The budget of the European Union

1. What is the role and purpose of the EU budget?

The main principle for the budget is that “expenditure at the EU level is mainly to safeguard a European public good” (Gros, 2009, p. 7), and it is the Union’s role to increase growth, employment and productivity with a high emphasis on human capital and research. The budget of the EU calculates the amount of money that is distributed to each single policy area. It can be described as an instrument that forecasts and authorizes all revenue and expenditure that the European Community needs to keep the institutions functioning. (European Court of Auditors, 2009). Furthermore, the budget also plays an important role in redistributing and transferring funds from richer to poorer regions to achieve convergence. (Doménech, 2000, p. 2)

2.  Identify the main priorities of budgetary spending. How has this evolved over the years?  

The structure and the size of the EU have evolved within the last years. Historically, funds were used for administration only. The budget was originally financed by contributions of the member states. But as mentioned in the Treaty of Rome and in the Amsterdam Treaty, the budget should totally finance itself from own resources. That means that the Community should be financially independent and its resources should be owned by the Community. (McDonald, 2005, p. 126)

The size of the EU budget has been growing over the years. The budget has increased by almost a hundred billion euros from 1988 to 2009 and its current amount is about €147 billions. One reason for that is the increasing number of member states that need to receive financial help. (European Commission, 2009)

The main priorities of budget spending are agriculture, structural operations, internal policies, external actions, administration and monetary resources. Table 1 shows the percentage spent on each category.


Table 1:  Appropriations for commitments

Source: Gros 2009, p. 5

A major stake of the budget is spent on Common Agriculture Policy (CAP) and regional aid. The CAP was meant to ensure its own food supply after the Second World War and in the 1980s poorer member countries needed to be attracted with funds for joining the internal market and monetary union. Various reforms have taken place and although the amount of funds spent on CAP decreased from 58.3 percent (1988) to 39.5 percent (2009), it still receives the majority of money. The new multi-year financial perspective (2007 to 2013) increased funding for internal policies from 6.8 per cent to 14.8 per cent for internal policies i.e. for R&D, education etc. and continues reducing money spent on agriculture. (Gros, 2008, p. 5)

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3. Assess the reasons why current funding arrangements for the EU budget are regarded as inappropriate and unfair?

The budget of the EU has always been an issue of high political tension. Each member state is concerned about their contributions and how much funds they receive. But the current budget “does not reflect its main task and policy goals” (Gros, 2008, p. 8).

The main issue still concerns CAP. Although it is a declining sector, it still receives more than 40 per cent of the budget. Already historically, agricultural spending has been deforming factor in the ...

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