In the conclusion of the European Council in December 2005, the Presidency mentions only in a single sentence what had filled covers of newspapers the days before: “The European Council reached agreement on the Financial Perspective 2007-2013 as set out in doc. 15915/05.”1 It was the second attempt after a former Council six month before, and also this time it needed tough negotiations and a number of revised proposals, until the quoted sentence could be printed.
The reason for this controversy can be summarized in an old German adage: “Beim Geld hört die Freundschaft auf.” Those who are partners in other situations begin to bargain over every Euro they have to spend for the EU budget, giving short-term national interests priority to long-term EU interests. In some way this is understandable, despite the fact that the Council should bring forward the European project – politicians are elected in the nation states and have to justify every Euro they leave in Brussels. Besides this, the term of “solidarity” has neither in Article I-2 of the “Treaty establishing a Constitution for Europe”2 , nor in article 1 of the “Treaty on European Union”3 been concretised.
But nevertheless the difficulties surrounding the agreement on the Financial Perspective are symptoms of a serious problem: Countries which pay more into the budget than they get back, the so-called net contributors, feel to have unacceptable high costs in relation to the benefits they gain from their EU-Membership. The debate on “net positions” is one of the major reasons which lead to the low acceptance of the European Union in public: According to Eurobarometer, 62% of the population are worried “about the increasing costs for the Member States of building Europe.”4 Only the fear of a transfer of jobs to other Member States was mentioned more often (73%).
Table of Contents
Introduction
Methodology
Structure
1. The structure of the own resources system and the net position problem
1.1 Chronological development of the own resources system
1.2 The expenditure side of the budget
1.3 The net position problem
2. Two concepts of limiting the net balance
2.1 The equity safeguard mechanism by Padoa-Schioppa
2.2 The generalised budgetary compensation mechanism by Waigel
3. A special case: The UK-rebate
3.1 Historical Genesis
3.2 Financial consequences
3.3 Britain today: Still a rational for the rebate?
3.4 The UK rebate – basis for a general compensation mechanism?
4. Analysis of the compensation mechanisms
4.1 The calculation of the net positions – a difficult task
4.1.1 Problems on the revenue-side
4.1.2 Problems on the expenditure side
4.2 Benefits of an EU membership – beyond the budget
4.3 Juste retour versus European policies, principles and law
4.4 Applicability with regard to transparency
4.5 Costs of the Waigel mechanism
4.6 Enforceability of the compensation mechanism
5. Conclusion and Recommendations
Objectives and Core Themes
The primary research objective of this thesis is to determine whether a general compensation mechanism should be implemented within the EU resources system to address the perceived "net position problem." It evaluates the fairness of budgetary imbalances and the feasibility of correction models.
- Current structure of the EU own resources system and the origins of the net position problem.
- Evaluation of proposed compensation mechanisms, specifically those by Padoa-Schioppa and Waigel.
- Critical analysis of the UK-rebate as a potential model for broader EU financial policy.
- Scientific assessment of the technical difficulties in calculating accurate national net positions.
- Political and economic feasibility of enforcing compensation mechanisms among Member States.
Excerpt from the Book
3.3 Britain today: Still a rational for the rebate?
Today all Member States except Britain criticise the compensation mechanism. Even the Commission comes to the result that “in view of the dramatic shift in the UK`s position compared to the other net contributors, it is legitimate to re-consider the existing correction system”.
There are four arguments against the mechanism:
1. The structure of EU spending has changed. While in 1984 70% of the total expenditure was used for CAP, the share decreased to only 42,4% in 2004. Therefore it can not be argued, that the rebate corrects a specific agricultural problem of the UK. Instead, the rebate includes all other EU policies, e.g. cohesion or financing of enlargement.
2. While the relative prosperity in the United Kingdom was below EC average in 1984, Britain belongs to the richest countries in the EU today. As figure 1.4 shows, Britain’s GNI per capita has reached 152 (EU25 = 100) and is only beaten by Sweden, Denmark and Luxembourg.
3. The budgetary imbalance is not unique. While Britain had the biggest imbalance before the correction, we have four other countries with a similar budgetary imbalance today. Therefore the Berlin European Council decided that those four countries only have to pay 25% of their normal share of the UK rebate (before it was 33%). The absurd result of this decision is that relative poorer countries have to pay a rebate for one of the richest countries in the EU.
4. From the point of solidarity it can be argued that the rebate is against the “principle of solidary responsibility for the common revenues.”
Summary of Chapters
1. The structure of the own resources system and the net position problem: This chapter outlines the development of the EU's own resources system and introduces the concept of budgetary imbalances between net contributors and net recipients.
2. Two concepts of limiting the net balance: This section explains two specific theoretical models, the equity safeguard mechanism by Padoa-Schioppa and the generalized budgetary compensation mechanism by Waigel.
3. A special case: The UK-rebate: This chapter examines the historical context and financial impact of the UK-rebate, questioning its ongoing rationale and suitability as a model for future reform.
4. Analysis of the compensation mechanisms: The final analytical chapter evaluates the technical, financial, and political criteria required for a functional correction mechanism, including the difficulties of net position calculations.
5. Conclusion and Recommendations: This concluding chapter synthesizes the arguments and suggests that while technical challenges persist, a "second best" correction mechanism might be necessary for public acceptance and fairness.
Keywords
EU budget, net contributors, net position, own resources system, UK-rebate, budgetary imbalance, Padoa-Schioppa, Waigel mechanism, juste retour, financial perspective, Rotterdam-Antwerp effect, solidarity, fiscal equity, EU financing, European integration
Frequently Asked Questions
What is the central focus of this thesis?
The thesis explores the debate surrounding budgetary imbalances within the European Union and assesses whether a general compensation mechanism should be established to correct the "net position problem."
What are the primary themes discussed?
Key themes include the structural evolution of the EU budget, the fairness of financial contributions, the technical complexities of calculating net positions, and the political challenges of reaching unanimity on budgetary reforms.
What is the main research question?
The research question is whether the European Union should implement a general compensation mechanism in its resource system to resolve the net position problem.
Which scientific methods are employed?
The study utilizes desk research, content analysis of legal acts and primary EU documentation, and statistical analysis of budgetary data to evaluate the feasibility of proposed correction models.
What topics does the main body cover?
The body covers the history of EU resources, theoretical correction models (Waigel and Padoa-Schioppa), a detailed analysis of the UK-rebate, and an evaluation of the criteria for political and financial enforceability.
Which keywords characterize this work?
Core keywords include EU budget, net positions, own resources system, UK-rebate, budgetary imbalance, and fiscal equity.
What is the "Rotterdam-Antwerp effect" mentioned in the study?
It refers to statistical distortions where duties collected in major port countries (like Belgium and the Netherlands) are formally attributed to those countries, even though the economic cost is borne by the final consumer in other Member States.
Why is the Waigel mechanism considered a potential "second best" solution?
The author argues that while calculating true net positions is technically imprecise, a mechanism like Waigel’s provides a transparent and feasible tool to improve perceived fairness and align contributions more closely with national prosperity.
- Citar trabajo
- Daniel Neugebauer (Autor), 2006, The debate on the rebate: Should there be a general compensation mechanism in the EU resources system to solve the net position problem?, Múnich, GRIN Verlag, https://www.grin.com/document/52286
