The budgetary procedure

This fact sheet explains what the EU budget is and the aims of the budgetary procedure, the legal basis of the budgetary procedure, the main stages of the budgetary procedure, the evolution of the EU budgetary procedure since the 1970s, Parliament’s role in shaping the budget, and the structured frameworks and coordination involved in managing the EU budget.

Legal basis

The budgetary procedure is based on key EU treaties, regulations and agreements that define how the budget is prepared, adopted and managed to ensure transparency, cooperation and sound financial governance.

• Article 314 of the Treaty on the Functioning of the European Union (TFEU) sets out the process for adopting the EU’s annual budget, defining the roles and cooperation between the Commission, Parliament and Council.
• Article 106a of the Treaty establishing the European Atomic Energy Community states that the EU’s budgetary rules also apply to Euratom.
• Articles 39 to 55 of the Financial Regulation establish the procedure for drawing up the draft budget and how the budget is structured.
• The Interinstitutional Agreement on budgetary discipline, cooperation and sound financial management provides a framework for the Commission, Parliament and Council to work together effectively, ensuring transparent and responsible budget management.

What is the EU budgetary procedure?

The EU budget is the European Union’s yearly financial plan. It funds policies and programmes that benefit people, regions and sectors across the EU – from research and climate action to agriculture, education and external aid. Although relatively small compared to national budgets, the EU budget has a wide reach and must be managed with care, transparency and accountability. The yearly budgets are part of long-term financial plans called multiannual financial frameworks that outline the EU’s budget priorities and spending limits over several years.

The EU budgetary procedure is the structured process through which the EU’s annual budget is proposed, negotiated and adopted. The Commission drafts the initial budget proposal; the Council and the European Parliament examine and amend it, and together they adopt the final version.

The procedure helps ensure that EU funds are spent efficiently and responsibly and reflect the priorities and needs of EU citizens. By following a transparent and cooperative process, the budgetary procedure is crucial for maintaining trust in how EU resources are managed and spent.

Objectives

The EU’s budgetary procedure has two main aims:

• To decide how much money the EU can spend each year,
• To allocate that money across different policies and programmes.

The procedure includes preparing, negotiating and adopting the annual EU budget.

Once the budgetary procedure has been completed and the annual budget adopted, the budget is implemented in the relevant budgetary year: the money is allocated to specific purposes (committed) and the actual payments are made.

Then, once the budgetary year has ended, the EU’s spending is carefully examined in the annual discharge procedure, where Parliament decides whether the funds for the previous year were used properly and approves the final accounts.

For more information, see the fact sheets on:

• Budget implementation
• EU spending
• Budgetary control(annual discharge procedure)

How does the budgetary procedure work?

The annual EU budget is proposed by the Commission and adopted jointly by Parliament and the Council following an agreed schedule. Together, Parliament and the Council form the ‘budgetary authority’.

Article 314 TFEU sets out the stages and maximum time limits applicable during the budgetary procedure. However, before the procedure starts each year, the institutions agree on a schedule to follow in practice. The procedure consists of a series of steps.

1. The Commission proposes a draft budget

Parliament and the Commission start by setting out their spending priorities for the coming year. The Commission then creates a draft budget and sends it to Parliament and the Council. While officially due by 1 September, in practice the draft is usually ready earlier, by late May or early June.

The Commission can update the draft budget later if new developments arise, but these changes must be made before Step 4 below. In practice, the Commission does this every year, usually in early October, in what is known as an ‘Amending Letter’.

2. The Council adopts its position

The Council reviews the draft budget and sends its position to Parliament. In practice, the Council always suggests changes to the draft budget. The Council is required to clearly explain to Parliament the reasons behind its decisions.

While officially due by 1 October, the Council typically sends its position to Parliament earlier, by the end of July.

3. Parliament responds

Parliament has 42 days to respond. It can:

• Approve the Council’s position,
• Decline to take a decision, in which case the budget is deemed adopted,
• Suggest changes in the form of amendments.

If Parliament suggests changes, which it always does in practice, the amended draft goes back to the Council and the Commission. The President of Parliament, in agreement with the President of the Council, must then immediately convene a meeting of the Conciliation Committee.

If the Council accepts Parliament’s changes within 10 days, the budget is adopted.

4. If the Council and Parliament disagree: Conciliation Committee

The Conciliation Committee is made up of 27 representatives each from the Council and Parliament. Once the committee has been convened, it has 21 days to come up with a compromise.

The compromise must be supported by a qualified majority of the Council representatives and a majority of Parliament’s representatives.

The Commission also participates, helping to bridge any differences between Parliament and the Council.

a. Standard outcomes

In practice, once the committee has been convened, there are two standard outcomes:

Agreement: Parliament and Council representatives agree on a compromise in the Conciliation Committee. The two institutions then have 14 days to formally approve the joint text of the compromise budget.

Failure to agree: If no compromise is reached within 21 days, the Commission must propose a new draft budget and the process begins again from step 1.

Since the Treaty of Lisbon, the Conciliation Committee has failed to reach an agreement four times (on the 2011, 2013, 2015 and 2019 budgets). Each time, the new draft budget from the Commission, which included any areas on which agreement was reached the first time round, was finally adopted.

b. Other possible outcomes

Other outcomes are theoretically possible under the TFEU, but do not happen in practice. Notably:

• If Parliament rejects the compromise, the Commission must propose a new draft budget, whatever the position of the Council. In practice, there has never been a situation in which Parliament’s representatives have agreed on a compromise text only for Parliament as a whole to reject the agreement.
• If Parliament approves the compromise but the Council rejects it:
• If Parliament does vote to reconfirm some or all of its initial position and reaches the required majority, these amendments are included in the joint text, which is then deemed adopted. While possible in theory, in practice there has never been a situation in which Council representatives have agreed on a compromise text only for the Council as a whole to reject the agreement. In any case, it would not be in the Council’s interests to actively reject the compromise while Parliament approves it, since that would give Parliament the opportunity to strengthen its own position.
• If no agreement has been reached by the start of the financial year, the TFEU states that a temporary system called ‘provisional twelfths’ can be put in place until an agreement can be reached. The provisional twelfths system has been used four times: in 1980, 1985, 1986 and 1988.
• Under certain conditions, the Council can permit spending beyond the one-twelfth limit, as specified in Article 315 TFEU and detailed in Article 16 of the Financial Regulation. In such cases:

5. Budget is adopted

Once Parliament and the Council have agreed to approve the draft or compromise budget, Parliament’s President declares that the budget has been definitively adopted.

6. Draft amending budgets

In cases of unavoidable, exceptional or unforeseen circumstances (as outlined in Article 44 of the Financial Regulation), the Commission can propose draft amending budgets. These proposals aim to modify the adopted budget to address new needs and developments.

Amending budgets follow the same rules as the general budget for approval and implementation, though amending budgets are adopted without changes in almost all cases. Five amending budgets were adopted in 2024.

Process of approval of the conciliation joint text

The EU budgetary procedure has changed significantly over the years. Today, the European Parliament shares full responsibility with the Council for adopting the EU’s annual budget. But this has not always been the case.

A. Early stages

Before 1970, the Council alone had the power to decide the EU budget. Parliament could only give its opinion (consultation procedure). This began to change with two important treaties:

• In 1970, the Treaty of Luxembourg gave Parliament the final say on ‘non-compulsory expenditure’. This was defined as expenditure that did not result from the treaties and related legislation. In 1970, non-compulsory expenditure accounted for around 8% of the budget but, over time, it increased significantly, exceeding 60% of the budget by 2010.
• In 1975, the Treaty of Brussels granted Parliament the right to reject the entire EU budget.

B. Key changes with the Treaty of Lisbon

In 2009, the Treaty of Lisbon marked a turning point by:

1. Abolishing the distinction between compulsory and non-compulsory expenditure;
2. Introducing a single reading of the draft budget by each institution – that is, both the Council and Parliament now examine and vote on the budget proposal only once, instead of going through two rounds of review and amendment;
3. Establishing budgetary codecision, giving Parliament and the Council equal power in adopting the budget.

This reform streamlined the procedure and made it more efficient and transparent.

Role of the European Parliament

A. Powers under Article 314 TFEU

Parliament now has joint powers with the Council to determine overall budget expenditure.

Parliament’s position can even be considered stronger than that of the Council, since the Council can never impose a budget without Parliament’s approval, while Parliament may in some circumstances enforce a budget even if the Council disagrees.

However, this is rather unlikely and the new budgetary procedure is best described as a balanced codecision process, where both Parliament and the Council have equal roles in deciding on all EU spending.

B. Parliament’s strategic influence on the EU budget

Parliament’s ability to reject the budget underscores its influence and responsibility in ensuring that the financial plans align with its priorities and the interests of EU citizens. Parliament has exercised this authority selectively and strategically over the years.

Parliament has rejected the entire budget twice, in December 1979 and December 1984, since acquiring the power to do so in 1975.

C. 2025 budget

Parliament and the Council reached a provisional agreement on the 2025 budget on 16 November 2024, before the conciliation deadline. The Council adopted the final budget on 25 November 2024, and Parliament approved it in plenary on 27 November 2024. The 2025 budget establishes a total of EUR 199.4 billion in commitment appropriations and EUR 155.2 billion in payment appropriations.

During the negotiations, Parliament secured an additional EUR 230.7 million for the 2025 EU budget compared to the Commission’s original proposal. This additional funding is supporting several key priorities such as:

• Research and innovation,
• Health,
• Education,
• Support for young farmers,
• Biodiversity and climate action,
• Border management,
• Humanitarian aid.

The funding is also helping to repay COVID-19-related borrowing.

The 2025 budget was the first annual budget to be adopted following the revision of the multiannual financial framework (the EU’s seven-year spending plan) in February 2024.

Coordinating the EU budgetary procedure

Effective management of the EU budget relies on coordinated frameworks and policies. Interinstitutional agreements, multiannual financial frameworks and the European Semester are essential for ensuring that EU spending is well planned and kept within approved limits, and that economic policies are consistent across the EU.

A. Multiannual financial frameworks

Multiannual financial frameworks are long-term financial plans that outline the EU’s budget priorities and spending limits over several years. Multiannual financial frameworks do not replace the annual budgetary procedure, but provide a structured approach to financial planning and stability. The current multiannual financial framework covers the period from 2021 to 2027.

Under the Treaty of Lisbon and the Financial Regulation, the annual budget must stay within the limits set by the multiannual financial framework, which in turn must adhere to the spending caps set in the decision on own resources.

B. Interinstitutional agreements on budgetary discipline

C. In response to repeated disputes about the legal basis for the implementation of the budget, the institutions adopted a joint declaration in 1982 to help clarify and streamline the budgetary procedure.

This led to a series of interinstitutional agreements covering various periods from 1988 to 2013, and the most recent interinstitutional agreement for 2021-2027, which entered into force in December 2020. These agreements have considerably improved the way the budgetary procedure works.

The current interinstitutional agreement aims to:

• Enforce budgetary discipline,
• Improve the functioning of the annual budgetary procedure,
• Enhance cooperation between the institutions on budgetary matters,
• Ensure sound financial management.

It also sets out a plan for introducing new own resources to cover the repayment of the EU Recovery Instrument over the 2021-2027 period.

D. The European Semester

Introduced in 2010 by the Economic and Financial Affairs Council, the European Semester is a yearly cycle of economic policy coordination at EU level.

Originally aimed at achieving the Europe 2020 targets, it continues to play a crucial role in guiding economic policies across the EU.

Each year, the European Semester runs for six months. During this time, the Member States’ budgetary and structural policies are reviewed by the Commission to detect any inconsistencies and emerging imbalances.

Based on these economic assessments, the Commission provides the Member States with policy guidance and/or recommendations on fiscal, macroeconomic and structural reforms.

The aim of the European Semester is to strengthen coordination among Member States while major budgetary decisions are still under preparation at national level. Beyond helping to align national budgets, Parliament also seeks to make the most of areas where national budgets and the EU budget complement one another, and strengthen coordination between them.

For more information, see the website of the Committee on Budgets.

 

Eleanor Remo James

10-2025