Reform Approaches

Part of the ZEW Economic Studies book series (ZEW, volume 40)
During the course of the upcoming budgetary review scheduled for 2008/2009, not only the revenue side of the budget will be inspected but also the expenditure side. Both in the conclusions of the EU Council (European Council, 2005) and in the new Inter-Institutional Agreement (European Parliament, European Council & European Commission, 2006) an explicit reference is made to a revision of the UK correction and, on the expenditure side, of the Common Agricultural Policy. This broad view of the reform perspective is in line with our finding (see section 3.6) that many revenue side characteristics reflect compensation measures for perceived misbalances on the expenditure side. Therefore, it is not unrealistic to assume that any fundamental reform of the revenue side (with the reform of the UK correction as the prime objective as shown in section 3.7.4) is conditional on changes of the expenditure side. As the Lamassoure report (2007: 10) holds it,

the political link between a reform of revenue and a review of expenditure is inevitable and perfectly reasonable, especially as long as the logic of financing Community policies through revenue stemming from national budgets is still the Union’s guiding principle.

The calculations given in the following sections are based on the assumption that no radical solutions will materialise with regard to the expenditure side. In this short excursus we intend to sketch which modifications may emerge to our results if – against our expectations – a fundamental restructuring of expenditures could be achieved. Here, it should be stressed that many of our arguments with regard to single own resources items hold independently from expenditure side developments. What will be subject to change in the case of fundamental expenditure side reform, however, are the distributive effects. In the following, some of the possible reforms on the expenditure side are briefly presented, and their implications for the design of the revenue side are shown.


International Energy Agency Nominal Exchange Rate Expenditure Side Refund Rate Revenue Side 
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© Physica-Verlag Heidelberg 2008

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