Hungary and the new EU budget by Miklós Somai Institute for World Economics The new EU Budget and the new member states Project: „Preparing for the EU Council Presidencies of the Visegrad Countries” supported by the International Visegrad Fund Central European University (1051 Budapest, Nádor u. 9.), Gellner Room - 21 January 2010

Sources Consultation paper – September 2007 Hungarian gov. contribution – 2008 April Tamás Szemlér and Jonas Eriksson: The EU Budget Review (SIEPS = Swedish Institute for European Policy Studies) – April 2008

Has the EU budget proved sufficiently responsive to changing needs? A reform is needed…in order to –address new challenges: globalisation, environmental issues, climat change, energy security, migration, ageing population etc. –overcome net-balance approach = for H: main cause of difficulties H is in favour of a policy-driven budget –size of the budget should be defined by the needs created by policies –objectives…..policies…..own resources Balance between existing and new policies (Lisbon) –may require a higher level of Community spending

How should the right balance be found between the need for stability and the need for flexibility? MFF (multiannual financial framework) –good as it is: stable & predictable, loosening of the rules is not desirable –flexibility might only be considered for common policies within their budget BUT: –what if CAP with more flexibilty??? (like in US) –HC: no supply control, no (or minimal) intervention, no stocks to minimise price fluctuations (WTO, climat, food security scandals) –US new farm bill + Russia, Ukraine (low-tech/store)

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Objectives, policies, spending priorities 4 key policy objectives for EU-budget: –solidarity (unequal starting points, distortions on SM) –competitive Europe (Lisbon strategy) –sustainable development (environmental sust.) –EU as a reg/global player (joint actions to meet chall.) Existing policies contributing to these objectives should be kept: –Cohesion policy –CAP speed up modernisation and catching up to average EU-level of standard of living (…to consume)

Existing policies Cohesion policy boosts competitiveness by: –promoting employment –eliminating bottlenecks in infrastructure –supporting enterprises (…big multinationals) –facilitating intra-Community trade (…is that good?) No need for major reform (enough changes for 2007/13) CAP –Benefits for EU-citizens: safe food, high standards, preservation of landscape (public goods … new legitimacy: „if not as consumers, let them pay as taxpayers”) –Should remain EU competence

Impact of different level of co-financing of DPs on net budgetary position of the EU MS during the financial perspectives for (€ Mn/year) EU-members 20% co- financing 35% co- financing 50% co-financingEU-members Poland France Greece Spain Hungary Ireland Czech Rep. Lithuania Slovakia … Austria Sweden Belgium UK Italy Netherlands Germany … … … ,396.2 Poland France Greece Spain Hungary Ireland Czech Rep. Lithuania Slovakia … Austria Sweden Belgium UK Italy Netherlands Germany Source: own calculations based on Commission Budget Report 2006 and Health Check of May 2008

New challenges – possible responses Hungary emphasizes the need for further integration in the field of: –justice and home affairs –R & D –energy –environment and climat policy (new infra?…NL, H) –common foreign and security policy –migration Might imply a greater role for EU-budget in these fields, but not endanger cohesion pol. financing. H interested in obtaining the same sum as in 2007/13

Own resources Principles for reforms of revenues: –sufficiency, stability, simplicity, transparency, cost- effectiveness of collection, fair burden-sharing among MS (…main beneficiaries: firms, EU-bureaucrates, politicians) Current ORS: too complex, intransparent, degressive (burden-sharing for the corr.mech.) Own resources –TOR: diminishing but correct (to be kept) –VAT-resource: complicated/intransp. (to be replaced by GNI resource) –Correction mechanism ~ juste retour approach (to be abolished) H is against any coor.mech. H is for a two-pillars system (TOR + GNI), new OR (EU-tax) not until 2020 (+unanimity be kept for OR)

Enlargement Croatia makes no trouble BUT: Turkey +Western Balkan (+ Ukraine) same attitude as when H was approaching the EU: –too agricultural –too underdeveloped –transitional periods (phasing in) –reform of the budget and that of common policies (before enlargement)

Many thanks for your time and interest!