RJEA, Vol. 4, nr. 1, Mai 2004


Reflection on the Financial Issues in the Enlarging European Union

András Inotai

Although access to EU financial resources is by far not the only objective of the new member countries, it is considered to be an important instrument to accelerate growth and economic modernization and support the catching up process to current EU levels. The article deals with the current structure, constraints and contradictions of the EU budget from 2000 to 2006, both from the background of global developments, intra-EU interests and the requirements of successful accession. Special attention is paid to the preparation of the new member countries to efficiently and quickly absorb available EU resources (both in agriculture and in the framework of structural and cohesion funds). It is pointed out that, although net resource flow will substantially fall short of that to the more developed but still net beneficiary present member countries, it could generate budgetary constraints in the new member countries, particularly in the first and decisive years of membership. The last chapter addresses some key issues, concerns and uncertainties of the volume and structure of the budget for the next period covering the years from 2007 to 2013. In addition, it outlines a proposal for creating a new objective within the coming budget to co-finance the cross-country and harmonized development of infrastructure of the new and still candidate member countries. In case of a high level of regional cooperation between East, Central and Southeastern European countries, this seems to be the most powerful argument to fundamentally change the pattern of distribution of the EU budget in favour of the less developed but rapidly developing new member countries.

Keywords: acceding country, enlargement, EU budget, financial resource

Agriculture, the Structural Funds and the Budget after Enlargement

Jim Rollo

The purpose of this article is to examine how the legacy of the, often bruising, negotiations at Copenhagen and subsequently over agriculture will affect the political economy of the European Union and specifically the challenges facing the CAP, the Structural Funds in the next decade. The EU Budget for the remainder of the 2000-2006 Framework was fixed by the EU-15 at the Brussels Summit of October 2002 (European Council, 2002b) and is very unlikely to change. That is why the first real battle over resources engaging the new members will turn out to be the Financial Framework post 2006. This article will discuss the general context, before examining agriculture policy and structural funds after Copenhagen summit and finally the implications for the next Financial Framework.

Keywords: agricultural reform, enlargement, Structural Funds

The Choice of the Exchange Rate Regimes of the European Union Accession Countries Influenced by the World Currency Consolidation

Marin Frâncu

The pressure of the currency consolidation increased in the years 1990 as the world currency system became obviously too complicated and too costly. There are too many national currencies that generate artificial barriers and avoidable transaction costs, both for the domestic economies and for the world economy. The high costs and great vulnerability of the national currencies determined the financial and economic business of small open economies to move into the major currencies of the world. The world needs fewer national currencies, but does it need fewer central banks too? Or it needs central banks capable to pursuit sound monetary policies? What kind of institutional arrangements and international financial architecture are most suitable for the prospective environment of a greatly reduced multiplicity of currencies? A regional currency consolidation may be a good answer but a regional currency union is a better answer. Though, until membership of the Euro zone, what kind of the exchange rate regime is more suitable for Romania and other European Union accession countries? The hard peg regimes seem not to be a good solution. The best solution lays probable between managed floating regimes and intermediate regimes. This may be because emerging markets have both “fear of floating” and “fear of fixing”. But there is no ideal exchange rate regime”to suit everybody”. Once the exchange rate regime chosen, it evolves in time. So is the case with the exchange rate benchmarks for the national currency.

Keywords: convergence criteria, currency, Economic and Monetary Union, floating rate regime

Politica fiscal-bugetară din perspectiva procesului de integrare europeană

Dorin Măntescu

2003 was the best year in a transition decade from the point of view of the macroeconomic performance. Also, the structural reforms were consistent, wage policy was cautious and the first IMF agreement was concluded from the point of view of the implementation. However, notwithstanding the progress, România is still confronted with substantial structural problems in energy, railways and mining sectors. Furthermore, the large share of the total population that lives in the rural areas and the situation of the pension system represent additional major structural constraints that we currently face. The speed up of these reforms will require additional public expenditures. Additional public resources need to be channeled also in health, education, infrastructure and institutional reform areas. The level of public expenditures in România was around 32,7 percent of GDP in 2002 compared to over 45 percent in the other more advanced candidate countries and EU member states. There are two reasons for this lower expenditure level as percent of GDP: the lower level of public revenues as percent of GDP and the lower level of budget deficit. Given the additional expenditure needs, România should do the best effort to increase public revenues by improving tax collection, enlarging the tax base and cutting social security tax rates. Also given the lower levels of the budget deficit and public debt from a comparative perspective, România should increase the budget deficit. Taking into account that the larger public sector deficit is composed from the consolidated budget deficit and the arrears and losses in the public enterprises, an increase of the budget deficit accompanied by a larger decrease of the arrears and losses in the public owned enterprises will allow the reduction of the overall excess aggregate demand. This will help us to maintain the disinflationary tendency that our economy knew in the last several years while benefitting of additional public expenditures.

Keywords: budgetary deficit, pension system, public spending

Some Views on the EU's Conditionality and Pre-Accession Policies for the Central and Eastern European Countries

Oana Mocanu

The end of the Cold War has brought to the European public attention the issue of the ‘forgotten countries’ of the Eastern part of Europe. After years of totalitarian regime, these countries discovered the chance to ‘return to Europe’, to proclaim their freedom and their commitment to the democratic values. At the same time, they were about to face the difficulties of the transition process. Immediately after 1990, the Central and Eastern European countries (CEEC) began their quest for membership of EU. By choosing to open its doors to the Central and Eastern European countries, the European Union did not mean to make the accession process an easy one. On the contrary, EU imposed far stricter conditions for accession, bringing the ‘conditionality’ concept to the debates around the theories of European integration. This article will review some comments on the EU’s conditionality concept and on its effectiveness in support of the CEEC efforts of political and economic transformation.

Keywords: EU, European Commission, pre-accession strategy, Romania

Chirac's Gaullism - Why France Has Become the Driving Force behind the Effort to Build an Autonomous European Defence?

Marcel H. Van Herpen

The author analyses Chirac’s European defence policy and how it fits into the Gaullist tradition. He starts by sketching the original Gaullism of General De Gaulle which is based on four pillars: a national industrial policy, an independent foreign policy, the possession of a French nuclear deterrent and the ambition to build an independent European defence. His efforts in the last realm, however, are blocked by the US and its European NATO allies. In the Non-Gaullist Interregnum between 1974-1995 President Giscard d’Estaing jeopardised the Gaullist legacy, but President François Mitterrand became – against all expectations – a ‘Socialist Gaullist’ and it was he who realised one of De Gaulle’s objectives by creating the Eurocorps. His successor, Jacques Chirac has conducted a highly volatile European policy. The author distinguishes no less than six different and often contradictory phases in Chirac’s European defence policy. Despite the failures, some successes, however, have been booked, especially after the Saint-Malo Summit with Tony Blair. But much will depend in the coming years on how Chirac will succeed his balancing act between the EU-25, the French-German tandem and the ‘Big Three’.

Keywords: Gaullism, multilateralism