The EU budget combines resources at European level and allows EU countries to achieve more than they could by acting alone. The budget also helps save public money by financing projects such as infrastructure and research programmes, and makes use of economies of scale and leverage effects, while preventing duplication of effort at national level.
The EU budget is principally an investment budget and complements EU national budgets as its main aim is to boost growth and competitiveness at a broader European level. It only comes into play when it is more effective to spend money at EU level than at local, regional or national level. It finances activities including:
- developing rural areas
- promoting cohesion and conserving the environment
- supporting EU education and research programmes (Erasmus and Horizon)
- protecting external borders
- increasing development cooperation
- promoting human rights.
The long-term budget sets out the EU’s long-term spending priorities and limits. The long-term budget plan, known as the multiannual financial framework (MFF), typically covers a 7-year period. The MFF sets the maximum annual amounts (ceilings) for EU spending as a whole and the main spending categories (headings), and enables the EU to plan its funding programmes several years in advance. This is important to ensure that EU policies are effective.
The current MFF runs from 2021 to 2027. The European Parliament, the Council, and the Commission all contributed to its negotiation.
A new annual budget is negotiated and adopted each year. This sets out the spending and revenue for the financial year within the limits agreed before in the MFF in force.
The European Parliament, the Council and the Commission all have a say in determining the size of the annual budget and how it is allocated. But, under the Treaties (Article 17(1) Treaty on European Union, Article 317 Treaty on the functioning of the European Union), it is the Commission that is accountable for implementing the budget. Depending on the nature of the funding concerned, the EU budget can be managed (i) jointly by the Commission and national authorities; (ii) directly by the Commission or (iii) indirectly by other authorities inside or outside the EU. EU countries and the Commission share the responsibility for implementing about 80% of the budget.
The long-term budget negotiation process
Presenting the budget
The negotiation process for the long-term budget starts a few years before its actual adoption.
The Commission launches the formal process by presenting its MFF package.
This package includes proposals for:
- a MFF Regulation, which sets out how much the EU can spend
- an Own Resources Decision, which lays down the sources of EU revenue
- sectoral legislation governing all EU funding programmes
Negotiating the budget
The Council of the EU prepares its position, identifying the points requiring political direction and priority-setting from EU leaders. Its findings help the European Council draw up its draft conclusions on the MFF package.
EU leaders in the European Council provide political guidance on the main elements of the long-term budget, enabling the Council to reach its position.
The European Parliament also adopts a position on the Commission proposal. Trilateral negotiations with the European Parliament begin once the European Council has agreed its position, with a view to securing the European Parliament’s consent.
Adopting the budget
The long-term budget is then adopted following a special legislative procedure.
The MFF Regulation is adopted after:
- unanimity is reached to secure a deal in the Council
- the European Parliament gives its consent to conclude the decision-making process (The European Parliament can approve or reject the Council's position but it cannot make amendments to it).
Before the Own Resources Decision can enter into force it requires:
- unanimous agreement for adoption in the Council
- an opinion from the European Parliament
- approval by every EU country according to their constitutional requirements
The annual budget negotiating process
The EU’s annual budget is decided jointly by the European Parliament and the Council. The procedure they follow is established by Article 314 of the Treaty on the Functioning of the European Union and takes place the year preceding the budget’s implementation.
Standard budgetary procedure
- by 1 July, all EU institutions send the Commission their respective statement of estimates, drawn up according to their internal procedures
- by 1 September, the Commission submits its draft annual budget to the European Parliament and the Council based on the MFF Regulation in force and the budget guidelines for the coming year. In practice, the Commission aims to present the draft budget in June
- by 1 October, the Council adopts its position on the draft budget (including amendments)
- the European Parliament’s position follows within 42 days (also including any amendments)
If the European Parliament and the Council disagree:
- a Conciliation Committee with representatives of both co-legislators is convened and tasked with reaching an agreement on a joint text within 21 days of the European Parliament adopting its position
- the European Parliament and the Council have 14 days to approve or reject the joint text
If the joint text is approved:
- the annual budget is adopted by the European Parliament
If the Council rejects the joint text:
- the European Parliament can still adopt the budget but only with a specific majority (a majority of component members and three-fifths of the votes cast)
If the European Parliament and the Council both reject the joint draft or fail to agree:
- the budget is rejected and the Commission must submit a new draft budget
The annual budget can be amended to react to unforeseen circumstances or in light of information not available at the time of the Commission’s proposal. This can take place through a letter of amendment (if before the final adoption) or through an amending budget (if during the implementation). Both letters of amendment and amending budgets are dependent on the same procedural rules as the general budget.