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Budgetary decision making in the EU

Kilian Seng
Zeppelin University Friedrichshafen
Kilian Seng
Zeppelin University Friedrichshafen
Open Panel

Abstract

There is an ongoing debate about the importance of structural aspects versus power concerning the annual EU budget allocation to the member states. Setting thematic priorities for funding automatically has redistributive implications. Structural aspects can be understood as the formal decision making procedures governing the allocation of EU funds to the member states, which are indeed very complex as they involve many relevant actors and require the application of a plenty of specific funding rules. However, there still seems to be a lot of political discretion, which led to different attempts to rephrase the allocation of EU funding as primarily a matter of voting power of the member states in the EU Council - measured by voting power indices. The article discusses the literature on EU budget allocation and divides them into two broader categories, namely the ones focusing on decision making in the EU Council only and a second group considering also the interaction with other institutions as the EU Parliament. I use panel data on 25 countries for the period from 1976 to 2008 to demonstrate that the budget distribution cannot sufficiently be explained by approaches considering power only. Systematic deviations of the overall budget from the predicted values at the expense of small net payer countries become obvious. An additional complication is that the entire budget is not at the disposition of member states at the annual budget negotiations – as the simple voting game suggests. I show that the inclusion of structural variables can improve predictions significantly. Finally the commitment appropriations of the EU indicate a major shift in structural funds from the old to the new member states, so that Poland could become the biggest recipient of EU funding already by 2013.