Constructing the European Union's budget : origins, continuities, and consequences

Abstract

The European Union's budget is a transfer budget, unlike the budget of a fiscal (federal) state. Its role is to maintain a level of equality between member states and to sustain the functioning of the single market. But the ongoing agreement and institutionalisation of welfare related spending takes place at the national level and within national communities. The emergence of this transfer budget is not an incidental process. We know that member states are reluctant to integrate core state powers, and fiscal powers are core state powers. But the categorisation does not explain why and how member states have retained power over their fiscal capacities over the last seven decades. Based upon freshly collected archival material covering the time span from 1950 until 1979, five case studies show that preventing the integration of fiscal capacities was achieved through active political work by the member states. A period of institutional openness between 1950 and the 1970s shaped a path-dependency that, from then on, was not altered anymore but only reinforced. This pathdependency, here referred to as an underlying budgetary logic, steers what is considered appropriate for the budget. Maintaining this logic allows member states to predict their gains and losses through their budgetary contribution, the juste retour dynamic. Changes in the budget system frequently take place, but the underlying budgetary logic always remains the same. When there is a functional need for budgetary instruments that do not follow this logic, for example to stabilise the single market or to facilitate aid in times of crisis, the EU institutions resort to two strategies that can be traced throughout European budgetary history. Either they agree on budgetary instruments outside of the budget in fiscal galaxies, or they temporarily deviate from the underlying budgetary logic, which in the long-run safeguards the underlying budgetary logic.