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Maastricht will induce changes to the EC budget the various dimensions of which are explored in this volume. Based on the theory of fiscal federalism the author discusses important aspects of multilayer government finance for existing federations - Australia, Germany, Switzerland and the USA. He sketches the effects of an Economic and Monetary Union (EMU) onto the Community budget, and concludes with a systematic treatment of revenue instruments for its future financing



1. Introduction

It is simply a matter of time before the European Economic and Monetary Union (EMU) will be realised — notwithstanding a great number of pending political and economic obstacles to the forming of such a union and of uncertainties regarding the historical process itself — even after the Maastricht accord. EMU — the creation of a monetary zone with one single currency in Europe — will have a pervasive impact on many facets of political and economic decision-making within the Community, many of which have been studied by the Commission in its ‘One market, one money’ report (Commission of the European Communities 1990). A single European currency will almost instantaneously rival the US dollar as the predominant international means of exchange. It will alter world financial flows, improve efficiency conditions at both the national and international level, and it is likely to stabilise price levels for most of the countries adhering to EMU.
Paul Bernd Spahn

2. Multilevel Government Finance

‘Federalism’ has become a fashionable term, not only in Europe but in many parts of the world. Yet eager politicians and the media quickly fraught the word with compassions, anxieties, and prejudice. Nowadays the term ‘federalism’ is even — for some — a shorthand for centre government dominance and a threat to national and regional sovereignty. Such misconceptions are especially popular in the Anglo-Saxon world — possibly with regard to the US federal government having continually extended its grip on American states. Yet, recently, suspicion against centre dominance has become more widespread as Eastern European states have reacted against centralist rule, and Western Europeans have started to discuss the implications of the Maastricht accord.
Paul Bernd Spahn

3. Federal Financial Constitutions Compared

The following chapter tries to evaluate some experiences from existing federations that may be useful for the discussion of the EC budget under EMU. An arc is drawn between two extreme models: one that puts regional constituencies at the mercy of the centre; and another that leaves the centre depending on the mercy of states. These two models are discussed in relation to the Australian and the EC experiences — although it is clear that history never obeys the Ideal typus of any model. The exercise demonstrates — among other things — that the notion ‘at the mercy’ is applicable neither to Australian nor to European federalism.
Paul Bernd Spahn

4. The Future of the Community Budget under EMU

The 70s and early 80s were in fact difficult for the European Community: high rates of inflation combined with sluggish economic growth and persistently high unemployment. The process of European economic integration had almost come to a halt. The only major institutional reform was the creation, in 1979, of the European Monetary System (EMS) which was then regarded with suspicion by many analysts in particular by academics and central bankers. Concomitantly the United States, from 1982 on, experienced a strong expansion of their economy that brought about substantial employment growth and the reduction of inflation rates. The American experience was mainly attributed to three major economic policy measures: restrictive monetary policies, supply-side economics (mainly expressed through a lowering of tax rates), and deregulation, that is the reduction of state interference in the economy.1
Paul Bernd Spahn

5. Summary

EMU will have an important impact on the national fiscal systems of member states as it will impinge on European intergovernmental fiscal relations.
Paul Bernd Spahn


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