Hendrik Wagenaar: Bit rich of Cameron to bang the lectern

The reason for this is the better than expected performance of the British and Dutch economies over the past decade. That doesn’t mean that their economies were actually doing so well, but a recalculation of economic performance, accepted as an improvement in national accounting by all member states, resulted in a higher relative performance.

The Press is confused and uses the language of “spending” and “surcharges” and publishes alarming graphs of UK contributions, conveniently omitting the numbers on the annual rebates that the UK receives (although, granted, even with the rebate the UK is a net contributor), let alone a numerical estimate of the many economic benefits that accrue to the UK because of its membership of the EU.

If we try to see through the smoke and mirrors, what is at stake? I will illustrate this with the story of Carinthia, a small picturesque province of green mountains and emerald lakes in the south-west corner of the federal state of Austria.

On October 11, 2008 the governor of Carinthia, the notorious right-winger Jörg Haider, crashed his car on a street near Klagenfurt, the provincial capital. He was more then three times the legal drink-drive limit and died at the scene.

Haider left behind a monumental financial mess. At the centre of it was the Hypo-Alpe-Adria Bank. Haider had used it as a financial clearing house for all sorts of dubious transactions, wholly obfuscating the distinction between private and public money. In return he guaranteed the aggressive expansion of the bank into the former Yugoslavian republics.

When the whole edifice came crashing down after his death, in the wake of the banking crisis, it turned out that the province had underwritten €9bn (£7bn) in loans. To put that in perspective, the annual budget of Carinthia is €1bn (£800m). Compared to this, Greece is a paragon of budgetary restraint.

Such an elephantine debt must surely have led to draconic austerity measures. Carinthia’s 550,000 citizens must have suffered huge unemployment and welfare cuts. Hospitals must have closed and tuition fees gone through the roof.

In fact, nothing of the sort took place. The generous Austrian welfare and health care system remained in place, university education is still free.

Carinthia has been spared the fate of Greece, the UK or the Netherlands because it is part of a federal state. One of the benefits of a federal state is the automatic redistributive system of federal budgeting.

Simply put, rich states or regions subsidise poorer states or regions. And, usually, that system is automatic and largely invisible, which means that regions and citizens don’t notice it and thus don’t complain about the carefree spending of their wayward neighbours.

It is not wholly without problems. In the US, Democratic states are often net contributors to the federal budget and Republican states net beneficiaries, while the rich province of Bavaria gripes that its budget surplus is paying for the leftist politics of Berlin. But macro-economically federal redistribution buffers regional economic fluctuations.

In principle, as the case of Carinthia shows, a region can move from the status of contributor to that of beneficiary. After the size of its self-inflicted public finance debacle became clear, the federal state took over the debt and kept transferring its annual contribution to Klagenfurt. This benefits the whole country, not just the citizens of Carinthia.

The EU is not a federal state. Its political integration is laboured, half-hearted and reluctant, and federalism is a dirty word in most member states. That is one of the reasons for its persistent financial and economic problems. As a result its budgetary system of redistribution is clumsy and opaque. Yet its underlying logic is federal, as I described above.

Instead of having “apoplectic” fits, banging the lectern, and issuing empty threats to refuse payment, it would have been more helpful to explain the above mechanism of federal budgeting to the public. But that would require a measured and even-handed stance towards the EU and Britain’s position in it.

And, as we all know, at the moment that is far outside the cognitive capacities of the British political class.

• Hendrik Wagenaar is Associate Director of the Crick Centre, based in the University of Sheffield’s Department of Politics.