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Addressing the net balances problem as a prerequisite for EU budget reform: A proposal

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  • Angel de la Fuente
  • Rafael Doménech
  • Vasja Rant

Abstract

Conflict among member states regarding the distribution of net financial burdens has been allowed to contaminate the entire design of the EU budget with very negative consequences in terms of equity, efficiency and transparency. To get around this problem and pave the way for a substantive budget reform, we propose to decouple distributional negotiations from the rest of the budget process by linking member state net balances in a rigid manner to relative prosperity. This would be achieved through the introduction of a system of compensating horizontal transfers that would take to its logical conclusion the Commission's proposal for a generalized compensation mechanism. We discuss the impact of the proposed scheme on member states incentives and illustrate its financial implications using revenue and expenditure projections for 2013 that are based on the current Financial Perspectives and Own Resources Decision.

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Bibliographic Info

Paper provided by Barcelona Graduate School of Economics in its series Working Papers with number 343.

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Date of creation: Feb 2008
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Handle: RePEc:bge:wpaper:343

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Keywords: EU Budget;

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  1. Angel de la Fuente & Rafael Doménech, 2001. "The Redistributive Effects of the EU Budget: An Analysis and Proposal for Reform," Journal of Common Market Studies, Wiley Blackwell, vol. 39(2), pages 307-330, 06.
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Cited by:
  1. Rosella Nicolini, 2008. "Agglomeration and inequality across space: What can we learn from the European experience?," Working Papers wpdea0809, Department of Applied Economics at Universitat Autonoma of Barcelona.
  2. Callan, Tim ed. & Barrett, Alan & Goggin, Jean & Gorecki, Paul K. & Keane, Claire & Kearney, Ide & Matthews, Alan & Walsh, John R., 2009. "Budget Perspectives 2010," Research Series, Economic and Social Research Institute (ESRI), number RS12.
  3. Indhira Santos & Susanne Neheider, 2009. "Reframing the EU budget- decision-making process," Working Papers 306, Bruegel.

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