Budgetary transfers between the EU and the new Member States: manna from Brussels or a fiscal drag?

Member States receive funds for agriculture, structural development (e.g. infrastructure works) and internal policies (e.g. training, research, environmental protection), but in exchange have to make a contribution to the EU budget. Given the overall low level of income per head as compared to the rest of the EU, the ten new Member States receive a considerable amount of transfers with a view to fostering their catching-up process. While it is often argued that EU accession increases a country’s budget deficit, the calculations show that the fiscal impact of the EU financial flows in the medium-term should be favourable. Nevertheless, the challenges in restructuring budgetary and administrative procedures to be able to absorb the projected payments in the EU financial framework should be recognised.