Fiscal Policy in Economic and Monetary Union

Fiscal Policy in Economic and Monetary Union

Theory, Evidence and Institutions

Marco Buti and Daniele Franco

This book explores the origins, rationale, problems and prospects of the European fiscal policy framework. It provides the reader with a roadmap to EMU’s budgetary framework by exploring its theoretical and empirical foundations, uncovering its historical roots and emphasising its supranational nature.

Chapter 12: National Budgets and the EU Budget

Marco Buti and Daniele Franco

Subjects: economics and finance, money and banking, public finance

Extract

* 1. INTRODUCTION As it stands today, the EU budget is a historical relic. Three failures are most evident. First, its spending composition is heavily tilted towards the support of a declining sector, agriculture; second, it is almost impossible to reallocate spending across time and across policies to reflect economic and political priorities; and third, its size bears no comparison to any of the budgets of EU countries and it is unrelated to the EU goals. First, in terms of composition, the current EU budget still largely reflects a double deal: the EC-6’s Common Market and the Single Act of 1985. The first deal entailed a large share of Community expenditure devoted to the Common Agricultural Policy (CAP) as a price to be paid for allowing Germany’s industrial products to enter the French market. The second deal saw the rise of spending on cohesion and regional policies in the context of the Iberian enlargement as the price to be paid for compensating the possible losers of the 1992 Single Market project. Those two policies together represent some 85 per cent of the EU budget. The remaining 15 per cent is divided between third countries’ policies (essentially development aid and growthenhancing assistance), internal allocative policies (such as research, transEuropean networks, etc.) and administrative expenditure. The EU does not finance a EU-wide welfare system and thus plays no role in explicit interpersonal redistribution. However, the CAP, which originally represented much of the allocative function of the EU budget by moving away...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information