Budget of the European Union

Budget of the European Union
Name	Budget
Caption	The Flag of Europe symbolizes the European Union and its financial framework.
Currency	Euro (€)
Year	2021-2027 Multiannual Financial Framework
Revenue	€170.6 billion (2023)
Expenditures	€170.6 billion (2023)
Agency	European Commission
Website	https://ec.europa.eu/info/strategy/eu-budget_en

Budget of the European Union. The financial framework of the European Union is a unique instrument that pools resources from member states to fund common policies and priorities across the bloc. It is distinct from national budgets, focusing on areas where collective EU action provides added value, such as cohesion policy, agricultural policy, and research and development. The budget operates under strict rules of equilibrium, with annual spending authorized by the European Parliament and the Council of the European Union based on a long-term plan known as the Multiannual Financial Framework.

Overview

The budget is a central tool for implementing the political objectives of the European Union, as outlined in treaties like the Treaty on European Union and the Treaty on the Functioning of the European Union. Its size is modest compared to the combined national budgets of member states, typically amounting to around 1% of the Gross National Income of the EU. Key principles governing its operation include unity, universality, annuality, and specification, ensuring transparent and earmarked spending. The European Commission is primarily responsible for drafting and executing the budget, under the scrutiny of the European Court of Auditors.

Revenue

Revenue, known as "own resources," is derived from several sources defined by the Own Resources Decision of the Council of the European Union. The largest share traditionally comes from contributions based on each member state's Gross National Income, calculated by Eurostat. Other significant sources include a portion of the Value Added Tax collected nationally and customs duties levied on imports under the Common Commercial Policy. Historically, a major source was levies related to the Common Agricultural Policy, but this has diminished. Proposals for new resources, such as a levy on non-recycled plastic packaging or revenues from the Emissions Trading System, are part of ongoing reforms.

Expenditure

Expenditure is broadly categorized into several major headings, with the largest shares historically allocated to the Common Agricultural Policy and cohesion policy aimed at reducing disparities between regions like Southern Italy and Eastern Germany. Significant funds are directed towards competitiveness and growth, financing programs like Horizon Europe for research and the Connecting Europe Facility for infrastructure. Other important areas include spending on security, notably through Frontex, and external action, supporting development in countries like Ukraine and partnerships with the African Union. Administration of institutions such as the European Parliament in Strasbourg and the European Commission in Brussels constitutes a small fraction of total outlays.

Budgetary procedure

The procedure is a complex annual cycle defined in the Treaty of Lisbon. It begins with the European Commission presenting a draft budget to the European Parliament and the Council of the European Union. These two arms of the budgetary authority must agree on the final figures, with the Parliament having the final say on non-compulsory expenditure. The process operates within the ceilings set by the seven-year Multiannual Financial Framework, which is itself adopted following a special legislative procedure involving a unanimous vote in the European Council. Execution of the budget is managed by the European Commission and national authorities, with oversight from the European Court of Auditors.

History and development

The budget's evolution mirrors the integration of the European Union, beginning with the financial mechanisms of the European Coal and Steel Community established by the Treaty of Paris (1951). A major milestone was the 1970 Own Resources Decision, which gave the then-European Communities independent revenue. The Delors Commission oversaw significant expansions to fund the Single Market and cohesion policy following the accession of Greece, Spain, and Portugal. Subsequent reforms, like the Agenda 2000 and the negotiations surrounding the Multiannual Financial Framework for 2014-2020, have continually reshaped spending priorities. The departure of the United Kingdom, a major net contributor, prompted adjustments in the latest Multiannual Financial Framework.

Criticism and reform

The budget has faced persistent criticism, including allegations of wasteful spending within the Common Agricultural Policy and insufficient control, as highlighted in annual reports from the European Court of Auditors. Debates often center on the balance between net contributors, such as Germany and the Netherlands, and net recipients. Reform efforts have focused on linking funding to rule-of-law conditions, increasing flexibility for crises like the COVID-19 pandemic, and financing strategic autonomy initiatives like the European Green Deal. The creation of the NextGenerationEU recovery fund, financed through European Commission borrowing on capital markets, represents a historic shift in the EU's fiscal capacity.

Category:European Union