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Financial Perspectives: Challenges and Options in the EU Budget

Explore the stagnation of the EU economy, current budgetary issues, and proposals for reform in this insightful analysis by Iain Begg. Delve into the complexities of net contributions, policy priorities, and potential solutions for a more efficient budgetary system.

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Financial Perspectives: Challenges and Options in the EU Budget

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  1. FINANCIAL PERSPECTIVES Challenges and Options IAIN BEGG Visiting Professor European Institute, LSE

  2. As it stands today, the EU budget is a historical relic Marco Buti and Mario Nava ‘Towards a European Budgetary System’ EUI Working Paper, May 2003

  3. BACKGROUND AND ISSUES • Stagnation of the EU economy • Overall budget unlikely to grow as % of GDP • The letter from the six net payers • Uncertainty or disquiet about: • Current composition of spending…not just the CAP • Identifying a European added value in EU spending • Controls on fraud and managerial capacity • Concern about slow pace of ‘Lisbon’ agenda

  4. THE EU BUDGET TODAY • Barely 1% of EU GNI [Member States: 47%] • Financed by four ‘own resources’ • GNI (4th) resource now dominates • UK rebate and partial abatements for AU, DE, NL and SW • Set in medium-term Financial Perspective

  5. EU BUDGET BY POLICY, 2003

  6. IF WE START AFRESH… • Spend, regulate or co-ordinate? • The choice among modes of EU policy-making • Economic justifications for EU level funding • What to look for in European added value • Priorities for EU level, given small scale • If not agriculture, what? • Scale of budget

  7. NET CONTRIBUTIONS • Arise almost entirely on the expenditure side • Increasingly messy abatement mechanisms • No easy answer • Political support for net transfers fragile • ad hoc systems require regular renegotiation • UK and others may be fair, but cause friction • Something for everyone has important political ramifications, even if economically dubious

  8. THE 10th FEBRUARY PROPOSALS • Five new headings • But still largely the same policy functions • Agricultural ceilings frozen in real terms • Some orientation towards ‘Lisbon’, but limited • Proposal for generalised abatement • Scale rising by 25% over 7 years • Ultimately… more of the same • Hence an opportunity lost

  9. ISSUES FOR DEBATE • The budget’s role in economic management • Study needed of case for ‘federal’ stabilisation • The case for spending on new demands • Budgetary control a running sore • Is there a viable solution for net contributions? • The Commission’s generalised correction plan… • Integrated public finances – utopia?

  10. FINANCIAL PERSPECTIVES Challenges and Options IAIN BEGG Visiting Professor European Institute, LSE

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