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The EU Budget Dispute - A Blessing in Disguise?

This paper analyses the European budget and the position of the ten new member states. We argue that the EU budget should be reconsidered, as the Union has expanded to 27 member states and has become more heterogeneous. The budget priorities must be re-oriented towards potentially productive spending programmes. A simple economic growth model illustrates that the current EU budget setting is, at best, neutral with respect to the EU-wide long-term growth potential and may actually hamper growth in the majority of the EU countries if the distortionary nature of taxation is taken into account.

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Paper provided by Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies in its series Working Papers IES with number 2007/14.

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Length: 30 pages
Date of creation: Apr 2007
Date of revision: Apr 2007
Handle: RePEc:fau:wpaper:wp2007_14
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  1. Barro, Robert J, 1991. "Economic Growth in a Cross Section of Countries," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 407-43, May.
  2. Martin Hallet, 2004. "Fiscal effects of accession in the new Member States," European Economy - Economic Papers 203, Directorate General Economic and Financial Affairs (DG ECFIN), European Commission.
  3. Asea, Patrick & Mendoza, Enrique G & Milesi-Ferretti, Gian Maria, 1996. "On the Ineffectiveness of Tax Policy in Altering Long- Run Growth: Harberger's Superneutrality Conjecture," CEPR Discussion Papers 1378, C.E.P.R. Discussion Papers.
  4. Ondřej Schneider & Jan Zápal, 2005. "Fiscal Policy in New EU Member States: Go East, Prudent Man!," Working Papers IES 76, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised 2005.
  5. Sandy Dall’erba & Julie Le Gallo, 2007. "The Impact of EU Regional Support on Growth and Employment," Czech Journal of Economics and Finance (Finance a uver), Charles University Prague, Faculty of Social Sciences, vol. 57(7-8), pages 324-340, September.
  6. Gleich, Holger, 2003. "Budget institutions and fiscal performance in Central and Eastern European countries," Working Paper Series 0215, European Central Bank.
  7. Urlik Butzow Mogensen & Patrick Lenain & Vicente Royuela-Mora, 2004. "The Lisbon Strategy at Midterm: Expectations and Reality," CASE Network Reports 0058, CASE-Center for Social and Economic Research.
  8. Kneller, Richard & Bleaney, Michael F. & Gemmell, Norman, 1999. "Fiscal policy and growth: evidence from OECD countries," Journal of Public Economics, Elsevier, vol. 74(2), pages 171-190, November.
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