The European Union budget, the balanced budget rule and the development of common European policies

The European Union budget is subject to a strict annual balanced budget rule. Given different types of expenditure within the budget, this rule has most effect on - and is most threatened by - spending on the Common Agricultural Policy. This article examines the merits of applying a balanced budget rule to the EU budget and explores the links between the budget and the CAP. The presence of the rule also forced the EU to improve its financial management. The 1999 CAP reform is examined. The presence of a pre-agreed spending limit on the CAP forced changes to be made to the initial CAP reform agreement in order to comply with this limit, although political bargaining was critical in shaping the changes. The general perception is that the CAP drives the European budget. The budget, if not driving the CAP, imposes an increasingly tight constraint on its reform

Romania's EU accession negotiations: the significance of the EU budget

Romania completed its negotiations for accession to the European Union, as scheduled, by the end of 2004. The experience of the negotiations over the 2004 enlargement confirmed that the EU budget is an absolutely key issue in such talks. The purpose of this paper is to consider the context of Romania's negotiations over the EU Budget. First, we look at the relationship the EU15 member states have with the EU budget.We show how rules governing the operation of the EU Budget have affected budgetary flows to the EU15 and highlight the stability over time of the shares of total budget flows to and from each member state. Second, we look at the experience of the new Member States in their accession negotiations and review the outcomes. This will allow us to see how the political economy of the EU Budget affected the talks and the deal the new member states were able to secure. We then apply the lessons learned to the case of Romania. Our analysis reveals inflexibilities in the negotiations that left Romania more or less facing a 'take-it-or leave- it' offer

EU enlargement, the CAP and the cost of direct payments: a note

Negotiations over EU enlargement have highlighted difficulties in extending the CAP – and in particular direct payments - to the applicant countries, given the spending limits agreed in Berlin in 1999. This note presents estimates of direct payment costs in the Eastern European applicants. It argues that the only way all member states in an enlarged EU can receive the same level of payments is if the payments currently prevailing in the EU15 are reduced

EU biofuels sustainability standards and certification systems - how to seek WTO-compatibility

Biofuels are increasingly being produced and consumed as a partial substitute to fossil-fuel based transport fuels in the fight against climate change. Sustainability criteria have been introduced recently by some countries to help ensure biofuels perform better than fossil fuels environmentally. Concerns have been expressed from various quarters that such criteria could represent World Trade Organisation (WTO)-incompatible barriers to trade. The present paper addresses two specific issues. First, it argues that biofuels can be expected to be treated like any other traded product under WTO law. Thus an importing country could not impose different trade measures dependent on whether the biofuel complied with its sustainability criteria. Second, the Technical Barriers to Trade Agreement (TBTA) provides guidance on how to draw up criteria to help ensure WTO compatibility. This cannot guarantee compatibility, but it can help reduce significantly the chances of WTO Members bringing actions against a fellow Member’s biofuels sustainability criteria. There is little direct case law to draw upon but it is argued that, if the TBT guidance is followed, in the long term the absence of case law can be taken as an indication that the sustainability criteria established are WTO-compatible

EU rural development policy in the new member states: promoting multifunctionality?

European Union (EU) enlargement has seen ten new member states (NMS) adopt the full range of EU policies. Within this, the rural development arm of the Common Agricultural Policy offers particular points of interest. Member states chose from an extensive list of policy measures developed within the EU15 and intended, in particular, to operationalise the concept of rural multifunctionality within the ongoing CAP reform process. This paper identifies the rural development policy choices made by the eight central and eastern European NMS and develops a taxonomy to ascertain the extent to which the NMS are directing public funds to promote multifunctionality. A number of factors are then identified as helping to influence the policy choices made across countries

EMU and Politically-Induced Output Variability: Can the Stability and Growth Pack Help?

Rogoff, 1985, suggested that central bank independence would lead to lower inflation but greater output variability. Alesina and Gatti, 1995, demonstrated Rogoff’s work was partial by only considering economic sources of output variability. By including political factors, circumstances could be identified when making a central bank independent could reduce both inflation and output variability. In EMU, however, there is no choice about central bank independence. Starting with a review of the analysis presented by Alesina and Gatti, this paper suggests national fiscal policies could also be a source of politically-induced output variability. It reinterprets the analysis of Alesina and Gatti and identifies circumstances when the Stability and Growth Pact could help to reduce output variability in EMU.