The EU invests billions in a variety of policy areas. But what is most of the money spent on, and how does the EU actually finance itself? Find out this and more in this overview.
There will soon be another vote in Europe: the European elections will take place in the EU from June 6th to 9th, 2024, during which the EU Parliament will be re-elected. The election also has an impact on how the EU handles its money. One of the tasks of Parliament is to decide on the EU budget together with the Council of the EU. This budget determines how much money the EU can spend on what. This involves considerable sums of money.
The EU budget is set in a so-called multiannual financial framework (MFF) for a period of seven years. This is to ensure that expenses can be planned for the long term. At the same time, the EU sets annual upper limits for its expenditure.
According to the current MFF, which runs from 2021 to 2027, the EU can have resources worth almost 1.1 trillion euros. In addition, due to the consequences of the corona pandemic, the “NextGenerationEU” reconstruction program was decided on, so that the EU can raise a further 750 billion euros on the capital markets. Both figures refer to prices in 2018. However, an increase in the long-term budget is currently being discussed.
The MFF provides the framework for the annual EU budgets. In 2024, the EU budget will be 189.4 billion euros. For comparison: expenditure of around 477 billion euros is estimated for the 2024 federal budget.
Of the institutions of the European Union, the EU Commission – currently led by Commission President Ursula von der Leyen – is primarily responsible for implementing the budget. It is supported by the member states; around 75 percent of the expenditure is managed jointly by the Commission and national authorities. The Commission also proposes a draft budget, which can be amended by the Parliament and the Council of the EU. Both bodies must ultimately approve the budget. Because the EU budget is public money, it is controlled by Parliament through the discharge procedure: this is a retrospective review of how the Commission and other EU institutions handled their spending in a specific year. There are recommendations from the Council of the EU and the European Court of Auditors. Finally, Parliament can grant discharge, i.e. approve, postpone or reject the expenditure.
The EU uses the budget for spending in several policy areas. The following expenses all refer to 2018 prices. The largest item in the long-term EU budget is the heading “Cohesion, Resilience and Values”. A total of almost 1.1 trillion euros is earmarked for this area by 2027, i.e. more than half of the entire EU budget. This is primarily based on investments in regional infrastructure such as transport, so that in the long term similar living conditions prevail in all member states. Economically weaker EU countries in particular benefit from this. But it also includes the Erasmus exchange program for European students.
The EU is also investing a lot of money in agricultural and environmental policy (around 374 billion euros) as well as in the European internal market and digital affairs (around 143 billion euros). Agriculture in particular is supported by the EU with high subsidies. For example, farmers receive direct payments that depend on the size of the business. At around 23 billion euros by 2027, the budget for migration and border protection is comparatively small. The EU will spend more than three times as much, namely 73 billion euros, on the European administrative apparatus between 2021 and 2027.
In many regions of Germany, smaller and larger projects are financed with EU money. In Duisburg, for example, a new district was built on the banks of the Rhine. The city of Duisburg received approximately 5.3 million euros from the EU between 2018 and 2021 for this project. In Halle (Saale), the EU has supported broadband expansion with over 10 million euros.
The European Parliament’s Research Service has compiled a website listing other projects across Europe in which the EU is financially involved.
The EU receives the lion’s share of its revenue from the member states. They pay national contributions depending on their gross domestic product. Germany transferred a sum of almost 31 billion euros for the 2022 EU budget. This makes Germany the largest contributor to contributions in the European Union.
According to an analysis by the German Economic Institute (IW), Germany paid around 20 billion euros more into the EU in 2022 than it received. On the other hand, Poland received around 12 billion euros more from the EU in the same year than it contributed to the budget. Germany is therefore considered a net contributor, while Poland is the largest net recipient of EU funds. The EU Commission criticizes this classification and points out that Germany particularly benefits from European integration.
A special feature applied to the United Kingdom until Brexit: Due to the “British rebate”, the country had to pay significantly less to the EU since 1984.
In addition to Member States’ contributions, the EU has other sources of funding, including customs revenues and shares of VAT in EU countries. Curious: The EU also “earns” money from plastic waste. Since 2021, EU states have had to pay a tax of 80 cents per kilogram of non-recycled plastic waste.
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