Do Acceding Countries Need Higher Fiscal Deficits?

Abstract

The paper outlines the probable fiscal consequences of the accession process for the candidate countries and presents specific, fiscally sensitive aspects of acquis communautaire adoption. Apart from membership contribution fees, enlargement-related expenditures, never financed from the budget before, may additionally influence a public expenditure increase and a further deterioration of fiscal deficit to a level exceeding current values. To estimate the future net fiscal positions of acceding countries, the paper calculates the net financial position of each acceding country as a net gain from the negotiated EU transfers. The net financial position illustrates the net effect of the transfer flow to a given acceding country (including the government sector and other beneficiaries of the EU assistance) and from that country into the EU budget. The net fiscal position represents the net effect of accession on the government sector with the consideration of EU transfer flows to that sector, accession-related expenditures from the budget, as well as the positive fiscal effects of accession. The paper discusses the crucial issue in assessing the net fiscal position in the AC-10, namely the fact that negotiated transfers barely cover the latest and major budget obligations.