The Development of the EU Budget and EMU 1

• Published in: Fiscal Federalism and European Economic Integration pp. 83 - 100
• Main Author: Ardy, Brian
• Format: Book Chapter
• Language: English
• Published: Routledge 2004
• Edition: 1
• Subjects: Broad Economic Policy Guidelines; EU Wide Tax; Asymmetric Shocks; Excessive Deficits; National Monetary Unions; EU Expenditure; Discretionary Fiscal Policy; Monetary Unions; Central Government; Government Goods; Fiscal Federation; EEC Treaty; Direct Democracy; Relevant Shocks; Inter-regional Redistribution; ECB; Federal Fiscal Policy; Fiscal Stance; EU Budget; Interregional Redistribution; EU Tax Harmonization; EU Member State; Automatic Stabilizers; Inter-regional Insurance; Interregional Insurance
• ISBN: 1138810967; 0415247667; 9781138810969; 9780415247665
• DOI: 10.4324/9780203987254-7

Monetary unions historically have only persisted for nation states 2 (Bordo and Jonung, 2000) and they are, therefore, associated with comparatively large federal/central government budgets. These budgets, besides financing the provision of government goods and services, also enable fiscal policy to be used to stabilize the economy and to transfer resources between different regions 3 within the country. Economic and Monetary Union (EMU) in the European Union (EU) is different, as there is no federal government endowed with a large budget. EU member states have only ceded control over government expenditure and taxation reluctantly and to a very limited extent. Most EU policies have developed on the basis of creating a framework of legislation with little EU expenditure. This is true of the most EU policies such as EMU, the Single Market, Environmental Policy, Competition Policy etc. European Union expenditure is further limited by the fact that the operation of policies remains largely the responsibility of the member states.