3EU-Budget.pdf - ECON 475 Economics of the European Union MHT Notes Chapter III THE BUDGET OF THE EU AN HISTORICAL SURVEY The purpose of the budget is

3EU-Budget.pdf - ECON 475 Economics of the European Union...

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ECON 475 Economics of the European Union MHT Notes III.1 Chapter III THE BUDGET OF THE EU AN HISTORICAL SURVEY The purpose of the budget is to support the goals of the Treaty of Rome as well as various subsequent treaties and commitments made by the members of the European Union. The evolution of the EU has depended on the financing of the various goals it set itself. Whether future developments will be successful hinges on the ability to raise enough resources to support all these projects. In 1996, the size of the budget reached 86.5 billion ECU ($106 billion) a one third increase since 1991; this corresponds approximately to 1.2% of the total GDP of its members or, on a per capita basis, to 205 ECU ($ 250) per year. The expenditure represents 2.5% of the total member states public expenditure. The rate of growth overtime has been rather modest: the budget less than tripled in the 15 years from 1973 to 1988. The breakdown of revenues and expenditures showing the evolution from 1991 to 1997 is shown in an appendix. To prepare for enlargement, after bitter discussions between the members, fundamental changes were introduced to the budget. These issues are discussed later in the chapter.
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Economics of the European Union MHT Notes III.2 I Budgetary Procedures i. The Commission draws up the preliminary draft budget and sends it to the Council ii. The Council either adopts it or amends it by qualified majority and send the so-called draft budget to the European Parliament. iii. The Parliament carries on the first reading which leads to discussion as to approve and adopt or propose amendment for compulsory expenditures or vote on amendments for non-compulsory ones. iv. The Council will re-examine the budget to consider EP's amendments and will either accept the modifications and amendments by a qualified majority vote and adopt the budget or make other changes and send the budget to EP. v. The European Parliament has a second reading (and the final word): It can reintroduce the amendments after a conciliation procedure with the Council (and another vote by qualified majority) and adopt or reject the draft and oblige Council to produce another one. The second reading has now been dropped from the process II Revenues Until 1970, the EEC institutions depended on national contributions of the 6 members like any other international organization (in contrast, the ECSC had its own resources from the beginning). The calculations were based on relative wealth and on relative benefits received. From 1970 on, a shift to the concept of own resources directly paid into the coffers of the EC took place. The sources of revenue were then: 1. custom duties collected at the external common borders 2. agricultural levies on agricultural imports from ROW (set up as to equalize common
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Economics of the European Union MHT Notes III.3 internal agricultural prices) 3. specific proportion of national VAT receipts (not to exceed 1 % of the VAT basis or of the total value of all transactions in the EC subject to VAT calculated on a harmonized basis).
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