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
- The structure of the own resources system and the net position problem
- Chronological development of the own resources system
- The expenditure side of the budget
- The net position problem
- Two concepts of limiting the net balance
- The equity safeguard mechanism by Padoa-Schioppa
- The generalised budgetary compensation mechanism by Waigel
- A special case: The UK-rebate
- Historical Genesis
- Financial consequences
- Britain today: Still a rational for the rebate?
- The UK rebate – basis for a general compensation mechanism?
- Analysis of the compensation mechanisms
- The calculation of the net positions - a difficult task
- Problems on the revenue-side
- Problems on the expenditure side
- Benefits of an EU membership - beyond the budget
- Juste retour versus European policies, principles and law
- Applicability with regard to transparency
- Costs of the Waigel mechanism
- Enforceability of the compensation mechanism
- Conclusion and Recommendations
Objectives and Key Themes
This paper investigates the question of whether a general compensation mechanism should be implemented within the EU resources system to address the issue of net contributor imbalances. The study analyzes existing mechanisms and proposals, evaluating their effectiveness, feasibility, and potential consequences for EU finances and member states.
- The historical development and structure of the EU's own resources system.
- Analysis of the net position problem and its impact on EU member states.
- Comparative evaluation of different compensation mechanisms (e.g., Padoa-Schioppa, Waigel).
- Examination of the economic, political, and legal implications of implementing a general compensation mechanism.
- Assessment of the feasibility and potential costs of such a mechanism.
Chapter Summaries
Introduction: This introductory chapter sets the stage by discussing the contentious negotiations surrounding the EU's Financial Perspective 2007-2013, highlighting the disagreements between net contributors and net recipients within the EU budget. It establishes the "net position problem" as a significant factor influencing public perception of the EU and its costs. The chapter introduces the UK rebate as a historical precedent and motivates the research question of whether a general compensation mechanism should be implemented to solve the problem of unequal contributions and returns within the EU budget system. The chapter emphasizes the need for a mechanism that addresses the concerns of net contributors while aligning with EU objectives and principles.
The structure of the own resources system and the net position problem: This chapter delves into the structure of the EU's own resources system, tracing its historical development and explaining the factors contributing to the net position problem. It details the complexities involved in calculating net positions, outlining challenges on both the revenue and expenditure sides of the budget. The chapter lays the groundwork for understanding the core issues that necessitate the exploration of compensation mechanisms, demonstrating how imbalances between member state contributions and budget benefits arise.
Two concepts of limiting the net balance: This chapter presents two prominent proposals for addressing the net position problem: the equity safeguard mechanism by Padoa-Schioppa and the generalized budgetary compensation mechanism by Waigel. It compares and contrasts these mechanisms, analyzing their strengths, weaknesses, and potential impacts on the EU budget and member states. The chapter helps to highlight different approaches to balancing the budget and addresses how they differ based on their philosophies and approaches to fairness in the EU system.
A special case: The UK-rebate: This chapter provides a detailed analysis of the UK rebate, tracing its historical origins and examining its financial consequences. It discusses the ongoing debate surrounding the rebate's justification, considering whether it should remain in place or be replaced by a more general mechanism. The chapter analyzes if this rebate provides an example or a counter-example that can be applied to create a generalized compensation mechanism. The chapter also explores the reasons behind the ongoing debate on this special case.
Analysis of the compensation mechanisms: This chapter provides a comprehensive analysis of the feasibility, costs, and enforceability of potential compensation mechanisms within the EU system. It addresses practical difficulties of calculating net positions, considers the broader benefits of EU membership, and evaluates the compatibility of compensation mechanisms with EU principles and law. The chapter also emphasizes transparency concerns in implementing a general compensation mechanism.
Keywords
EU budget, net contributors, net recipients, compensation mechanisms, UK rebate, Padoa-Schioppa mechanism, Waigel mechanism, own resources system, Financial Perspective, European Union finances, budgetary balance, Juste retour.
Frequently Asked Questions: Analysis of Compensation Mechanisms in the EU Budget
What is the main topic of this paper?
This paper analyzes the net contributor imbalances within the EU budget and investigates whether a general compensation mechanism should be implemented. It examines existing mechanisms (like the Padoa-Schioppa and Waigel mechanisms), their effectiveness, feasibility, and consequences for EU finances and member states.
What are the key themes explored in the paper?
The key themes include the historical development and structure of the EU's own resources system; the net position problem and its impact; a comparative evaluation of different compensation mechanisms; the economic, political, and legal implications of implementing a general mechanism; and the assessment of its feasibility and potential costs.
What is the "net position problem" in the EU budget?
The "net position problem" refers to the imbalance between the contributions made by some EU member states (net contributors) and the benefits they receive from the EU budget, compared to other member states (net recipients) who receive more than they contribute. This imbalance creates tension and influences public perception of the EU.
What are the Padoa-Schioppa and Waigel mechanisms?
These are two prominent proposals for addressing the net position problem. The Padoa-Schioppa mechanism focuses on an equity safeguard, while the Waigel mechanism proposes a generalized budgetary compensation system. The paper compares and contrasts their strengths, weaknesses, and potential impacts.
What is the UK rebate, and why is it relevant?
The UK rebate is a special mechanism that reduces the UK's contribution to the EU budget. The paper analyzes its historical origins, financial consequences, ongoing justification debates, and potential as a model (or counter-model) for a more general compensation mechanism.
What are the challenges in calculating net positions within the EU budget?
Calculating net positions is complex due to difficulties in accurately assessing both revenue (contributions) and expenditure (benefits) sides of the budget. The paper highlights problems on both sides, emphasizing the intricacies involved in determining a fair and accurate net position for each member state.
What are the broader benefits of EU membership considered in the paper?
Beyond the direct financial benefits from the budget, the paper acknowledges other advantages of EU membership, such as access to the single market and various political and economic benefits. This perspective helps to contextualize the discussions about budgetary fairness and compensation mechanisms.
What are the legal and political implications of implementing a general compensation mechanism?
The paper examines the compatibility of compensation mechanisms with existing EU principles and laws, along with the political implications of implementing such a mechanism, considering potential impacts on EU member states and the overall functioning of the EU system.
What are the costs and enforceability considerations discussed in the paper?
The paper analyzes the potential costs of different compensation mechanisms and explores the challenges related to their enforceability. This assessment helps determine the practicality and effectiveness of each mechanism.
What conclusions and recommendations are provided in the paper?
The conclusion summarizes the findings of the analysis and provides recommendations based on the evaluation of different compensation mechanisms. This section offers insights into the feasibility and desirability of implementing a general compensation mechanism to address the net position problem within the EU budget.
What are the keywords associated with this paper?
EU budget, net contributors, net recipients, compensation mechanisms, UK rebate, Padoa-Schioppa mechanism, Waigel mechanism, own resources system, Financial Perspective, European Union finances, budgetary balance, Juste retour.
- Quote paper
- Daniel Neugebauer (Author), 2006, The debate on the rebate: Should there be a general compensation mechanism in the EU resources system to solve the net position problem?, Munich, GRIN Verlag, https://www.grin.com/document/52286
