With the future of the European Union at grave risk because of an insufficient EU budget, it is ironic that the “frugal four” countries, Austria, Denmark, the Netherlands, and Sweden, are advocating a 1% of EU GDP limit on EU revenues (The “Frugal Four” advocate a responsible EU budget, Financial Times, 17 February). 

According to the IMF, Austria collected 48% of GDP in government revenues in 2019, Denmark, 52%; the Netherlands, 44%; and Sweden, 49%.  Yet these four governments somehow contend that the European Union can get by on a mere 1% of GDP at the union level. This is utterly wrong. 

The high revenue-to-GDP collections in the four countries (and others of the EU) reflect the vital role of government in the 21st-century economy.  Revenues are needed for social protection, active labour market policies in economies facing deep structural change, just transitions for environmental sustainability, quality education and healthcare, and research and development outlays in an era when innovation is vital for competitiveness; and security.

The leaders of the frugal four indeed recognise that the EU faces today’s challenges on “fostering an innovative and competitive economy, the fight against climate change, migration, and security”.  Yet they believe that the correct ratio of revenues passing through governments at the national and local rather than EU-wide level should be more than 40 to one! 

Most of today’s problems cross national boundaries, just as migrants, workers, ecosystems, rivers, energy resources, and innovations transcend national boundaries. Inequalities across the EU regions put the union under great and increasing social and political stress.

One suspects that the four national leaders advocate the greater than 40-to-1 ratio only because they are elected nationally, rather than because the proper allocation of government functions is really 40-to-1 greater at the national versus regional level. In the United States, for example, which is approximately the same size as the EU economy, the federal government outspends the combination of states and local governments by roughly two to one.

The stingy 1% of GDP budget for the EU would mark an existential threat to the EU as the EU faces a much tougher geopolitical environment marked by highly erratic US policies, Russian opportunism, and Chinese technological prowess and diplomatic reach.

The EU needs to stand on its own feet geopolitically, socially, and technologically, which is utterly impossible without an adequate EU-wide budget.

The world desperately needs a healthy, prosperous, and secure European Union. The EU urgently needs the good sense to fund itself properly. DM