The EU has just adopted its budget for 2006. As usual, much of the money in it will be lost or stolen. For ten years in a row, the European Court of Auditors has refused to endorse the accounts and, barring a miracle, this year will be no different.

We are so accustomed to this state of affairs that it no longer makes the headlines. But just imagine if a private company were to behave this way. Imagine if, when presented with a firm’s accounts, the auditors announced that as much as 91 per cent of its expenditure might be going astray. The directors of such a company would be in prison. But, when that company is the EU, it is considered impolite to mention the subject.

This is, of course, part of the problem. A business is answerable to its shareholders, a national government to its voters, but the EU does not really have to answer to anyone. There is no link in Brussels between taxation, representation and expenditure: the EU disburses funds, but they are raised by the national governments. Milton Friedman once wrote that there are two kinds of money in the world: your money and my money.

I can’t understand why Germany always signs the cheques with such equanimity, since Germany more or less pays for the whole thing. During the recent German election campaign, there were fierce arguments between the parties over whether taxes could be cut without damaging public services. Yet, every week, the Germans meekly hand over some €400 million to Brussels. If ever there was painless tax cut, surely this is it.

Whenever I suggest this to German colleagues here, they mutter something about showing solidarity to weaker European economies – which is easy for them to say, I suppose, since MEPs are about to be made exempt from paying national taxes. But, if the intention is to help the poor, this is a funny way to go about it. The biggest beneficiary from the budget is Luxembourg, whose people are the wealthiest in the EU. In any case, there is no evidence that European subsidies help the recipient nations. Like all forms of social welfare, they disincentivise effort, breed ingratitude and encourage people to arrange their affairs in such a way as to qualify for hand-outs.

Look at where the money goes. 42 per cent of the budget will go on the Common Agricultural Policy, including a billion euros to subsidise the growing of tobacco in Greece. For all the talk about Europe becoming a hi-tech economy, we are still fire-hosing money at a system of farm support that drives up prices, penalises the poorest consumers, degrades the environment, hinders trade liberalisation and impoverishes the developing world. The next biggest tranche, 37 per cent goes on social and structural funds, the main beneficiaries of which are EU contractors and their friends.

Then come the political grants, aimed at buying the loyalty of client groups: the European Women’s Lobby, the European Trade Union Confederation, the Union of European Journalists and so on. And, in bizarre act of necrophilia, we have just agreed to spend some €9 million on promoting the European constitution. Is the EU proposing any savings to counterbalance these increases? Yes: it intends to cut the budget of OLAF, the anti-fraud office.

As I say, it is Germany’s generosity that pays for all this. So, here’s an idea for Angela Merkel – one that would tackle the dependency culture, reduce fraud and stimulate enterprise across Europe. Why don’t you simply withhold your contributions until the EU reforms itself? There would doubtless be complaints from those, like me, who earn their living from Brussels. But you would be doing the rest of Europe a favour.

This article was first published in the German newspaper Die Welt on 29 October 2005