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EUROPEAN PT 2
Budget of EU
The EU needs financial resources to conduct policies. The EU budget is the tool through which money is
collected and spent for Eu policies.
Overall the Eu budget has a very modest dimension: currently it is 1% of EU GNI.
Notwithstanding its small size, the EU budget has a fundamental political importance which is reflected in
the legislative procedure needed for its adoption.
The size of EU budget
Public expenditure in the EU budget corresponds to only about 2% of the sum of the public expenditure
implemented through the national budgets, or the whole EU Budget is only 20% of the public budget of
countries like Italy or France.
However:
– cost of the EU Institutions (administrative expenditure): around 6%. That is, 94% of the EU budget goes
to fund concrete activities in the different areas of EU policy.
– the EU budget does not finance activities typically covered by national budgets (e.g., welfare, healthcare,
military), hence resources are concentrated on key policy areas for which the EU has competence
– the EU budget amounts to an expenditure of less than 80 cents per EU citizen per day.... Is the EU worth
a coffee each day?
Rationale for Eu budget
• Revenues. The EU budget is financed either directly, from levies paid by individual taxpayers, or indirectly,
via contributions paid by the member states. Thus Eu resident taxpayers are the ultimate resource for the
Monet available to the EU budget
• Expenditures. Most of the EU budget is spent in EU countries (some 10% of the total goes to non-EU
countries).
The rationale for the EU budgetary expenditure lays in a ‘double market failure’, i.e. when private market
(first failure) and the national public authorities via the national budgets (second failure) would provide a
suboptimal amount (subsidiarity principle).
MFF and yearly budget
• The EU annual budget is set within a Multiannual Financial Framework (MFF), which currently covers a
period of 7 years.
• MFF gives guidelines for both revenues and expenditures, i.e. how to broadly allocate money within each
yearly budget document, and where to source the money from.
• The EU budget is subject to an annual adoption procedure which, starting from the sums agreed within
the MFF, fixes in detail the annual authorized expenditure for the year for any single policy item.
The multiannual financial framework
From art. 312 of the TFEU
“The MFF shall ensure that Union expenditure develops in an orderly manner and within the limits of its own
resources. It shall be established for a period of at least five years. The annual budget of the Union shall
comply with the multiannual financial framework.
The Council, acting in accordance with a special legislative procedure, shall adopt a regulation laying down
the MFF. The Council shall act unanimously after obtaining the consent of the European Parliament, which
shall be given by a majority of its component members.
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The MFF shall determine the amounts of the annual ceilings on commitment appropriations by category of
expenditure and of the annual ceiling on payment appropriations. The categories of expenditure, limited in
number, shall correspond to the Union’s major sectors of activity.”
• The MMF is not the budget of the EU.
• It is a mechanism for ensuring that Eu spending is predictable and at the same time subject to strict
budgetary discipline. It defines the maximum amounts (ceilings) available for each major spending areas
(heading) of the union budget.
• The Jeff was introduced in 1988 within the “delors I package”
• The MFF de facto sets political priorities for future years and constitutes therefor a political as well asa a
budgetary framework (‘in which areas should the EU invest more or less?’)
• The European Parliament and the Council (the budgetary authorities) have to agree each year on the
annual budget for the subsequent year. The annual budget adopted typically remains below the overall
ceiling of the MFF.
Annual budget procedure
1) Proposal. TheEuropean Commission prepares the draft budget, and submits it to the Council and
Parliament in year t-1 (e.g. 2013)
2) Adoption. The budgetary authorities, the Council and the EU Parliament, amend and adopt the draft
budget by December of year t-1
3) Execution. The European Commission is the main responsible for implementing the budget in year t
(2014)
4) Technical control. The European Court of Auditors audits in year t+1 the EU accounts (2015, on the 2014
budget) and then issues a verdict on the accounts, as well as on the underlying transactions down to the
final beneficiary.
5) Political clearing. Discharge is the final approval of the EU budget for a given year (following the audit
and finalisation of the annual accounts), by March of year t+2 (2016, for the 2014 budget). Discharge is
granted by Parliament on a recommendation from the Council. Discharge equates to approval by the
representatives of the EU citizens (the Parliament) of how the Commission implemented the budget in that
financial year, and the closure of that budget.
EUROPEAN PT 2
Budget of EU
The EU needs financial resources to conduct policies. The EU budget is the tool through which money is
collected and spent for Eu policies.
Overall the Eu budget has a very modest dimension: currently it is 1% of EU GNI.
Notwithstanding its small size, the EU budget has a fundamental political importance which is reflected in
the legislative procedure needed for its adoption.
The size of EU budget
Public expenditure in the EU budget corresponds to only about 2% of the sum of the public expenditure
implemented through the national budgets, or the whole EU Budget is only 20% of the public budget of
countries like Italy or France.
However:
– cost of the EU Institutions (administrative expenditure): around 6%. That is, 94% of the EU budget goes
to fund concrete activities in the different areas of EU policy.
– the EU budget does not finance activities typically covered by national budgets (e.g., welfare, healthcare,
military), hence resources are concentrated on key policy areas for which the EU has competence
– the EU budget amounts to an expenditure of less than 80 cents per EU citizen per day.... Is the EU worth
a coffee each day?
Rationale for Eu budget
• Revenues. The EU budget is financed either directly, from levies paid by individual taxpayers, or indirectly,
via contributions paid by the member states. Thus Eu resident taxpayers are the ultimate resource for the
Monet available to the EU budget
• Expenditures. Most of the EU budget is spent in EU countries (some 10% of the total goes to non-EU
countries).
The rationale for the EU budgetary expenditure lays in a ‘double market failure’, i.e. when private market
(first failure) and the national public authorities via the national budgets (second failure) would provide a
suboptimal amount (subsidiarity principle).
MFF and yearly budget
• The EU annual budget is set within a Multiannual Financial Framework (MFF), which currently covers a
period of 7 years.
• MFF gives guidelines for both revenues and expenditures, i.e. how to broadly allocate money within each
yearly budget document, and where to source the money from.
• The EU budget is subject to an annual adoption procedure which, starting from the sums agreed within
the MFF, fixes in detail the annual authorized expenditure for the year for any single policy item.
The multiannual financial framework
From art. 312 of the TFEU
“The MFF shall ensure that Union expenditure develops in an orderly manner and within the limits of its own
resources. It shall be established for a period of at least five years. The annual budget of the Union shall
comply with the multiannual financial framework.
The Council, acting in accordance with a special legislative procedure, shall adopt a regulation laying down
the MFF. The Council shall act unanimously after obtaining the consent of the European Parliament, which
shall be given by a majority of its component members.
, 2
The MFF shall determine the amounts of the annual ceilings on commitment appropriations by category of
expenditure and of the annual ceiling on payment appropriations. The categories of expenditure, limited in
number, shall correspond to the Union’s major sectors of activity.”
• The MMF is not the budget of the EU.
• It is a mechanism for ensuring that Eu spending is predictable and at the same time subject to strict
budgetary discipline. It defines the maximum amounts (ceilings) available for each major spending areas
(heading) of the union budget.
• The Jeff was introduced in 1988 within the “delors I package”
• The MFF de facto sets political priorities for future years and constitutes therefor a political as well asa a
budgetary framework (‘in which areas should the EU invest more or less?’)
• The European Parliament and the Council (the budgetary authorities) have to agree each year on the
annual budget for the subsequent year. The annual budget adopted typically remains below the overall
ceiling of the MFF.
Annual budget procedure
1) Proposal. TheEuropean Commission prepares the draft budget, and submits it to the Council and
Parliament in year t-1 (e.g. 2013)
2) Adoption. The budgetary authorities, the Council and the EU Parliament, amend and adopt the draft
budget by December of year t-1
3) Execution. The European Commission is the main responsible for implementing the budget in year t
(2014)
4) Technical control. The European Court of Auditors audits in year t+1 the EU accounts (2015, on the 2014
budget) and then issues a verdict on the accounts, as well as on the underlying transactions down to the
final beneficiary.
5) Political clearing. Discharge is the final approval of the EU budget for a given year (following the audit
and finalisation of the annual accounts), by March of year t+2 (2016, for the 2014 budget). Discharge is
granted by Parliament on a recommendation from the Council. Discharge equates to approval by the
representatives of the EU citizens (the Parliament) of how the Commission implemented the budget in that
financial year, and the closure of that budget.
