1. Hungary and the new EU budget by Miklós Somai Institute for World Economics somaimiklos@vki.hu 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

2. 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

3. 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

4. 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)

5. Agricultural policy in

6. 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)

7. 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

8. Impact of different level of co-financing of DPs on net budgetary position of the EU MS during the financial perspectives for 2007-2013 (€ 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 -399.2 -295.2 -287.9 -198.4 -194.6 -147.3 -95.3 -58.7 -43.1 … 39.8 70.4 231.4 248.2 266.6 337.6 558.5 -698.6 -516.6 -503.8 -347.3 -340.5 -257.8 -166.8 -102.8 -75.5 … 69.7 123.2 405.0 434.2 466.6 590.8 977.4 -998.0 -738.1 -719.7 -496.2 -486.5 -368.3 -238.3 -146.8 -107.9 … 99.5 175.9 578.6 620.3 666.5 844.0 1,396.2 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

9. 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

10. 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)

11. 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)

12. Many thanks for your time and interest!