The European Union Budget, the Balanced Budget Rule and the Development of Common European Policies

Abstract

The European Union budget is subject to a strict annual balanced budget rule. Given different types of expenditure within the budget, this rule has most effect on – and is most threatened by – spending on the Common Agricultural Policy. This article examines the merits of applying a balanced budget rule to the EU budget and explores the links between the budget and the CAP. The rule has forced the EU to improve its financial management, as the 1999 CAP reform shows. The presence of a pre-agreed spending limit on the CAP forced changes to be made to the initial CAP reform agreement in order to comply with this limit, although political bargaining was critical in shaping particular changes. The general perception is that the CAP drives the European budget. Yet the budget, if not driving the CAP, imposes an increasingly tight constraint on its reform.