Finances: how the EU puts its budget to good use 


The EU budget is used to fund the policies decided at EU level. Read more about how the EU invests the money.

Find out how the EU makes the most of its funding ©AP Images/European Union-EP  

Most Europeans would like the EU to do more in 15 key policy areas, according to a recent Eurobarometer survey. These areas vary from boosting employment to fighting terrorism, tackling migration and acting on the environment. However, in order for the EU to be able to act, it will need to have the necessary resources. As the European Commission publishes a paper on the future of the EU's finances on 28 June, read on to find out more about the EU's budget: how it is funded, what it is used for, and how it could be financed in the future.

What the EU budget is used for

The EU's budget for 2017 is €157 billion. This might seem like a lot of money, but in fact it only represents about 1% of the wealth created by all EU countries taken together in a year. Not only is most of the budget funded directly by member states, about 94% is also used to fund activities in those countries. Just 6% is used to run the EU institutions and coordinate the work.

A significant share of the budget is used for agriculture, research and underdeveloped regions, but EU money is also used to carry out emergency support operations, help European firms become more competitive and support member states tackle youth unemployment.

There is also a long-term budget for a period of seven years - also known as Multiannual Financial Framework - which sets the limits for the annual budgets.

The Commission manages the funds, but the Parliament is responsible for checking the implementation in order to boost transparency and avoid fraud and misuse of the budget. Every year MEPs are asked to sign off on how the Commission has used the money. In addition the European Court of Auditors also scrutinises revenue and expenditure.
New ways to look at the budget

MEPs are also considering whether there could be better ways of funding the EU's budget. They recently looked at suggestions to have more sources of revenues instead of mainly relying on contributions by member states. This could for example include customs duties on imports from outside the EU or one based on value added tax (VAT).

For the current long-term budget, MEPs also fought for more flexibility in the budget in order to better respond to unforeseen crises, such as the migration crisis. The Parliament insisted on having a revision clause that enables the Commission to review the budget at mid-term and propose changes as needed.

In February MEPs adopted three reports on how they believe the EU should use all existing tools in the current treaties and be reformed in in order to better meet people's expectations.
One report considered what treaty changes might be needed for additional reforms, for example having an EU finance minister. Another report looked at what improvements are already possible under the existing system, while the third considered how to improve the economies of countries that have adopted the euro.
Debate on the future of European integration

The Commission is publishing five reflection papers until the end of June as a starting point for a debate on the future of European integration. Each paper is dedicated to a specific theme: Europe’s social dimension, globalisation, the economic and monetary union, defence and finances. The papers contain ideas and scenarios for what Europe could be like in 2025, but no specific proposals. The initiative finishes in mid-September when Commission President Jean-Claude Juncker delivers his annual state of the union address.