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

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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.

Suggested Citation

  • Angel de la Fuente & Rafael Doménech & Vasja Rant, 2008. "Addressing the net balances problem as a prerequisite for EU budget reform: A proposal," UFAE and IAE Working Papers 738.08, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    • Handle: RePEc:aub:autbar:738.08
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    1. repec:spo:wpecon:info:hdl:2441/10059 is not listed on IDEAS
    2. repec:esr:resser:rs012 is not listed on IDEAS
    3. Iain Begg & Henrik Enderlein & Jacques Le Cacheux & Mojmir Mrak, 2008. "Financing of the European Union Budget," Sciences Po Economics Publications (main) hal-03459814, HAL.
    4. repec:spo:wpmain:info:hdl:2441/10059 is not listed on IDEAS
    5. 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.
    6. Indhira Santos, 2009. "Reframing the EU budget- decision-making process," Bruegel Working Papers 306, Bruegel.
    7. Heinemann, Friedrich & Asatryan, Zareh & Birkholz, Carlo, 2024. "The future of EU cohesion," ZEW Expertises, ZEW - Leibniz Centre for European Economic Research, number 307989.
    8. van der Hoek, M. Peter, 2011. "European Union Finances," MPRA Paper 89953, University Library of Munich, Germany, revised 2011.

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    JEL classification:

    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods

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