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The Deadlock of the EU Budget: An Economic Analysis of Ways In and Ways Out

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  • Charles B. Blankart
  • Christian Kirchner

Abstract

Most of the EU budget is spent on redistribution. Large sums of money are transferred from the member state governments to Brussels and back to these governments. Some member states end up as net receivers and some as net payers. Most economists agree that the resources of the budget should be reallocated from redistribution towards the provision of more Union-wide public goods. While such appeals have been made for years, little change has been observed. We want to explain why. We propose to distinguish two periods. In the early years of the Community, some larger member states or coalitions of member states were able to credibly threaten to terminate membership if their claims on budgetary resources were not fulfilled. Their activity has created a redistributive status quo to which, in the second period, the budgetary rules of the Treaty were applied. It is shown that the combination of the Council’s qualified majority rule on the expenditure side and the unanimity rule on the revenue side and on the programs are largely responsible for creating a deadlock in the status quo with large redistribution and few Union-wide public goods. In order to break the deadlock, a complementary budget procedure is proposed on the basis of voting by veto.

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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 989.

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Date of creation: 2003
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Handle: RePEc:ces:ceswps:_989

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References

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  1. Guido Tabellini, 2003. "Principles of Policymaking in the European Union: an Economic Perspective," Levine's Working Paper Archive 506439000000000157, David K. Levine.
  2. Widgren, Mika, 1991. "Voting Power in the EC Decision Making and the Consequencesof two Different Enlargements," Discussion Papers 377, The Research Institute of the Finnish Economy.
  3. Mueller, Dennis C., 1978. "Voting by veto," Journal of Public Economics, Elsevier, vol. 10(1), pages 57-75, August.
  4. Richard E. Baldwin & Joseph F. Francois & Richard Portes, 1997. "The costs and benefits of eastern enlargement: the impact on the EU and central Europe," Economic Policy, CEPR & CES & MSH, vol. 12(24), pages 125-176, 04.
  5. Brennan,Geoffrey & Buchanan,James M., 2008. "The Reason of Rules," Cambridge Books, Cambridge University Press, number 9780521070904, October.
  6. Tapio Raunio & Matti Wiberg, 1998. "Winners and Losers in the Council: Voting Power Consequences of EU Enlargements," Journal of Common Market Studies, Wiley Blackwell, vol. 36(4), pages 549-562, December.
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Cited by:
  1. Kauppi, Heikki & Widgrén, Mika, 2009. "The Excess Power Puzzle of the EU Budget," CEPR Discussion Papers 7220, C.E.P.R. Discussion Papers.
  2. Lars Feld, 2005. "The European constitution project from the perspective of constitutional political economy," Public Choice, Springer, vol. 122(3), pages 417-448, March.
  3. Kauppi, Heikki & Widgrén, Mika, 2008. "Do Benevolent Aspects Have Room in Explaining EU Budget Receipts?," CEPR Discussion Papers 6778, C.E.P.R. Discussion Papers.
  4. Indhira Santos & Susanne Neheider, 2009. "Reframing the EU budget- decision-making process," Working Papers 306, Bruegel.
  5. Karen Pittel & Dirk T.G. Rübbelke, 2005. "Internationale Klimaschutzverhandlungen und sekundäre Nutzen der Klimapolitik," Perspektiven der Wirtschaftspolitik, Verein für Socialpolitik, vol. 6(3), pages 369-383, 08.
  6. Iain Begg, 2007. "The 2008/2009 review of the EU budget: Real or cosmetic?," CESifo Forum, Ifo Institute for Economic Research at the University of Munich, vol. 8(1), pages 45-50, 04.
  7. Kauppi, Heikki & Widgrén, Mika, 2008. "Do Benevolent Aspects Have Room Explaining EU Bydget Receipts?," Discussion Papers 1161, The Research Institute of the Finnish Economy.

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