Having state governments at
the front in putting together a federal budget is problematic for several
reasons. Those governments can easily form ideologically clashing groups that result
in stalemate at the expense of the federal level. That states have a built-in
political interest in safeguarding their own turf means not only that they
would tend in a positive sense to ward off too much federal encroachment at the
expense of the states and federal-state balance necessary for the check-and-balance
function of federalism, but also that the states could exploit a structural conflict
of interest to deny the federal governmental institutions adequate sovereignty and
money to act effectively in the common or general interest as represented by
the union rather than any one state or subset of states. The lack of progression
of negotiations in the Council of Ministers in 2026 on the upcoming seven-year
federal budget demonstrate that perhaps the European Parliament rather than the
Council of Ministers should come up with the budget and sent to the European
Council for passage.
In late September, 2026, state
officials (European affairs ministers) met “for another round of negotiations .
. . Despite a shared ambition to reach a deal by the end of the year,
negotiations [appeared] to have stalled, with significant differences still
unresolved.”[1]
The stalling due to significant differences, including on E.U. taxation,
was not new. The E.U. Commissioner for the Budget, Piotr Serafin, observed at
the time, “this is my fourth [Multiannual Financial Framework] negotiations, so
I have to admit that some of the discussions come with a sense of déjà vu. Many
positions are quite predictable, as they have been consistently repeated over
the last decades.”[2] The
longstanding intransigence suggests that ideological differences, which tend to
be intractable, were in the mix. One benefit of being in a political union is
that federal institutions can bridge over divisions that are “dug in” at the
state level, essentially breaking the “log jams” (i.e., entrenched tree
branches in the water blocking the flow of a river).
Besides being able to overcome
divisions between states, the federal level does not contain state-level jealousy
of an active federal government; the conflict of interest that, if exploited by
state governments to “starve” the federal institutions of federal tax revenue
or adequate money to spend, does not exist in the European Parliament because
the representatives thereof are directly elected by E.U. citizens rather than
appointed by state governments. In fact, such direct federal election renders the
Parliament a fitting institution to construct a federal budget—more so than the
Council of (state) Ministers. This is particularly so because of the existence
of federal taxes not contributed by the state governments as by quota, for instance.
For their part, the state governments could have their “up or down” say in
voting by qualified-majority vote in the European Council on a budget that has
been passed by the Parliament. As for the Commission, its recommendations would
be heard at the committee level in the Parliament in the crafting of the
federal budget.
More generally, the state
governments arguably have too much influence at the federal level. Some direct
involvement, rather than even by elected senators who represent the states but
not necessarily their respective governments as in the U.S., is prudent as a
check against too much federal encroachment on the states as has happened in
the U.S., but too much direct involvement by state governments at the federal
level can enable the exploitation of institutional or structural conflicts of
interest—such as from jealousy of the power of federal officials and
institutions. Even at 27 states, the E.U. has suffered from want of federal
authority due to the power of the state governments to invoke a veto in the
European Council and the Council of Ministers. Retaining the veto as more
states are added to the Union would itself suggest that the state governments
have too much obstructive power at the federal level. Put another way, a
conflict of interest exists in depending on state governments to give up their
veto power at the federal level. Generally speaking, the existence of structural
conflicts of interest in a federal system is not a good thing for any federal
system; such conflicts should be unwound both institutionally and in terms of
processes (e.g. voting in the Council of Ministers).
The U.S. is hardly free of
such conflicts. That justices on the U.S. Supreme Court are appointed by one
federal institution and confirmed in office by another federal institution and
yet those justices go on to hear disputes between the federal government and a
state (or states) represents a conflict of interest; it is like having one football
team appoint the referee, and then would anyone be surprised when 90 percent of
the rulings during the games involving that team are in favor of it? The vast
majority of federalism cases before the U.S. Supreme Court have been decided in
favor of the federal level. No surprise. What is surprising is that this
blatant conflict of interest has been virtually invisible in spite of the
percentage of federalism cases having been won at the expense of the states. In
the E.U., a similar insight regarding having the Council of Ministers and the
European Council so salient in the construction and passage of the federal budget
would make for a more perfect Union.
2. Ibid.
