RJEA, Vol. 3, nr. 2, Iulie 2003

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The Financial Settlement in the Enlargement of the European Union: Lessons for Romania?

Alan Mayhew

At the end of every European Union accession negotiation, there is a fight about finance. Yet finance is by no means the most important element of the negotiations. Matters affecting the vital interests of new and old members like the free movement of labour or the representation of the new member state in the institutions of the Union are usually far more important in the longer term. But it is easier for politicians to talk to voters about money than about policy. The budgetary negotiations in this first enlargement to the countries of Central and Eastern Europe were perhaps more important in that these are relatively poor countries compared to the Union average per capita gross domestic product. They all will have to invest heavily in transport and environmental infrastructure in the coming decades in order to catch up with the standards of the EU-15 and support higher economic growth and development. Assuming responsible macro-economic policy in the new member states, EU budgetary transfers can speed up this investment process considerably, allowing these countries to catch up with the old member states in terms of per capita income more quickly. Higher transfers to the new member states means of course larger net budgetary contributions for the old member states (EU-15). This comes at a time when budget deficits are high and rising throughout the EURO-zone and when member states are making politically controversial cuts in social spending. The fiscal discipline involved in membership of the monetary union and implementation of the Broad Economic Policy Guidelines therefore means that the existing member states of the Union are not keen to see their net budgetary position with Brussels deteriorate or even their gross contributions to the budget rise. This paper investigates the background to the budget negotiations and the political economy behind them.

Keywords: financial framework, financial provisions, Luxembourg Group, reform, Structural Funds, the Common Agricultural Policy

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The Difficult Task of Maintaining Credibility

Lucian Croitoru, Cornel Tarhoaca

During the past two years the main features of the Romanian economy were the strong economic growth and the presence of a relatively high surplus on the foreign exchange market. Among the direct consequences of that surplus were the gradually declining depreciation rate, the tendency towards real appreciation of the leu against the euro-USD basket as compared to 2000, the generalization of anticipations regarding that appreciation and the decreases in the interest rates. The decreases in the interest rates and elimination of the well-known costs of high and volatile inflation brought about important benefits in terms of economic growth. Indeed, the lower inflation stimulated investments by contributing to the extension of decision-making horizons. Is it possible to repeat the same trend also in 2003?

Keywords: asset, balance of payments, capital inflow, economic growth, foreign currency, interest rate

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Towards Effective and Accountable Leadership of the Union- Options and Guidelines for reform (part two)

Wouter Coussens, Ben Crum

The success of the Convention on the future of the EU will to a great extent depend upon on its answers to the institutional questions. Among these questions, the issue of EU leadership plays a crucial role. In this paper, three challenges for the re-organisation of leadership in the Union are identified:
– Union leadership has to be more effective;
– Leadership in the Union should contribute to the democratic character of the Union;
– Leadership reform should not fundamentally distort the Union’s institutional balance.
In view of these three challenges, the authors consider the two main strands of debate that touch upon the issue of leadership in the EU: first, the debate on the election of the Commission President and, secondly, the different proposals for reforming the Council Presidency

Keywords: accountability, democratic legitimacy, efficacy, executive responsibility, institutional balance, Presidency

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European Pension Systems – the Real Challenge of the 21st Century

Maria Augusztinovics

It will be argued that the present focus of the pension reform debate – public, pay-as-you-go versus private, funded – is misplaced and somewhat outdated. Pay-as-you-go versus funding or pre-funding is a more-or-less technical issue. The public versus private choice should be seen as a cost-benefit, efficiency problem. These two dichotomies represent important, but secondary problems. (They cannot even be expected to help solving the certainly serious – although not that catastrophic as often painted – problems caused by the foreseeable demographic changes, the so-called ageing of the population.) The major distinctive attribute of existing European pension schemes is not the mode of financing or management. It is the Bismarckian heritage, the close link to employment, based on the typically 20th century-type, continuous working career. A presently emerging trend, however, is the transformation of the labour market. The so-called “atypical” forms of employment (part-time work, outsourcing, work at home, fixed-length contracts, etc.) are spreading and the traditional employer-employee link is weakening, if not – at least partially – disappearing. Activity ratios (poorly represented by the unemployment rate) are declining. This trend will probably be accentuated by the deepening of globalization and European integration, the growing importance of migration, including temporary migration (i.e. working in one country for a few years, then in another one, then maybe returning home for retirement). The questions thus arise: how, when, where will people, who are economically “inactive” or wandering around during a large faction of their earning span, acquire pension eligibility, sufficient for income security in old age? Will the present forms of pension insurance (including social security as well as country-based private funds) be able to live up to this 21st century-type of challenge? If not, what are the adequate models for the future and what are the feasible ways of transition to them? How much and what type of European harmonization of pension systems is and will be required? (For example, how could a harmonized European system react to country-specific mortality rates and to the emerging problem of the “oldest old”?) The paper is intended to discuss these and several related

Keywords: demography, educational category, employment, globalization, labour market, migration, pension insurance, pension schemes, transition

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