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Fighting over peanuts? the European union budget

Center of Economic Performance (2005) Fighting over peanuts? the European union budget. CEP Policy Analysis (CEPPA002). The London School of Economics and Political Science, Center of Economic Performance, London, UK.

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Top of the agenda at the European Union (EU) summit on 15/16 December 2005 is the budget for 2007-13. The original proposal from the European Commission was for a budget of one trillion euros or 1.21% of EU gross national income (GNI). The proposal at the end of the Luxembourg presidency, rejected at the summit in June 2005, was for 871 billion euros (1.06% of EU GNI). Six months, and much discussion later, the UK’s proposal is for 847 billion euros (1.03% of EU GNI). • Any changes to the overall size and composition of the budget as a result of the summit are likely to be marginal. The current UK proposal includes cuts in development aid to new member states, cuts in rural aid to old member states, a major review of all spending in 2008 and a small reduction in the UK’s rebate. • Of the current EU budget, approximately 45% goes on the Common Agricultural Policy (CAP), 35% on structural funds (the EU’s supra-national regional policy) and 7% each on aid, administration and a diverse range of other policies. • The CAP has several negative effects. These include artificially inflating food prices in the EU, which is bad for consumers, particularly poorer ones; driving down the world price of food, which is bad for countries that produce food, many of which are poor and middle-income countries; and encouraging overproduction and specialisation by farmers, both of which may be bad for the environment. • Major reform of the CAP would use the principle of subsidiarity to repatriate the CAP to national level where it clearly belongs. • There are two main problems with the EU’s structural funds. First, the allocation of expenditure is highly political and as a result not well targeted on the poorest regions in the poorest countries. Second, the expenditure itself has not been very effective: no Objective 1 region (those targeted by the funds) has moved out of the category.

Item Type: Monograph (Report)
Official URL:
Additional Information: © 2005 Center of Economic Performance
Divisions: Centre for Economic Performance
Subjects: D History General and Old World > D History (General) > D901 Europe (General)
H Social Sciences > HB Economic Theory
Date Deposited: 17 Jul 2014 12:00
Last Modified: 16 May 2024 13:10

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