Budget of the European Union facts for kids

The EU's budget in 2022 was about €170 billion. This money helped support farming, transport, building, the environment, education, research, welfare, foreign policy, and more.

The budget of the European Union is like a shared piggy bank for all EU countries. It helps pay for big projects and programs across Europe. These include things like the European Regional Development Fund (which helps poorer regions), Horizon Europe (for science and research), and Erasmus+ (for student exchanges).

This budget is mostly for investing in the future. It's only about 2% of all the money spent by EU governments combined. It helps countries work together on goals they all agree on. The EU budget supports actions that are better done at a European level than by individual countries.

The EU plans its budget for several years ahead. For example, from 2014 to 2020, the long-term budget was about €1,082.5 billion. For 2021 to 2027, it's about €1,074.3 billion. This long-term plan is called the Multiannual Financial Framework. It helps the EU invest in projects that take a long time to complete.

In the past, most of the EU budget went to farming. But over time, EU countries and the European Parliament decided to use the money for more things. They wanted to support the European Single Market (a free trade area). So, they put more money into Structural Funds. These funds help different regions grow and become stronger. The EU also started spending more on transport, space, health, education, and research.

Since 2000, the EU budget has changed to include new member states. It also supports new goals like creating jobs and helping young people. For instance, the Youth Employment Initiative and Erasmus+ programs help young people. In 2015, the European Fund for Strategic Investments (EFSI) was created to boost investments.

A large part of the EU budget (around 70% from 2014–2020) goes to farming and regional development. About 39% of the budget goes to farming. This is because farming is one of the few areas almost fully funded by the EU. This means the EU budget often pays for things that national governments would otherwise have to pay for.

The second biggest part of the budget (34% from 2014–2020) goes to regional development. This money helps fund important projects in different regions. In some EU countries, European funding pays for up to 80% of public investments. This spending helps all EU countries, not just the poorer ones.

About 6% of the EU budget pays for running the European Institutions. This includes salaries for staff, building costs, and the European School system.

How the EU Budget Works

The EU budget is approved by the European Parliament and the Council of the European Union. It must stay within the limits set by the Multiannual Financial Framework (MFF). The MFF is the EU's long-term budget plan, usually for seven years.

How the Budget is Approved

Each year, the European Commission suggests a draft budget by September 1st. The Council of the European Union then gives its opinion by October 1st. If the European Parliament agrees, or doesn't make a decision within 42 days, the budget is approved.

If the Parliament wants changes, a special committee meets for 21 days. This committee tries to agree on a final budget. If they can't agree, or if the Parliament and Council don't approve the final text, the whole process starts again.

How the Budget is Used

The European Commission works with EU countries to spend the budget. They follow strict rules called the Financial Regulation. The EU budget is spent carefully and transparently.

EU programs are managed in three main ways:

• Direct management: The European Commission or its agencies handle the money directly.
• Indirect management: Other groups, like international organizations, manage the spending.
• Shared management: EU countries' own authorities oversee how the money is spent.

Checking the Budget

The European Commission reports on how it spent the money. It publishes reports like the annual accounts.

The European Parliament and the Council check these reports. They decide whether to give their final approval, called 'granting discharge'. This means they agree that the Commission spent the money correctly for that year.

The European Court of Auditors also checks the budget every year. This is an independent group that makes sure the money was spent legally and wisely. They check if the accounts are reliable and if all rules were followed. Since 2007, the European Court of Auditors has approved the EU's accounts every year.

If money is spent incorrectly, the Commission takes action to fix it. For example, in 2017, the Commission got back €2.8 billion that was spent wrongly. This shows they work to keep the budget on track.

Where the EU Gets Its Money

How the EU gets its money (2017)      VAT-based contributions (12.2%)     GNI-based contributions (56.1%)     Customs duties (14.7%)     Other income (12.4%)     Money from previous year (4.6%)

The EU gets its money from four main sources:

1. Customs duties: These are taxes on goods coming into the EU from outside.
2. VAT-based contributions: A small percentage of the value added tax (VAT) collected by each member state.
3. GNI-based contributions: A percentage of each member state's gross national income (GNI). This is the biggest source of income.
4. Other income: This includes taxes from EU staff salaries, fines, and money from non-EU countries for certain programs.
5. New own resources: Starting from 2021-2027, the EU will also collect some levies directly.

Customs Duties

Customs duties are taxes collected on goods imported into the EU. EU countries collect these taxes and send them to the EU. They can keep a small part (20% as of 2021) to cover their costs. The European Commission checks to make sure these duties are collected correctly.

In 2017, the EU received over €20 billion from customs duties.

VAT-based Contributions

This money comes from the VAT collected in each EU country. Since VAT rates vary, a special formula is used to calculate how much each country contributes. Countries usually pay 0.3% of their VAT base to the EU budget. However, some countries like Germany, the Netherlands, and Sweden pay a lower rate (0.15%).

In 2017, the EU received nearly €17 billion from VAT-based contributions.

GNI-based Contributions

This is the largest source of money for the EU budget. It comes from each member state's gross national income (GNI). The GNI-based contribution makes sure the EU budget always has enough money.

The percentage each country pays changes slightly each year. This is because it covers whatever isn't paid for by other sources. In 2017, this source provided about 56.6% of the EU's total income. Some countries, like Denmark, the Netherlands, and Sweden, get a small reduction in their GNI contribution.

The total amount of money the EU can collect from member states is limited. It cannot be more than 1.20% of the total GNI of all member states combined.

Other Income

In 2017, other income made up 12.4% of the EU's revenue. This includes taxes from EU staff, money from non-EU countries joining programs, and fines.

If there's money left over from the previous year's budget, it's usually returned to the member states. This means they pay less the next year.

Special Rules for Contributions

The EU budget has had special rules to adjust how much certain countries pay.

• The UK rebate used to give the United Kingdom money back from its contributions. This rebate is no longer in effect since the UK left the EU.
• Some countries, like Austria, Denmark, the Netherlands, and Sweden, received special lump-sum payments to reduce their contributions.
• Germany, the Netherlands, and Sweden also paid a lower VAT rate (0.15% instead of 0.30%).

After the UK left the EU, the EU is looking at changing how it gets its money. The goal is to make the system simpler and fairer for all member states.

How the EU Spends Its Money

How the EU spent its money in 2014 (total: €142,496 million)      Growth (e.g., infrastructure) (47.01%)     Natural resources (e.g., farming) (38.80%)     Security and citizenship (1.64%)     EU as a global partner (6.12%)     Administration (6.43%)     Compensations (0.003%)

Most of the EU budget (about 94%) goes to programs and projects. These projects are both within EU countries and outside the EU. Less than 7% of the budget is used for running the EU's offices and paying staff salaries.

Spending Areas (2014–2020)

From 2014 to 2020, the EU budget was spent in six main areas:

• Growth: This helps make the EU more competitive, create jobs, and support economic development.
• Natural resources: This includes money for farming, fishing, and protecting the environment.
• Security and citizenship: This covers justice, border protection, immigration, public health, and culture.
• Foreign policy: This includes aid to countries outside the EU and humanitarian help.
• Administration: This covers the costs of running all the European institutions, like staff salaries and buildings. It also includes the European School system.
• Compensations: These were temporary payments to Croatia when it joined the EU.

Spending Areas (2021–2027)

EU budget and recovery spending

The EU budget for 2021–2027 is about €1,074.3 billion. It also includes a special recovery package called Next Generation EU. This package has €750 billion in grants and loans. It helps countries recover from the economic challenges of the COVID-19 pandemic.

A big part of this budget (about €95.5 billion) goes to Horizon Europe. This program supports research and development. It funds excellent science, helps with global challenges, and boosts innovation across Europe.

How Countries Contribute

The amount each EU country contributes to the budget, and how much they receive, changes over time. There are different ways to look at these numbers. Some countries might contribute more than they receive, while others receive more than they contribute.

The table below shows how much each member state is expected to contribute to the EU budget in 2023. This is based on their VAT and GNI.

How EU countries contribute to the budget (2023)

Member state	Share of national contributions (%)
Belgium	3.61
Bulgaria	0.54
Czech Republic	1.77
Denmark	2.09
Germany	23.60
Estonia	0.24
Ireland	2.36
Greece	1.33
Spain	9.11
France	18.55
Croatia	0.42
Italy	12.77
Cyprus	0.16
Latvia	0.25
Lithuania	0.39
Luxembourg	0.40
Hungary	1.20
Malta	0.10
Netherlands	4.61
Austria	2.51
Poland	4.70
Portugal	1.65
Romania	1.87
Slovenia	0.39
Slovakia	0.74
Finland	1.75
Sweden	2.88

Images for kids

See also

• Economy of the European Union
• European Green Deal
• Common Agricultural Policy
• Common Fisheries Policy
• Regional policy of the European Union
• European Anti-Fraud Office
• Directorate-General for Budget