Reforming Government Subsidies in the New Member States of the European Union

Subsidy reform has been a key component of the pre-accession reform agenda of the 10 new member states that joined the EU in 2004 (EU-10). During the pre-accession period, these countries had to undertake a number of important structural reforms in their economies. One of the most critical reforms was to reduce, and in some cases, eliminate their subsidy programs. This paper analyzes how key subsidy reforms (in state aid to enterprises, agriculture, energy, and transportation) were carried out in the EU-10 during 1995-2005, and explains observed variations across types of subsidies and across countries. Based on an extensive qualitative analysis, the paper draws lessons for future successful reforms of government subsidies. 32B