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In spite of the widespread use of the concept of potential
output in economic theory and empirical applications as well as in
economic policy debates, the historical background and the
assumptions inherent to this concept are rarely made transparent,
let alone critically questioned. Against this background this book
sets out to determine the extent to which the concept of potential
output rests on clearly defined theoretical foundations and how far
prevailing empirical quantification methods really provide reliable
insights into potential output growth of an economy. In addition,
the authors examine alternative methods for a forward-looking
assessment of potential output growth.
Looking back over the last decade it can be said with some
justification that sig nificant progress has been achieved on the
way towards fully integrated financial markets in Europe. The 1993
Internal Market initiative and the Euro introduction in 1999/2002
constitute important milestones. The integration process has
further been intensified by market developments like the surge in
mergers and acquisi tions and by technological innovations like
internet based distribution. As a result, some market segments
today do no longer have a national character. Nevertheless, this
success should not obscure the fact that integration of financial
services markets is still a long way from the level of integration
that exists within national markets. Particularly for retail
financial services national borders still constitute a considerable
de facto barrier. The absence of frequent direct cross border links
between financial service providers and retail consumers holds true
despite the fact that the Euro has made product comparisons easier
and that the internet has reduced information costs to a
considerable extent."
The general review of the European Union's budget scheduled for the
years 2008 and 2009 offers a unique opportunity for reflections.
Explicitly this review is "without taboos" so that also substantive
changes can and should be debated. Without doubt much better
budgetary systems can be imagined compared to the status quo of the
EU budget which is the outcome of a path-dependent process and
where many details are only understandable by taking account of the
historical context of past decisions. However, even if much better
systems could be designed in theory, each reform suggestion, in the
end, must pass the reality check of fi- ing unanimous support from
all 27 member countries. This restriction heavily l- its the
universe of available reform options. Faced with that difficulty
the ZEW project team embarked on the adventure to think about
possible reform options for the future EU own resource system. This
volume documents the conclusions. At first sight our reform
suggestion may - pear to be of a rather piecemeal nature since we
recommend a reform model with strong ties to the status quo.
Nevertheless, we are convinced that our seemingly minor changes
will set the budget on a path towards a more rational European
budget which, in the end, will create leeway for financing European
policies with a true European value added. We gratefully
acknowledge financial support from the German Federal Min- try of
Finance in conducting this study.
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