An in-depth analysis by Giulia Russo Walti on the budget made available to the European Union by the Member States
The budget made available to the European Union by the Member States is the dossier at the center of the attention of European and national buildings.
The budget allows EU policies to be implemented according to pre-established priorities and must always be in balance between revenue and expenditure, since the Union has the obligation to keep the budget in balance.
The annual budget must respect a multiannual financial framework; in other words, the European budget is voted for a period of seven years with maximum annual amounts not to be exceeded, the so-called ceilings.
Therefore, in the current period 2014-2020, this reference framework foresees a maximum expenditure of 960 billion euros, equal to about 137 billion euros per year, which represents less than 1% of the total value of the economy of the EU (Gross National Income of all EU Member States).
By way of comparison, the EU budget was € 160 billion in 2018; the budget of France for the same year is 330 billion euros and Germany’s 343 billion euros. It is therefore a modest value relative to the national budgets of the major contributors.
According to the provisions of art. 312 and 314 of the Treaty on the Functioning of the European Union (TFUE), the draft annual budget is presented by the Commission to the Council of Ministers, and is adopted following the approval of the majority in the European Parliament.
Likewise, the regulation establishing the multiannual financial framework is adopted unanimously by the representatives of the Member States meeting in the Council and subsequently approved by the democratically elected MEPs.
Furthermore, although 74% of the Union budget is managed through a partnership between the Commission and the Member States, investing in areas such as agriculture, cohesion policy, growth and jobs, the ultimate responsibility for implementation of the budget is up to the Commission.
Long-term budget negotiations for 2021-2027 are ongoing. The Union’s aim is to maintain previous standards despite the absence of a net contributor, the United Kingdom.
The European Commission proposed in May 2018 to allocate a total of 1.11% of the EU27 GNI, some Member States however want to contain the budget, and in December 2019 the Finnish Presidency of the Council proposed a multi-year budget of 1 087 billion euro (1.07% of the EU27 GNI) in commitment appropriations.
With what amount the individual states contribute and the result of a complex intersection of data: inflation, gross national income, the growth of each one.
The first contributor in absolute terms will be Germany, followed by France, Italy and Spain. In relative terms, the first contributor is Luxembourg, contributing 1.08% of the Gross National Product.
The so-called net contributors, who guarantee the EU budget more money than they receive, benefit from other economic advantages, such as belonging to the common European market.
According to the calculations of the EU Commission, against an average annual payment of 15.27 billion euros (2018 prices), in 2021-27 Italy will benefit from 81.63 billion euros per year deriving from membership of the Market unique.
Originally the European Community was mainly financed through contributions from the Member States. In 2018, Member States’ contributions represented 71% of the Union’s revenue, which enjoys growing own resources.
First of all, traditional resources; customs duties on imports from outside the European Union. 25% of the taxes for the import of non-European products are collected by the Member States. This is a limited resource, only 16% of the Union’s total revenue, as the conclusion of free trade agreements aims at canceling customs duties.
Secondly, a percentage of the Value Added Tax is levied and allocated to the Union coffers. In 2018, 0.3% of national VAT went to the Union. VAT represents 12% of the budget in 2018.
Finally, a minimal percentage, 1% of the Union’s revenue derives from the income tax of European civil servants, the remuneration of EU loans and services, the fines and financial sanctions applied by the Court of Justice to companies. .
Expenditure is divided into the five major European spending areas, based on the main policies previously agreed.
The first major area of ​​expenditure concerns competitiveness and cohesion for growth and employment for a competitive and dynamic economy. This is a particularly large area which includes the Structural Funds, investments in transport, energy, education and training, research and infrastructure. Aid to disadvantaged regions is included; training for job seekers or help for business creation.
Furthermore, the Union funds the area of ​​sustainable growth, which concerns the conservation and management of natural resources. The Common Agricultural Policy is part of this: aid to farmers and breeders to support their activities and also the growing attention to environmental protection.
The third area concerns freedom, security and justice within the EU: from European citizenship to the fight against transnational crime.
The fourth area sees the EU as a global player; the resources that finance diplomatic activity, humanitarian development aid. Finally, the administrative expenses; remuneration of the staff of the European institutions.
As nearly 75% of EU spending is managed jointly by the Commission and EU governments, the latter share the responsibility of minimizing errors. The Commission works closely with them to ensure that money is spent effectively and efficiently, and if not, the Commission takes action. In 2018, for example, funds disbursed to beneficiaries across the EU and over € 3.2 billion in funding were either recovered by the Commission or directed towards other projects.
In addition to moving forward with the negotiations for the adoption of the multiannual financial framework for the period 2021-2027, the EU is currently examining some possible new ways of financing the EU budget as its own resources, which could support the policies of the EU, for example the contribution based on non-recycled plastic packaging waste. However, no measure considered could be approved without the unanimous agreement of all EU governments and parliaments.
The post-Brexit budget adjustment process envisages two alternative hypotheses: the overall reduction of the budget in absolute terms, and the consequent rearrangement of the budget with respect to some policies considered to be priorities, a hypothesis that does not seem to be successful among the tables of the European institutions. The alternative hypothesis is that member states increase their contributions to the EU budget to cover the imbalance caused by the abandonment of the United Kingdom.
