A better budget for Europe: economically efficient, politically realistic

Abstract:

Dissatisfaction with the EU budget has grown steadily over the past three decades. During that time, economists have produced a large number of studies which attempt to find the optimal structure of spending for the budget, based on theories of fiscal federalism. Those studies have provided invaluable insights into how EU money should be spent.

They are often ignored, however, by policymakers. For many, the EU budget is all about politics; finding a spending structure that allows all Member States to reach agreement so that the EU can continue with its most important activity: not spending, but regulation.

Both groups are right. The expenditure of the EU budget must be determined both by an economic analysis and by a political decision. The economic analysis should be used to select which areas of spending can be done efficiently at the EU level. But the decision on which of those areas should benefit from EU funding must be based on political criteria.

This European Policy Analysis proposes a method for analysing the EU budget which combines economic, political and legal aspects. This integrated and multidisciplinary approach was lacking in the previous literature on the EU budget. The objective is to offer a basis for a realistic and comprehensive analysis of how the budget should be structured.

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