European Public Finances : Much Ado About Nothing ?

In this article, European public finances are analyzed by focusing on the EU budget and the influence of the EU on member states’ taxes and spending. Starting from the economic theory of federalism, the chapter surveys the development of EU revenue, spending and off-budget activities, discusses the redistributive impact of the EU budget on member states, budgetary decision-making procedures and to what extent the EU influences member states’ public finances. It is demonstrated that political reasons have been the driving force for EU finances in the past and argued that it will dominate in the future. The analysis is hence guided by a political economics perspective on the interaction between the different players in EU decision-making and the institutional restrictions they face. This involves the interests of the Commission, the Parliament as well as those of the single countries in the Council. They are restricted by the system of member states’ contributions to the EU and the balanced budget requirement, but also by the budgetary procedures that determine their individual decision-making power. Paper prepared for the Handbook of Public Administration and Policy in the European Union, edited by M. PETER VAN DER HOEK, Erasmus University Rotterdam, The Netherlands. – Revised Version. I would like to thank Jan Schnellenbach and three anonymous referees for valuable suggestions and criticisms. Mailing Address: Prof. Dr. Lars P. Feld Philipps-University of Marburg Public Finance Group Am Plan 2 D-35096 Marburg (Lahn) Germany [email protected]