Nico Groenendijk

A principal-agent model of corruption

One of the new avenues in the study of political corruption is that of neo-institutional economics, of which the principal-agent theory is a part. In this article a principal-agent model of corruption is presented, in which there are two principals (one of which is corrupting), and one agent (who is corrupted). The behaviour of these principals and agent is analysed in terms of the costs and benefits associated with different actions. The model is applied to political corruption in representative democracies, showing that, contrary to common belief, the use of principal-agent models is not limited to bureaucratic corruption.

The European patent system: dealing with emerging technologies

In light of recent controversial patent decisions in biotechnology, this article argues that the current European patent examination and opposition procedures do not suffice to balance the patent system These procedures do not provide sufficient guidance for patent examiners to deal effectively with the emerging life science technologies. The European Patent Office needs to instill more self-reflection into the patent system and foster interaction between the Office and patent stakeholders. In this respect, we propose that the EPO should establish an ex-ante, patent-granting advisory body that would consist of multidisciplinary staff drawn from various technical fields, and collaborate closely with the scientific community and other national bodies. It is expected that such an advisory body would provide an input to the existing patent system, since it would anticipate, control and reduce the possibility that patent examiners would issue low-quality patents with huge socio-economic consequences.

A Requiem for the European Coal and Steel Community (1952-2002)

In July 2002 the Treaty on the European Coal and Steel Community (ECSC) expired. The ECSC is now being dissolved, its assets are transferred into special research funds, and European coal and steel policy is integrated into mainstream EU industrial policy. The ECSCs main task was to integrate the post-war European coal and steel industry, but the ECSC can also be looked upon as an experiment in supranational government and economic policy coordination, among other things. The paper first discusses these different aspects of the ECSC. Attention is then paid to the economic policy and budgetary heritage the community leaves behind. In the light of the coming EU enlargement particularly the ECSCs experiences in fostering innovation and regional restructuring might provide useful lessons. Therefore, we conclude that in spite of its expiration, the basic ideas of the ECSC have lost nothing of their relevance yet.

Fiscal Policy Surveillance in the enlarged European Union: Procedural Checks or Simple Arithmetic?

In its recommendation on the 2004 update of the Broad Economic Policy Guidelines (BEPGs), the European Commission (2004) issued country-specific recommendations for fiscal policy in the Central and Eastern European (CEE) countries that have recently joined the European Union (EU) (henceforth the EU-10 countries). All countries except Estonia and Slovenia were urged to reduce their general government deficits, or to pursue low budget deficits in a credible and sustainable way within the multi-annual framework of EU budgetary surveillance. Some countries have received additional recommendations (the Czech Republic to reform its health care and pension systems, Estonia and Lithuania to avoid pro-cyclical policies, and Poland to reform its pension system). Most new Member States will consequently have to reduce their fiscal deficits and/or will have to avoid pro-cyclical fiscal policies to comply with the BEPGs, but also because of the required convergence within the Economic and Monetary Union (EMU). Bearing in mind that the government balance for the new Member States was –5.7 per cent of gross domestic product (GDP) in 2003, the required reduction of fiscal deficits will not be easy. This has been acknowledged by the Commission, which has argued that the need to reach and maintain sound budgetary positions will require an appropriate time path between the necessary consolidation and the appropriate fiscal stance supporting the transition. Particular attention will also need to be given to country-specific circumstances, in particular to initial budgetary positions, to ongoing structural shifts in the new Member State economies, and to the possible risks resulting from current account imbalances and strong credit growth.

The next Multiannual Financial Framework: from national interest to building a common future

The Multiannual Financial Framework (MFF) is the budget of the European Union and the most important tool to finance common policy areas, actions and strategies. Upon a proposal from the European Commission, it has to be approved by the majority of the members of the European Parliament, before it can be unanimously adopted by the Council. Furthermore, the Own Resources Decision has to be adopted with unanimity within the Council and be ratified by all 27 Member States in accordance with their constitutional requirements. Reaching an agreement between the three negotiating institutions will not be straightforward, as views on the development of the financial resources of the European Union diverge considerably. Nevertheless, a decision has to be taken by the end of 2012 in order to be able to implement the new MFF properly. With this paper, the Centre for European Studies contributes to the debate. The paper describes the European Commissions proposal, the European Parliaments resolutions on the topic as well as the positions of two Members of the Council. In addition, the paper sheds light on where the positions differ and where there is common ground and room for compromise.

Federalism, Fiscal Autonomy and Democratic Legitimacy in Europe: Towards Tax Sharing Arrangements

In this article data on fi scal autonomy of different levels of government in the European Union are presented. Within Europe central governments still hold the lion’s share of the power to tax and spend. Other levels of government largely have to make do with upward and downward funding schemes which seriously diminish their fi scal autonomy. It is argued that this (vertical) fi scal imbalance has considerable negative impacts on especially the legitimacy of the European Union, both in terms of input and output legitimacy, and that the EU as a whole suffers from a joint legitimacy problem in fi scal matters. After a review of several theories on federalism (fi scal federalism theory, dual or competitive federalism and cooperative federalism) it is concluded that the model of cooperative federalism best suits the European Union. Part of this model is tax sharing (or joint taxation) which is advocated as a way-out of the current fi scal deadlock.