Language learning | English » Kiss Eszter - Opposits and interests related to the EU budget 2007-2013

http://www.doksihu Budapest Business School Faculty of International Management and Business Foreign Correspondent Professional Training Opposits and interests related to the EU budget 2007-2013 (Ellentétek és érdekek az EU 2007-20013-as költségvetése kapcsán) Prepared by: Eszter Kiss Budapest, 5 April 2005 2 http://www.doksihu CONTENTS Introduction.4 The Commission’s proposal.10 Reactions to the Commission’s proposal16 Summary.23 Bibliography.27 3 http://www.doksihu Introduction The reason for having chosen this topic is that this issue is quite difficult and interesting as in this case not only the economic considerations but also the political interests play a significant part. Therefore, it is rather hard to make the EU the world’s most competitive, knowledge-based economy which characters would be essential so that the Member States’ economy could prosper both in the long and the short run. The big question is whether the Member States of the EU

would make an effort to leave a few of their interests out of account in order to reach the common long-term aims, like the establishment of a Europe composed of countries with high level of development, based on collectively given assistances and the protection of all the national characters, for example mother tongue, culture, feeling and dress. It will take many years to accept the budget plan as there are several difficulties which make it extremely hard to reach a common agreement. One of the main causes of the problems is that the Member States have to accept it unanimously. The other difficulty is caused by the way the countries calculate their profit. They support only the recommendations by which they are going to get more money from the common budget than they have paid in. It is understandable, although we cannot forget the other aims of the EU. There are facts that give a real meaning to the concept of European citizenship and cannot always be showed in figures. This is

the establishment of an area of Freedom, Security and Justice in the Union. Specific initiatives in this area included the decision to create a European Police Academy, to establish an agency for border control (strengthening but not replacing national efforts) and migration policy. During the process of making an acceptable budget the states should consider not only the “figures” but also these factors as being profitable in the economic sense is not the sole aim of the EU. Its own resources and other revenues finance the EU budget. The own resources can be defined as revenues accruing automatically to the EU in order to finance its budget without the need for any subsequent decision by national authorities. The own resources finance the bulk of the EU budget, but there is also a small share of other revenues (e.g 4 http://www.doksihu bank interest and contributions from non-member countries to certain Community programmes). When the Council and the Parliament approve the

annual budget’s total revenue, it must equal the total expenditure. The total amount needs to finance the budget automatically from the level of total expenditure. In case there is a surplus it reduces the Member States GDP-rated contributions in the subsequent year, although it is not allowed the EU’s balance to show deficit and settle it by credits. Every May the Commission puts forward a draft preliminary budget for the following year. Using this as a base, the Council then establishes its own draft budget The European Parliament then reads the budget proposal and returns it to the Council, which subsequently returns it to the Parliament for a second reading and adoption. The process should end in December. During the presidency of Jacques Delors the European Commission put forward two reform packages in order to put the problematic issues into order for example to make clear the financial backgrounds of the budgetary frames. His second package was accepted in 1992, in which

till 1997 the statement of costs was indicated. This was the first time when the period of seven years came up. This plan was a serious step towards a fairer encumbrance division among the Member States, although it meant the decrease of the own sources at the same time too. On the whole this package gave the poorer countries an advantage as the richer states consented to make material sacrifices for them. We can distinguish compulsory and non-compulsory expenditure in the EU’s budget. In the former case the Council has the final say on the level and structure of all these sorts of expenditure. The compulsory expenditures include the Common Agricultural Policy (CAP) and other much smaller budget items. This kind of expenditure reaches almost the half of the total budget because of the size of the CAP. All other budget expenditures belong to the non-compulsory ones and over this element the European Parliament has the final decision. 5 http://www.doksihu Recently, each budget is

accepted within a framework called the Financial Perspective. There are wide categories of the annual expenditure, like external actions, internal policies and agriculture - at present we find them under new names. Every category has a ceiling settled in advance that must be taken into consideration by the Council and the Parliament when they decide on the annual budget 1 We can mention several major principles in accordance with which the EU budget operates and which the EU budget always has to take into account. 1.The principle of universality is based on two rules: a. the rule of non-assignment, which states that budgetary revenue may not be allocated to particular items of expenditure b. the gross budget principle which states that all revenue and expenditure must be indicated in full in the budget without any adjustment 2. The principle of unity means that all the Communitys revenue and expenditure must be brought together in a single document. 3. The annuality principle

means that budget operations relate to a given budget year This way it is easier to control the activities of the Community executive. Commitment appropriations cover the total cost in the financial year of the legal obligations entered into. The payment appropriations cover expenditure, up to the amount entered in the budget, resulting from the commitments entered into during the financial year and/or previous financial years. 4. The principle of equilibrium requires estimated revenue for a financial year to be equal to the expenditure of that year. No funds may be borrowed to cover a budget deficit. A surplus is entered as revenue in the following years budget In case any unforeseen additional expenditure comes up in the course of the year, it must be financed by a modified budget which will regroup appropriations within the budget. 1 See: http://www.cecorguk 6 http://www.doksihu 5. Specification of expenditure means that each appropriation must have a given purpose and be

assigned to a specific objective in order to prevent any confusion between appropriations at both the authorisation and the execution stage. Thus to ensure that the established budget be quite unambiguous it is executed in accordance with the wishes of the budgetary authority. The new currency, the euro has been in use since 1 January 1999, which is linked to 12 of the 25 Community countries (Denmark, Sweden and the United Kingdom are still outside the euro zone and the new Member States). The estimates of expenditure and revenue in the budget are drawn up in euros. In the coming period (2007-2013) the arguments in the enlarged European Union are expected to become more intense than the former ones. There are several prominent points which are going to come up, like the reforms of the common agriculture, the appearance of new items among the expenses and the way of sharing the encumbrances, especially in connection with the structural and cohesion funds. The Member States’ disputes

are mostly based on their different stage of development and the economic regional differences in their countries – the latter, of course, is not applicable to all of the member states, e.g to Cyprus, Malta or Luxemburg However, on the whole this sort of problem can be found in most of the Member States. Since each country would like to represent its interests with good results it can happen that they are going to do it together. For the sake of protecting their common goals more successfully the states may form smaller groups. In this manner they could increase the chance that their wishes be reflected in the budget later on. On the basis of many aspects the nations can organise themselves into groups. One of these groups consists of the EU’s big net contributors: Germany, the United Kingdom, the Netherlands, Austria, France and Sweden. Having paid a lot into the budget it is not surprising that they gave voice to their opinions during the elaboration of the common allocated

funds of 2000-2006 and currently as well. Since the big net paying states were aware of the fact that almost each new member would be entitled to the common regional subsidies, they counted on a proposal which stated that the sum of this subsidy 7 http://www.doksihu should be raised. With a view to prevent it they started to campaign so that the amount of their contributions be reduced. To solve this kind of problem the European Commission published the Agenda 2000 program package (accepted in 1999) containing suggestions in relation with the change of the structural and the cohesion policy. It wished to put forward a proposal concerning the above-mentioned issue which would be acceptable both for the present and the new members and could be financed by the budget. There is a high value on this package as the fair distribution of the structural and the cohesion funds causes big difficulties related to the budget of 2007-2013 too. Since the main net contributors’ aim to reach the

decrease of the expenditure was very powerful, a lower rate of the expenses of the structural and cohesion budget was accepted than the one put forward by the European Commission. At the time of accepting the Agenda the Member States still did not know how many states and when would join, so later on the expenses of the structural and cohesion policy were modified several times. The real starting point of the debates about the budget was the European Commission’s proposal both in 1997 (Agenda 2000) and in February 2004 (EU budget between 20072013). It turned out from the reactions that the four countries’ aspects (Germany, Austria, Sweden, the Netherlands) differ in certain cases on which they set quite high value, although they have quite a few common interests too. Consequently, they are going to take steps on the basis of the same principle in some cases. Their actions will assemble in a strong group when the calculation arguments are coming on, especially because France and

the United Kingdom agree with them in the basic issues as well. Neither the French and the British nor the four states intend to accept a budget exceeding the former one, moreover they would decrease it. As regards Hungary there is one essential controversion between it and the big net payers: meanwhile they would like to pay as small a sum of money for the budget as it is possible, Hungary has an interest to keep the budget as large as it can be - being a prospective significant net beneficiary. Our elementary aim is to make a larger sum of money available from the cohesion funds. It corresponds with the goals of the states which have been the biggest 8 http://www.doksihu beneficiaries of the structural funds earlier. On the other hand, this interest does not accord with net payers’ ones. Therefore, the debate about the collective budget money is unavoidable, but it is practical to avoid arguing about how this contribution should be distributed with the recent beneficiaries for

the time being as they are our potential competitors for the appropriation of this source. If these arguments began too early, our chance of acquiring a sizable amount of money would considerably decrease. 9 http://www.doksihu The Commission’s proposal Since 10 February 2004, when the European Commission brought its recommendations to the open they have been in the crossfire of disputes. As for the Commission’s timetable it hoped to have a decision on the financial perspectives in the first half year of 2005. Based on the Commission’s proposal the whole structure of the budget seems to be changed, although the new categories consist of all the previous articles. Similarly to the preceding ones, the regional policy and the agricultural policy are emphasized too. There are new policies as well, like the aim of competitiveness, the protection of the EU’s borders and neighbourhood policy, which are all supported by Hungary. In the European Commission’s view the remedial

sources should be concentrated on the new Member States thus, we have to entreat carefully the big net payers’ aspect. Of course, this position would be very favourable for Hungary but the recent recipient countries would not appreciate it at all. This way it would become harder to reach the increase of the budget’s size because in a situation like this they are not likely to support this proposal. The European Commission’s budgetary proposal means abundant sources to the new members so that they be able to fall into line with the others. However, we must make it absolutely clear that these are just recommendations. Nothing could spoil more the possibility of this proposal’s implementation than if it turned out that we were not able to spend this money efficiently. With a view to the above-mentioned considerations we have to look for those part areas on which we can have joint interests with the big net paying countries for no one wants to have “enemies” in the Union. Or

rather, everyone can need the other’s back in the future. In addition, the supposition that says that rather the countries than the regions would get the sources can be greatly important for Hungary. This sort of solution could make the use of the EU- subsidies smoother since the regional institution system in 10 http://www.doksihu Hungary has not been formed efficiently yet. Besides, if the state got the money it could reduce the looses in the long run in case the most-developed areas come out of the outstanding supporting rounds, as it can happen to the regions in Central Hungary, because afterwards these developed regions could not participate in significant subsidies. However, in this case the internal policy would have a significant part in distributing it in the country, of which unfortunately I am not convinced that it would be absolutely fair. Areas whose presidents are from the same party as the prime minister, perhaps could get more subsidies. Anyhow, I find the EU’s

supervision completely necessary since it is much more independent from the internal policy of the given state. The phrase “common” is stressed, although not all the nations’ connection is the same with the common budget. On the one hand, the size of the payment depends significantly on the geographical location and the relative richness of the country. Under the geographical location we think of, for instance, the size of a state. In a smaller country like Malta there are no regional differences or even if there are, those do not mean a considerable problem. This way Malta and the countries in a similar situation (e.g Cyprus or Luxemburg) are not really affected by the regional policy and its subsidies. On the other hand, the amount of the contributions that a state can have a share in hinges upon its economic state of development and structure. This way it is hard to strike a balance between the nations, therefore, it is one of the always-present issues in the disputes about

the acceptance of the budget. The Member States’ views that representing their interests alone is efficient has changed. Nowadays they have started to form groups to protect or oppose the Commission’s suggestions together. The financial perspectives sought to set the framework for the annual budget and provide the means to implement EU policies. The Commissioners discussed the goals and challenges ahead, the instrument of the financial perspectives and the specifics of the new proposal. 11 http://www.doksihu Categories of the proposed financial framework 2007-2013: 1. Sustainable growth: This category would have two subheadings: (a) Competitiveness for growth and employment. It is debated that the EU must realize the full potential of the opportunities posed by enlargement, which would make the Union the largest internal market in the world. More must be done for example to strengthen coordination of research activities to make the EU more competitive compared to the United

States, Japan and China. This sub-category also includes education, training, improving student mobility and Trans-European networks. It also contains a reserve to be used in connection with the broad economic policy guidelines. (b) Cohesion for growth and employment. The cohesion and structural funds are the EU’s instruments for solidarity and should be one of the main instruments to increase competitiveness of the regions. The Commission’s plan would give equal treatment to poor regions in rich old member states or poor new member states. It also contains an instrument for cross-border cooperation . 2. Preservation and management of national resources This includes agriculture in the form of market-related expenditures and direct aid to farmers. It is currently a hard question for the Council whether this should be changed or not. Rural development and the environment protection also fall under this category. 3. Nationality, freedom, security and justice The creation of

this new category evidenced how this policy area had risen up the political agenda. It includes migration policy and border control, which would become even more important with the EU’s eastward expansion. It also includes protection of health and of consumer interests – to mention only a few aspects where the European citizen expect the EU to provide 12 http://www.doksihu "European public goods". Beside these, the backing of the European culture and the variegations are emphasized as well. 4. Unexpected expenditures Due to the unforeseen extra expenses some reserve amount of money is always separated. It takes usually about 1 or 2 % of the total annual budget. 5. The EU as a global partner This should include the European Development Fund, providing assistance to African, Caribbean and Pacific nations in the future, which are currently part of an extra budget, as well as pre-accession bids to countries such as Turkey. Putting the European Development Fund under the

EU’s central budget would help overcome many of the bureaucratic hurdles currently faced by recipient countries. Spending in this area should be increased, especially given increasing expectations that EU should speak with a single voice in external affairs. “We take this very seriously,” Ms. Schreyer (European then - Commissioner who was responsible for the EU budget) said. "Europe should take over more responsibility in the world", she added 6. Administration It contains the supporting of the EU institutions’ operation 7. Introduction of a common refunding system In this manner the EU wished to comply with the English request for correcting its budgetary imbalance. This issue is one of the most difficult ones. Being the United Kingdom a big net payer of all proportion it has got back around two thirds of its net contribution since 1984. The Member States, whose net contribution reaches a certain level of their GDP, in order to avoid being in the position of the

exaggerated net payer have reached that their contributions to the refund be reduced. Therefore, the difference between what the Member States pay in and get out cannot be unfairly high. On the other hand, unfortunately this all results in financing this expenditure by the other members, who are quite poor. In its proposal, the European Commission was by no means suggesting an increase in the “own resources ceiling.” It proposes to use 114% on average over the period, although there are countries which still find it too high, like Austria. 13 http://www.doksihu This proposal dealt with the income side too. The means by which money is raised to fund the budget are set out in the agreement known as the Own Resources Decision. These five plus one sources of the Community revenue together account for almost 75% of the Unions budget: 1. Customs duties: after importing from the external countries these duties behove the common budget based on the common duty tariffs. The Member

Sate which is responsible for the collection can keep a fix per cent (20-25%) to cover its administrative expenditure 2. Agricultural duties: within the frame of the common agricultural policy they come in the budget too. Its task is to equalize the differences between the lower world market prices and the higher community prices. The relevant point in which it differs from the first one is that this sort of duty changes frequently, so it is called a moving duty. The disadvantageous side of these two duties is in their gradual decrease due to the ambition for self-sufficiency and the liberalisation of the world trade, decreasing the amount of the duties. 3. VAT (Value Added Tax) - based contributions: it cannot be regarded as a real community tax since the Member States pay it monthly harmonised with the amount determined in advance for the financial year. Since every country is obliged to pay the same sum of money irrespective of their economic positions it puts a significantly

bigger burden on the poorer countries. 4. Contributions based on Gross National Product (GNP): it was introduced in 1998 to refill the revenue side to be able to finance the expenditure of the EU and to reduce the poorer countries encumbrance. Without this source their encumbrances in comparison to the national income was significantly deformed. 5. Introduction of the EU-tax Its imposition would be necessary so that the sharing of the states’ payments become fairer. This one could be a determined in proportion with the imposed tax for the companies’ income or of the VAT as 14 http://www.doksihu well as the energy-tax. If this is accepted, it could lead to more peaceful negotiations about the budget as the bigger part of the European Commission’s plans were financed by its own resources. This way the Community could get a comprehensive and directive part over the Member States, therefore the thought of a unified European Union could come closer to the reality. Unfortunately,

we have to admit that this action would result both in advantages and disadvantages. To find the best solution is not easy in this case so we can count on a big fight between the Member States again. Currently the countries should only consider concerning this recommendation whether they could back this idea from the beginning of the next period (2014) 2. 2 Source: European Commission (2004a), p. 29 15 http://www.doksihu Reactions to the Commission’s proposal Unsurprisingly the Member States do not agree with all the issues and it just makes the procedure more difficult that not each of them protests against the same article. Of course, there are suggestions that a few of them support, and there are other recommendations backed by other groups. In order to come to an agreement I think it is essential that all the states try to understand the others’ reasonings and be willing to make a compromise. As I mentioned we can talk about at least three big-sized, strong groups. I am

going to present the views of a group including some of the big contributors: Germany, the Netherlands, Sweden and Austria. However, for instance the UK and France do not belong to them in this case as they have special interests but in the basic issues all the big net paying countries are going to take steps together. This way they are going to form a pretty strong block. The second group is made up of the four big net beneficiaries: Greece, Spain, Portugal and Ireland. The third big one consists of the Eastern-European states: among others our homeland, Slovakia, the Czech Republic and Slovenia, which also have common goals. Let’s see first the big net contributors as maybe we can say that their parts in the budget are indispensable. Each of the four countries thinks the same about their most important question: the upper limit of the common budget is unrealistically high. Germany, Austria, Sweden and the Netherlands insist on the value of 1 % of the GNI. In my view this value is

not high at all, and even not the 1,24%. There is no doubt that the sum of money sounds much - since it is much -, but we should focus on the fact that it is only 1,24% of the GNI that is not indispensable. Meanwhile the Austrians are against nearly all the recommendations, the Swedish judgement in connection with the proposal for the structure of the expenses is at least positive. In accordance with the German, Swedish and the Dutch opinion during the period of 2007-2013 the old members should limitedly participate in the structural and cohesion assistances and none of the three 16 http://www.doksihu states support the introduction of the tax based new source. The Dutch clearly stated that the cohesion policy should concentrate only on the Member States which really need it. Their other suggestion is to handle mindfully other issues that are not mentioned in the proposal, like the question of the migration. The Germans and the Swedish agree with the Dutch concerning the expenditure

that it is the right of the new members to get the regional and the cohesion subsidies, but according to Germany the method to support the regions instead of the countries is not unacceptable. Among the four states only Sweden agreed with the European Commission on the length of the financial perspective. It is sure that they are going to be very confident, just as before since the amount of the cohesion and structural expenses have been constantly on the agenda because of deciding what rate would be the most suitable both for the richer and the poorer countries concerning the financial transactions. With the accession of the new members it is just going to be more difficult to make a common agreement. Besides these, I should like to mention that to decide which states are richer and which are less well-off causes a problem too. The balances of the Member States do not reflect always the existing stage of development. This way it can happen that a pretty rich country becomes the

EU-budget’s beneficiary, like Denmark and another state, like the UK will be one of the big contributors, although its GDP per capita is below the common average. Even if it succeeds in spending money on the “poorest” states, the total amount of the subsidy does not necessarily stay in the supported country, since the investments financed from the EU’s budget are frequently carried out by the firms of the developed states. Afterwards, it will be possible that they acquire a part of the backed states’ income for instance in the form of tax so this sum of money simply goes back to their public cashes. In my opinion the four net beneficiaries could be the first who set a good example with their “renunciation and unselfishness” and could present a main goal of the European Union. Up to this time they have been the most supported countries, but the accession of the 10 new members is likely to change it. Most of them need to be backed therefore, the four states should renounce

the subsidies in the new Member States’ favour. Or to be more precise the yet beneficiaries should contribute to the European Commission’s suggestion including this sort of efforts. The unified Europe should have priority over their national interests. This way of thinking is quite hard because the citizens of a 17 http://www.doksihu country are not keen on sacrificing themselves for the citizens of another country. The task of the government to explain to them why the renunciation is advantageous for them is not simple as the profit is nowhere and in a world like this, where money plays a significant part, the material interests are the crucial ones. We can state that they agree with each other in quite a few issues. None of the four beneficiaries would be against the period of the 7 years and the ceiling of 1,24 % moreover Spain find this number the lowest one which should be accepted. It would not mind if this rate was higher, but since it is fully aware of the opinion of

the big contributors, the Spaniards are not going to put forward this sort of suggestion. Each of the four beneficiaries is against the ceiling of 1% and they are emphasising the EU’s tasks, the implementation of which would be unrealisable with this sum of payment into the budget. They are ready to consider the idea of harmonizing the tax system and the tax-based community payments. Besides, they are not unwilling to accept the Energytax but only with adequate corrections All in all both Ireland and Greece accept the EU’s coming priorities, although the Greeks would do it only on the condition of a uniform tax system. For Greece the establishment of workplaces, the increase and the remedial program are essential. About the latter one Portugal and Spain have the same opinion, so basically they made a favourable statement on the Commission’s proposal. All four of them have a stake in raising the European Parliament’s authority and its budgetary competence. In this manner they

could feel the democratic operation of the EU is ensured. According to all the indications Ireland, Spain and Greece are willing to support the EU measures if the new Member States come to an advantageous, financed position. However, not all of their interests correspond. With reference to the CAP (Common Agriculture Policy) allowances, Ireland is alone that does not have an interest in the regrouping of the CAP expenses in favour of the structural funds. Spain and Portugal would show an inclination towards the significant reform of the CAP provided that in this way it becomes possible to increase notably the amount of the structural funds’ sources. Since they count on that they would have a chance of receiving the same amount of the subsidy from the structural funds as before. In case it did not happen these two states would be elbowed out of the beneficiaries’ round. As Greece’s amount of income originated from the structural funds is nearly the same that is coming from 18

http://www.doksihu the CAP, this kind of change would be acceptable for it as well. In this manner, we can say that the expenditure of the CAP is one of the always-present issues. As Portuguese agricultural products are less affected by the CAP subsidies it does not have an interest in increasing this sort of subsidy. On the contrary, a country that has a big agricultural sector and produces first of all continental products, like France, can benefit from this subsidy. On the other hand, states that are the main supporters, which do not have considerable agrarian account, are not keen on financing it, for example the United Kingdom. A significant agricultural reform has been tried to accomplish for a long time, but it always has been managed to arrest this initiation. However, it is true that France and the UK have the same basic interests as being big net paying countries and would like to pay less or at least not more in the future, but we can see that there are opposites between

them too. In this part I am going to outline some East-European countries’ aspects. As every one of them is a new member they had to pay their part first in May (two-thirds of the annual budget) in favour of the European Union. They can effectively take part in the elaboration of the financial plan since their accessions. All of these countries intend to ask for subsidy in order to reduce the regional differences in their homelands. I can imagine the establishment of a Common Program that would cover EU sources which can be acquired by more countries together. The members with the same interests (like presently the new Eastern countries) could take steps to reach common, bordercrossing goals increasing the chance of getting the contribution and showing they are able to cooperate well. It could make it possible that the states become much more attractive for both the national and international capital in shorter time as the redistribution would be unnecessary among them and the

states could check each other any time. Among these new Member States Slovenia is one of the smallest ones in CentralEurope and has the highest stage of development. Originating from the fact that it has traded with former Yugoslav countries, Slovenia emphasizes that solidarity should remain a main principal in the enlarged EU too as it has an interest in improving the European Union’s connections with its neighbour states. 19 http://www.doksihu As I mentioned above each of them lays claim to the structural and cohesion funds. In our case we wish that the rate between these two contributions changed in favour of the latter one. Up to that time we need the agricultural subsidies and we can only hope this amount of money is going to increase, until Slovenia finds them exaggerated and inefficient. According to it this sum should be turned to the structural funds and the regions of the new states should have a share in the regional subsidies during the whole period (the seven years)

continuously. In the case Slovakia would support the strengthening of the cohesion policy more. The huge differences between Bratislava together with its environs and the East part of the country (lots of slums) catch our eyes. Therefore, the Slovakians’ main aims are the modernization and the recovery of the state. They are fighting for sources from which they would finance the education, the retraining of the unemployed people and the training of that part of the society that needs to keep up with the others. Consequently, this way the Slovakians could increase the flexibility of the labour market and the employees’ educational level could be higher, not mentioning that the unemployment would decrease and the economy of country could start growing. Besides, they intend to develop their traffic infrastructure and industry structure to abolish the regional differences and to attract more investors later on. In their views concerning the target of the competitiveness is that all

the Member States have to be entitled for its utilization. For them the fair division of the encumbrances has great importance consequently, they refuse the current British rebate system and they claim for further refunds, as they don’t serve the concept of the solidarity. Additionally, they profess that both the “new” and the “old” Member States have to be measured with the same scale from any kind of aspects. During the passing years the Czech Republic’s economy has continuously improved and it is going to do its best to keep up this tendency more efficiently with the help of the subsidies. Its expressed aim is to keep up with most of the developed countries so it intends to be a net beneficiary till the end of the coming period (2013) and make the most of the EU’s subsidies. In spite of it the Czechs do not wish to reach the increase of the EU budget, moreover they are open to accept the reduction of the ceiling’s value provided that it will not influence the new

members unfavourably. 20 http://www.doksihu Having a different opinion from that of the Hungarians and the Polish, the Czechs do not set a high value on employment and production. They have faced with considerable environmental pollution in the former industrial areas and they had to encounter a growing unemployment rate in the depression areas since the democratic transformation. The differences in the country have not changed relevantly in the past decade. In this manner, the economic and the social development of these regions have the priority over everything else. The Czech Republic needs to improve the competitiveness of the country and its educational level. Because of these reasons it is expected that the Czech Republic will not modify its plan. The European Commission’s proposal would suit the Hungarian expectations provided the amount of the Member States’ payments increased. However, we have to keep in mind that in the big economies the economic growth is decreasing

and thereby reforms should be carried out in their homelands, like in Germany. The Commission held out the prospect of providing an even bigger amount of money for Hungary during these seven years. This way Hungary could lighten its economic backwardness, and could reform its economic structure. After Hungary’s accession we will have a share from the subsidies in the frame of the Common agricultural policy, structural policy and the internal policies. Being member States, of course just like all the other members we also have to contribute to the EU budget. During the period of 2004-2006 Hungary is going to get back 1,389 billion euros from the European Union, which is by 386 million euros more than our contribution 3. Similarly to the beneficiaries we do not agree with the 1 % ceiling either, because the sum of money for the developing countries could decrease and a dangerous fight could start between the “old” and the “new” beneficiaries. One way how Hungary could avoid a

situation like this is if it put forward a proposal that was available only for the countries of this area. It should aim at developing regions crossing the borders 3 Source: Hungarian Ministry of Foreign Affairs 21 http://www.doksihu Actually, we could bypass the problem of the internal policy’s interests and our reputation in the investors’ eyes could get better. The European Commission recommended a subsidy of 24, 61 billion euros for Hungary, which takes 300-320 euros per capita annually. In order to the EU budget be able to transfer this sum of money for us, the budgetary ceiling of (at least) 1,14% would be needed. Meanwhile the big contributors set the ceiling of 1 % and would like to all the actions to this arrange, the beneficiaries wish to reach the 1, 24 % and this way achieve as many goals as they can. On the negotiations the backed states should emphasize that they are able to use efficiently the contribution and they do not need more decades to keep up with

the others as there is a lot at stake. However, every one has to see it clearly that it is pretty essential when, how much and how we can have access to the subsidies. In the worst case a sum of money transferred not in the right time can cause economic decline or social problems. In addition, we should not abuse the minority block’s power, as it can be more harmful than advantageous in the future, the constructive behaviour is the most effective in the long and in the short run too. This statement is of course true for all the other Member States as well, and they are open to these “rules” too. In my opinion it is that makes the task of the nations’ representatives so interesting. We are of the same opinion as the Slovenians because any sort of refunds based on the principle of solidarity is not right. We agree with the Commission’s proposal concerning the length of the financial perspectives that after 2006 it should take seven years, and afterwards (from 2013) the periods

of five years should follow each other. This method could make the agreement over the budget easier as the Member States should set their aims in the shorter run. 22 http://www.doksihu Summary All in all I think we can state it without any exaggeration that all the Member States aspire to carry their targets into execution on which they can obtain profit and would not spend on goals that would be advantageous firstly from the Community’s view. I am full with doubts concerning the fact whether it will be ever possible that the EU’s first aims become the first aims of the countries too. Its reason is that in our world where money directs almost everything it is difficult for me to believe that once the collective backing, the solidarity and the wish to help for each other will be the leading principals. Moreover, I have to add that it has arisen in me whether different groups of the Member States are going to be formed in the future on the basis of their stage of development.

This way the countries in unfavourable position could not be such a big burden to the more developed ones as in the enlarged union everything is going to be carried out in a slower and more roundabout way. In a “more-tier” Union the poorer states would get some subsidies (but I am sure not so much as in an absolutely unified Community) to develop but the uniformed Europe would not come true. Unfortunately, this idea has arisen in the Greeks too (not just in me) that we can take an ill omen but it augurs well that other member States were against this suggestion. Consequently, if many smaller groups formed, every one could rightly raise the question: What has happened to the European Union’s main aim? The nations should consider it over and over again what sort of self-denying measures they can take for the Community since without them the Union will not be able to progress significantly. Based on it I take sides with the Hungarian and Slovenian opinion about the UK rebate. Such

a welfare state could go on without this refund as well, but for the EU budget the loss of this money causes problems, especially now when the number he unprivileged countries has arisen. Even this refund cannot be cancelled in all, at least its size should be reduced, as in this manner it looks as if the disadvantaged countries got a “discount loan” that they have to pay back, and they should be pleased because there is no interest and do not have to refund the whole sum. So in this case: Where is the solidarity? Even if I were British I would think the same, 23 http://www.doksihu without respect to nationalities. I do not protest against the fact that the big net payers are entitled to get back their money, but only some part of it, which is feasible and can be accepted by everybody. And we can ask the current big beneficiaries about the solidarity too. How do they imagine the development of the new states if they are not willing to renounce at least a part of their

subsidies? It is true that they and each of the Member States agree in backing us and the countries in similar situation, but how are they going to do it if the big net payers refuse to pay more than ceiling of 1 %? There are a lot of new Members who would need to be supported beside the old members but only the promises are not enough. Every one of them have counted and still counts on the favourable decision of Portugal, Spain, Greece and Ireland, but if we take a close look at it, we see that each of them waits for something as a return for their “sacrifice”. Unsparingly by way of compensation they intend to acquire subsidies just this time they would simply redeploy their demands. To be honest, it sounds better as they can stress that they don’t lay claim for the CAP subsidies or don’t mind if it was reduced, reformed in the future in favour of the East countries. But in silence they add that then they have the right to get more from the structural funds in order that their

balances show the same amount as before. I do not agree with the idea that their subsidies should be cancelled, but we have to find the best way to make an agreement with them how the money going to them could be reduced and we have to find the best solution which can be advantageous both for them and for the East states. The final aim is the same for everyone: to be in surplus at the end of the annual budget year. If it could be possible, then it is sure that everyone would find the EU the most advantageous, profitable and well-working institute all over the world without any hesitations. Is it possible? Of course not So the big issue during the negotiations is who can be the “ biggest winners”, as it is everybody’s aim. Personally the Germans seem to be more sympathetic than the English as they have considerably contributed to the budget for many years just like England and they do not insist on refunding their money, although I am aware of the fact that the II World War plays

a significant part in it, and it is expected that the EU budget cannot count on their extensive payments in the future due to internal policies. 24 http://www.doksihu We have to remember that the possibilities offered by the unified market include significant advantages for all the Member States too even if this profit cannot be indicated in the public budget only at the level of companies. There are a number of measures to establish an entrepreneur-friendly environment: abandonment of customs duties, hindrances originated from the exchange-rate differences are to be done away with in all the states with the introduction of the euro, the free movement of capital and the common liberalising measures, like export subsidies or actions against dumping. Besides these we should mention the easier access to the venture capital and the modernization of the bankruptcy. Each of these procedures let the entrepreneurs get more profit on their business or lose as little money as it is possible.

I think because of these huge fights for the money Hungary should use the subsidy as efficiently and as soon as it is possible in order to avoid unpleasant positions that there is no point in backing us with so considerable sum of money (as it has happened in some states, where there are still significant differences between some regions). The moment it becomes obvious that a country uses its subsidy inefficiently, in my view the others will immediately “attack” it and will refer to it in the future too by distributing the money, hoping they can get this country’s share and promising they can use this sum better. This way I absolutely agree with the Ireland point which claims that the subsidies in themselves are not sufficient. A well-working internal policy is indispensable for the success. However, Hungary has to keep in view too how relevant it is not to enter into controversies with more partners in the EU about the budget at the same time I do hope that our country, this

or the following government, will measure up to this task and for instance will not charge officials with tasks with which they are not acquainted. We have to take long-term steps and make possible the almost perfect execution of the plans. The nations’ cooperation is essential in the EU, the parties’ cooperation is Hungary’s interest and this latter one requires a change of approach. We can see clearly that new reforms in the EU are needed (by us too), with the help of which the decision-making could take a shorter time, and all the states could think over what they are for and against more easily. Even the atmosphere could be more peaceful by the help of the reforms so the Member States could cooperate more efficiently. In 25 http://www.doksihu addition maybe sometimes everyone will have a little time between two fights to remember that the development of a country is as big a result as gaining a smaller fortune. 26 http://www.doksihu Bibliography Bernek Ágnes,

Kondorosi Ferenc, Nemerkényi Antal, Szabó Pál. Az Európai Unió Budapest: Cartographia Kft. ,2003 Horváth Zoltán. Kézikönyv az Európai Unióról Budapest: Magyar Országgyűlés, 2002 Szemlér Tamás. EU- Költségvetés 2007-20013: Érdekek és Álláspontok Budapest: Magyar Tudományos Akadémia Világgazdasági Kutatóintézet, 2004. EC Representation in the UK. Executives Ian Barber, Eddie McVeigh, Elizabeth Holt, Andy Klom. 31January2005 wwwcecorguk 24 March 2005 Europa-the European Union On-Line. Ed Dalia Grybauskaitė February 2005 europe.euint/common/budget 30 March 2005 EUobserver.com Ed Lisbeth Kirk 2005 Euobservercom ASBL www.euobservercom 24 March 2005 EC Representation in the UK. Ed Ian Barber, Eddie McVeigh, Elizabeth Holt, Andy Klom. 31January2005 wwweuropeorguk 24 March 2005 Magyar Köztársaság Országgyűlése -Tájékoztató March 2004. www.mkogyhu/biz/eib/link2/040302htm 02 April 2005 27