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The European Union’s Budget Expenditures Report

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Updated: Oct 20th, 2021

Introduction

The European budget is a composed of three main elements: traditional own resources, VAT-based resource and GNI-based resource.

The traditional own resources (TOR) consist of all the custom duties charged on all the products imported into the boundaries of the European Union from other non-member states. For last year, 2007, they comprised around 15% of the total, or 17.3 billion Euros. The second resource, that based on VAT (value added tax) is a uniform percentage rate applied to the revenue that each member state has from its own VAT. For the 2007 budget the revenue from the percentage on VAT was a total of 17.8 billion Euros, which is slightly more than 15% of the budged. The third resource is that based on the GNI, Gross National Product, of each of the member states of the Union. A uniform percentage rate is applied for all, 0.73% of their Gross national Product. This is the largest share of revenue for the budget. It accounts for a total of around 69% of it, or an amount of around 80 billion Euros.

Analysis

Let see now how is this budget distributed among different sectors and countries. First we have to state the priorities of budget spending for the European Union. The management of the European budget, 76% of it, is done mostly by the shared responsibility between the European Commission and Member States. All of the member states are equally responsible for protecting the financial interests of the Union. So, in a graphical display, the budget implementation may be:

The centralized version of the expenditure is when the European Commission directly implements the budget in the different sectors of interest regulated by the sets of Priorities and Implementation Strategies for the European Union which is decided by the European Parliament when it approves the budget for the year to come every December. This year the budget and the priorities and strategies for it were discussed and approved on December 18th.

For 2009 the main concern of the European Union is the current financial and economic crisis and its development. In order to respond properly to this crisis the biggest portion of the union budget will go for the “Sustainable growth” sector. This comprises investments in employment policies, innovation and research, and regional development programs. For this year the European Union has increased its innovation’s programs investments by 22% and its research programs investments by 11%. This is done in order to respond to the priority of the Union to respond adequately to the crisis and enhance competitiveness along with creating a low-carbon economy. This sector of the budget will be around 60.1 billion Euros, or 44.7% of the total available. The next biggest sector is that of “Natural Resources”. This sector is constituted of investments and spending in management and preservation of the natural resources of the Member States. It comprises issues related to the environment, investments in technology and research for the “clean air and land” policy, fisheries, rural development, etc. This sector comprises around 42.8% of the total budget, or 57.5 billion Euros. The third sector is that of Administrative Expenditure for all of the European Union institutions. In total they have 7.6 billion Euros, or 5.7% of the budget. Of which the European Commission gets 3.6 billion Euros, or 2.7%. Another sector is that of “European Union as a global partner”. This comprises 5.5% of the budget or 7.4 billion Euros. This amount is dedicated to investments and grants to the EU-candidate states, those within the Association-Stability Pact or aid given to African, Pacific and Caribbean countries. The last sector, comprising 1.1%, or 1.5 billion Euros, is that of Citizenship, Freedom, Security and Justice.

As mentioned above, part of the funds will be handed over to various member states. The amount will vary according to the areas of interest that the Union has in each specific member state and the special needs that come along the process. This will be done together with the supervision of the European Commission. Some member countries have a higher focus of attention than the other due to their development and economic needs. Much of the budget part for fighting unemployment and raising economic development will be given to Portugal, Greece, Bulgaria, Romania, Czech Republic, Slovakia, Cyprus, Lithuania and Latvia. These are countries with lower economic growth and development and need to be boosted more. Also, they have higher rate of unemployment (in % related to population) than the other members. These problems concern more the Czech Republic, Slovakia, Romania and Bulgaria. These last two are also subject to “compensation” by the EU in order to invest in boosting their economies. The above mentioned countries will also receive part of the budget related to rural development.

The largest part of the budget in agricultural production will go to France since it is the biggest agricultural producer of the Union. Italy, Germany and the Nordic countries member of the union (not Norway) will get the most part of the industrial investments since they have large heavy industry sectors like the automotive sector in Germany, United Kingdom and Italy or the steel-related production in the Nordic countries (Denmark, Finland and Sweden). The sector of natural resources will be distributed to virtually every member state in relation to the resources they posses as acknowledged by the European Commission. The member states that will receive more of the “clean air and land” policy will be Italy, due to its “garbage” problems along with Bulgaria, Romania, and Slovakia. As we can see, these member states, along with the other mentioned for the economic development and growth investments are the ones that benefit the most from the budget. In fact, they may receive more funds that what they contribute by their 0.73% share of the GNI, the VAT or customs-related taxes for goods imported from non-EU members. There is the part of the citizenship and freedom of the budget which is spent into various organizations, in any of the member states, which are dedicated to these issues. This is done in the forms of grants or regional projects. This is all what can be said about the budget of the European Union.

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