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FINANCIAL PERSPECTIVES Challenges and Options

FINANCIAL PERSPECTIVES Challenges and Options. IAIN BEGG Visiting Professor European Institute, LSE. 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. BACKGROUND AND ISSUES.

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FINANCIAL PERSPECTIVES Challenges and Options

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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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