Theory, Evidence and Institutions
* 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...
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