The political economy of financing the EU budget

By adopting a more specific political economy perspective, this chapter aims at contributing to the debate on reforming the actual system of funding the EU budget. We argue that the present debate is often ill focused and that what is really at stake is the nature of the European Union, whether this is just a club of sovereign states or a true federation directly affecting European citizens, who have then the right to be represented even on matters concerning the EU budget. We also argue that the main reason to reform the present system lies in the legitimacy crisis the EU is currently facing and that proposed reforms should be assessed on the basis of their ability to address this problem. Also, a dynamic perspective, asking how a budget reform would affect the bargaining positions of the different European institutions, is essential to understand the forces at play and to assess the possibility that a reform will take place.