way in which the EU spends its resources is the primary indicator of its political priorities and its institutional ability to organise their pursuit.
This collection of viewpoints from diverse businesses and NGOs, social organisations and think tanks, addresses the political challenge of acting on these two priority areas of climate change and the reform of the EU budget Continue reading →
On FollowTheMoney.eu I have published a first article with some thoughts about the main developments with regards to the EU budget in 2009. This article looks at the budget review, the possible denial or delay of discharge for the Council and the provision of new transparency data.
In a second articleto be published later this weekby now I will speculate on the impact of the European elections on budgetary policy in the European Parliament and the Commission – including my guess for the next Budget Commissioner.
I have written the other day about the special loan(s) offered to Hungary to fight the financial crisis. Now I finally managed to find numbers about the size of Hungary’s budget to put things into perspectve. And it made me speechless. The annual Hungarian state budget has a size of around 50 bn Euro (s. their national office of statistics). Now with a loan of around 20 bn Euro (plus the extra 5 bn from the ECB) this counts for 40% of Hungary’s budget. Have I ever seen anything like that?!!!