Economic, Institutional and Power Perspectives on EU Income Redistribution and a Ukraine Enlargement

The analysis looks into European Union income redistribution policies and also places a focus on certain theoretical, institutional and empirical aspects of a future enlargement of the EU to admit Ukraine as a member; while suggestions for policy reforms in the EU and for a transition process for new member countries are also presented. Moreover, the role of the Banzhaf power index in terms of the intra-EU allocation of EU grants and loans under the Recovery and Resilience Facility (part of the Next Generation EU plan) as well as EU transfers to regions/national institutions in EU countries are considered - within a cross country analysis. As independent variables in the regression analysis for the grant/loan ratio on the one hand and the EU transfers/GDP of recipient countries we consider the relative per capita income (in purchasing power parity figures) of recipient countries, Corona death ratios and related indicators as well as the Banzhaf power index (for the European Council) which has changed after BREXIT and which would also change in the context of an EU-Ukraine enlargement. The Banzhaf power index measures power in the context of weighted majority decisions in the European Council. The regressions show several significant variables - but the Banzhaf power index is insignificant for the grants-to-loans ratio of recipient EU countries; and we even can state a new Banzhaf index paradox. The regression analysis for the grant loan ratio is the first to date in the literature. There is considerable potential for a new X-EXIT in the context of a Ukraine enlargement where lessons from BREXIT should be carefully considered if one is to avoid further such disintegration cases. As prior to previous enlargements, topics such as the role of redistribution and fiscal competences at an EU level in relation to revenue-raising and spending have been raised, one can assume that these issues will be to the fore once again if the prospect of a Ukraine-enlargement becomes more likely. One lesson to be drawn is that Ukraine should get lower EU transfers per capita than was the case for Poland in 2005. The required reforms in the EU are pointed out on the one hand, on the other hand politico-economic reflections suggest that the implementation of such reforms will be rather difficult; not least in the context of the fast aging of societies in Germany, Italy and Spain after 2025 - with the caveat that strong immigration from Ukraine could slow down the greying of societies particularly in Germany and Italy, so that anti-EU sentiments could become weakened under certain conditions. An EU enlargement to admit Ukraine is finally considered in a scenario perspective.