Working Paper: CEPR ID: DP5134
Authors: Heikki Kauppi; Mika Widgrn
Abstract: The EU declares to provide support for the rural and poor regions of its member states. However, recent research shows that past EU budget allocations (in EU-15) can largely be explained by measures of the distribution of voting power in the Council of Ministers deciding on the bulk of EU spending. Yet, empirical analysis also indicates that the needs of the member states play a role in the determination of their receipts from the EU budget. As a rough estimate, power explains 60% of the budget allocation and, when stable coalition structures among member countries are allowed, even 90%. In this paper we use such estimates to predict EU budget shares after the eastern enlargement. We compare incumbent member states' predicted budget receipts before and after eastern enlargement, and examine the impact of different voting rule proposals on predicted budget shares and receipts in EU-25. According to our estimates, eastern enlargement has large effects on the budget receipts of the incumbent member states. Moreover, whether the voting rules are based on the Nice Treaty (NT) or the Constitutional Treaty (CT) makes a difference for most member states. Many member states would be worse off under CT than under NT. In relative terms, Germany would be the biggest winner under CT, because under CT population counts more on power than under NT voting rules.
Keywords: constitutional treaty; EU budget; treaty of Nice; voting power
JEL Codes: C71; D70; D72
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| voting power (D72) | budget allocation (H61) |
| eastern enlargement (F55) | budget receipts of incumbent member states (H69) |
| voting rules (Nice Treaty vs. Constitutional Treaty) (D72) | budget outcomes (H68) |
| Germany's population size (J11) | voting power under Constitutional Treaty (D72) |