The Fiscal Balance of Stateless Nations with the EU

Jaume Garau and Félix Pablo, authors of this policy paper, analyse fiscal transfers within the EU at a sub-central level: Their research is focused on how Cohesion funds impact on the specific cases of Aragon, Scotland, the Basque Country, Flanders, Galiza, Wales And Catalonia, Valencia and the Balearic islands.

They claim that even though redistribution mechanisms of European Funds are established by Brussels, state governments have plenty of leeway to decide how much of the European aid is in the end assigned to each region within the state. In other words, the governments in Madrid and London, for example, enjoy significant capacity to decide how much of the European Funds goes to each region within the State.

This capacity held by the governments of Member States can – at times – distort the initial purpose of the Cohesion Policy. The lack of transparency and clear criteria and targets about how European Funds are assigned among the regions within a State often leads to tension concerning the final sharing out of EU aid among regions: paradoxes occur in which areas with very similar per capita income and populations receive very different levels of European financing.

There are some cases of regions which have the same per capita income and the same population, however, they receive over three times more European Funds investments than others. In this case, the European Regional Policy does not help to harmonise the differences, but rather increase them.

The purpose of this study is to analyse what a series of regions receive in European Funds and what they contribute – in tax – to the European Union budget. The end target is to come up with a new tool to better evaluate the European Regional Policy and its effects.