What to Reform in the European Budget? Some Reflections on the Stakes of the Current Budget Review Process
The EU budget is the financial tool supporting European integration. The way it has developed over decades, both as concerns revenues and expenditure, superposed to a complex decision-making process, where member states retain veto rights in crucial respects, means that it currently displays a significant inertia, while its size and structure are not the most appropriate for endowing the Union with the means allowing it to best react to the present-day challenges. Tensions are also rising between the national interests of individual members and the common interest, which previous attempts to reconcile by way of special treatments granted to some countries are clearly unsustainable, while inducing additional rigidities to the budgetary construction. This obviates the need for a comprehensive reform, which the 2008/2009 budget review that the Commission was mandated to undertake may set in motion. The following paper attempts at taking stock of the most significant problems in need of a solution and to explore the most appropriate ways available for tackling them.
The Revenues of the European Union : Past, Present, and Future
The European Commission wants to reform the EU budget. New own resources are high on the wish list. The article gives the rationale and the historical background to the debate on the reform of the EU budget and discusses the proposed new own resources from the point of view of the relevant theories. Theories that are suitable for the EU as it has grown to be. The current debate is plagued by too many ad hoc assessment criteria; a systematic onset is desirable. The status quo of the current budget is, from the point of view of the legitimacy of EU policies, not that bad. Only seigniorage, the monetary gain from the creation of money that flows to the ECB, comes into account as a new own resource.
Appropriate growth policy: a unifying framework
In this lecture, we use Schumpeterian growth theory, where growth comes from quality-improving innovations, to elaborate a theory of growth policy and to explain the growth gap between Europe and the US. Our theoretical apparatus systematizes the case-by-case approach to growth policy design. The emphasis is on three policy areas that are potentially relevant for growth in Europe, namely: competition and entry, education, and macropolicy. We argue that higher entry and exit (higher firm turnover) and increased emphasis on higher education are more growth-enhancing in countries that are closer to the technological frontier. We also argue that countercyclical budgetary policies are more growth-enhancing in countries with lower financial development. The analysis thus points to important interaction effects between policies and state variables, such as distance to frontier or financial development, in growth regressions. Finally, we argue that the other endogenous growth models, namely the AK and product variety models, fail to account for the evidence on the relationship between competition, education, volatility, and growth, and consequently cannot deliver relevant policy prescriptions in the three areas we consider.