Abstract:  The last few years have resulted in substantial changes for the EU’s fiscal powers, primarily through the introduction of the Next Generation EU funds. This article argues that the assessment of these developments as federalisation processes is based upon a central misunderstanding of the EU budget as a public goods budget in a federal state. The EU is a compound polity comprising of mature states, and its budget may be termed a “transfer budget,” which allows member states to predict budgetary costs and benefits. To understand the transfer-oriented nature of the budget, this article adopts a historical institutionalist lens. Revisiting the fiscal centralisation in the European Coal and Steel Community allows us to understand how the six delegations agreed to combine economic and social aims in this budget, which was intended to serve the European Coal and Steel Community with similar elements to a public goods budget. Revenue consisted of debts and a levy on coal and steel produce, whereas expenditure ranged from investments to payments to individual workers. The Treaty of Rome, with its anti-supranational basis, triggered a critical juncture in Europe’s budgetary history: Since 1957, a transfer budget evolved. Revisiting the European Coal and Steel Community budget system allows us to understand the fiscal federal appearance of the Next Generation EU funds: While the EU makes new attempts to use its budget for the provision of common goods, its functions are limited by the institutional structure of the transfer budget.

Keywords:  budgetary history; EU budget; European Coal and Steel Community; fiscal integration; Next Generation EU

Published:   27 October 2023

Issue:   Vol 11, No 4 (2023): Comparative Fiscal Federalism and the Post-Covid EU: Between Debt Rules and Borrowing Power