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Fiscal system and fiscal relations in the European Union: political restraints and alternative approach to public finance


  • Hrvoje Šimović

    () (Faculty of Economics and Business, University of Zagreb)


Development of the European integration through the European Union (EU) considers not only strengthening integration from the economic aspect (internal market). It also considers the political aspect of the integration i.e. strengthening political integration of member states and their citizens. Political segment of integration considers strengthening of the internal policies of the EU in which fiscal system, i.e. public finances have extremely important role. The EU fiscal system presents reflection of the extremely strong and often confronted interests between the economic and the political integration. These issues are closely related to the second component of the European politic and economic integration, that are the fiscal relations between the EU “central” level and the national “lower” levels which bring the all important decisions in the EU. According to the theory of public finance (fiscal federalism) and the criteria of economic efficiency, fiscal functions (allocation, redistribution, stabilization) and activities are assigned to the different levels of government, as well as certain resources for their financing. On the basis of fiscal functions carried out by national levels in the EU, and the manner of their financing, the EU is a prominently fiscally decentralized complex community. The traditional approach to the fiscal federalism that fiscal authorities are transferred from central to lover levels means that this is a process of decentralization, while in the case of the EU this means centralization of fiscal authorities from the level on national states to the EU as a supra-national level. The main goal of this paper is to analyze fiscal relations in the EU according to basic fiscal functions: allocation, redistribution and stabilization. Methodology would include analysis and comparison of positive EU aspect with normative aspect of public finances in multi-level community. Induction of gained results will confirm thesis that, because of political restraints, development of common (central) system of the EU public finances is based on alternative approaches of harmonization and cooperation.

Suggested Citation

  • Hrvoje Šimović, 2007. "Fiscal system and fiscal relations in the European Union: political restraints and alternative approach to public finance," EFZG Working Papers Series 0704, Faculty of Economics and Business, University of Zagreb.
  • Handle: RePEc:zag:wpaper:0704

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    Cited by:

    1. Alexandru Dronca & Ana-Maria Arjocu, 2015. "The Impact Of Fiscal And Budgetary Policies On The Unemployment Rate In The Eu Member States," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 1, pages 203-207, February.

    More about this item


    fiscal system; fiscal relations; fiscal federalism; the European Union;

    JEL classification:

    • H77 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Intergovernmental Relations; Federalism
    • H87 - Public Economics - - Miscellaneous Issues - - - International Fiscal Issues; International Public Goods
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General

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