How to Reform the EU Budget? A Multidisciplinary Analysis

Abstract

The European Union is currently negotiating its next budgetary package for 2014-2020, amid calls for reform, and criticisms that the EU budget is out of touch with the realities of today's EU. This thesis aims to contribute towards that debate, by proposing an innovative methodological framework to assess which policy areas and funding programmes should be allocated to the EU level. The methodology proposed is multidisciplinary, combining the branch of economics generally used to analyse the EU and its budget (known as fiscal federalism) with another branch of economics (public sector economics), political science and EU law. From these four disciplines, eleven steps are derived, and this eleven-step analysis is applied to the three main areas of EU spending to assess whether or not they should be funded by the EU budget: agriculture, regional policy and research policy. The need for a multidisciplinary methodology arises from the fact that the EU budget is not equivalent to a national budget, because the EU is essentially a legislative union, where spending powers have remained small and are mainly there to support the regulatory initiatives. Therefore a different type of analysis is needed to address not only the economic issues involved, but the political and legal aspects as well. The research question addressed by this thesis is therefore both normative and methodological. It seeks to answer to answer a normative question – how should the EU budget be spent – but also addresses a methodological puzzle – how to create a multidisciplinary methodological framework that can be used to define how the EU finances should be organised, by completing fiscal federalism with insights from other theories, thereby making it more suited to the analysis of the EU? The results of applying this methodology to the three main areas of EU spending are as follows. The analysis supports EU cohesion funding for poorer EU Member States, as this funding can potentially be very efficient in helping those regions and is backed by EU law and political legitimacy. However, concerning funding for the wealthier Member States, the analysis has exposed a trade-off that should be openly addressed. The economic analysis would suggest to renationalise it because it is not efficient at EU level; however, the political analysis shows that there can be advantages in providing cohesion funding to all Member States. Concerning agriculture, all sections of the analysis have shown that this spending policy should not be at EU level, except EU law, which gives an ambiguous result. It is shown that this policy is inefficient and even in some respects harmful for the economy and at the same time also decreases political legitimacy. For research policy, the analysis has shown that, while economic criteria would advise a significant or even total transfer of funding programmes from the national to the EU level, this could lead to political and legal problems. Therefore, the conclusion is that there should be an increase in research funding from the current (very low) levels, but that this should not go beyond a certain level.