1. Lars Jorgen MAGNUSSON Senior Administrator External Actions DG Budget
EU budget
and
Financial Programming
Lars Jorgen MAGNUSSON
Senior Administrator
External Actions
DG Budget

2. EU: 28 Member States with nearly 500 million inhabitants

3. European Court of Auditors
EU Institutions
European Commission
Council of the
European Union
European Parliament
European Court of Auditors
Court of Justice of the
European Communities 3 3

4. EU Budget Section I – Parliament Section II – Council
Section III – Commission
Section IV – Court of Justice
Section V – Court of Auditors
Section VI – Economic and Social Committee
Section VII – Committee of the Regions
Section VIII – European Ombudsman
Section IX – European Data Protection Supervisor
Section X – European External Action Service (EEAS)
– 95% of the EU budget – goes to fund concrete activities ("operating appropriations") is paid out by the Commission (Section III).

5. EU – relative size of the EU Budget

6. Legal framework and regulations
EU Treaties set out basic principles, budget procedure, general goals of policies
Multiannual financial framework regulation with a duration of at least five years establishes annual upper limits (known as ‘ceilings’) per heading
Own resource decision determines what and how much to collect - financing mechanisms and revenue limit (‘own resource ceilings’)
Financial Regulation specifies the rules of spending and financial management

7. Multiannual Financial Programming
Multiannual Financial Frameworks (MFF)
, , 2014–2020
The MFF translates into financial terms the Union’s political priorities for a given period
Divides the expenditure to categories (headings) and provides the general framework (ceilings) to be respected in annual budgets
Defines the maximum amounts of money to be spent during the period and in each budgetary year in:
commitment appropriations: legal pledges to provide finance, provided that certain conditions are fulfilled
payments: cash or bank transfers to the beneficiaries

8. Annual budgetary procedure
In the Treaty of Lisbon, the budgetary procedure has been improved
The "Multiannual Financial Framework" becomes legally binding
The European Parliament decides on an equal footing with the Council

9. EU Budget Expenditure Lifecycle

10. Who manages the EU budget?
Executive agencies
Centralised
Joint
International Organisations
Shared
Member States
Direct
Indirect
Decentralised
Third Countries
Community agencies
Specialised Community bodies
EIB & EIF
National agencies

11. Who manages the EU budget?
The bulk of EU expenditure is managed jointly between
the Commission and the Member States
under the so called
shared management
22%
76% 2%

12. Accountability and external control
Transparency in the use of funds: recipients of all EU funds disclosed, e.g. Through Financial Transparency System
Reporting: Commission publishes annual accounts of the EU
External control: European Court of Auditors annual report
Political accountability: EP gives discharge

13. The "4 eyes" principle Authorising Officer Operational verification
Operational initiation
Financial initiation
Financial verification

14. EU Budget 2013 For 500 million Europeans For growth and employment

15. EU budget 2013 in figures Budget headings Sustainable growth 67.5
2013*
Change from 2011
Sustainable growth
67.5
4.7 %
a) Competitiveness for growth and employment
14.8
9.1%
b) Cohesion for growth and employment
52.8
3.5 %
Preservation and management of natural resources
60.0
2.2 %
Citizenship, freedom, security and justice**
2.1
10.9%
The EU as a global player***
9.4
7.4 %
Administration
8.3
1.3 %
Total
147.2
(*)Expenditure estimates for EU policies in commitment appropriations (billion EUR)
(**) Excluding the European Union Solidarity Fund.
(***) Including the Emergency Aid Reserve.

16. Reflecting Europe 2020 priorities
Balancing austerity and growth-boosting measures
The 2013 EU budget looks to the future
Innovation Union
EUR 23.0 billion
Youth on the move
EUR  1.4 billion
A digital agenda for Europe
EUR  2.4 billion
A resource-eficient Europe
EUR 22.1 billion
An industrial policy for the globalisation era
EUR billion
An agenda for new skills and jobs
EUR  9.5 billion
European platform against poverty
EUR billion

17. Sustainable growth
2nd column: Budget 2013, expenditure estimates for EU policies in commitment appropriations (billion EUR)
3rd column: Change from 2011

18. Natural resources
2nd column: Budget 2013, expenditure estimates for EU policies in commitment appropriations (billion EUR)
3rd column: Change from 2011

19. Citizenship, freedom, security and justice

20. The EU as a global player
(2) Including the Emergency Aid Reserve

21. Administration
5.6 % of the EU budget is planned to cover the functioning of all the EU institutions, compared to 5.7 % in 2011
Major reform of administration which saved the EU taxpayers EUR 3 billion.
The Commission has maintained the policy of 0 % staff growth.
The rest of the 2013 budget (94.4 %), is directed to Union programmes and operations in favour of Europe’s regions and towns, business, scientists, citizens and the EU’s actions in the world

22. Where does the money come from?

23. Sustainable growth: Competitiveness in 2010

24. Natural resources in 2010

25. MFF Challenges
Exceptional Lisbon Treaty: more responsibilities
Austerity climate
Financial crisis interventions
Ensure synergies to prove EU Value-added
Social, economic and territorial disparities
Connect Europe better to strengthen the internal market
Unstable neighborhood
MORE EUROPE FOR THE SAME MONEY!

26. Responses European logic fully geared to Europe 2020 strategy
Modernised budget, output oriented, simplification, conditionality, leveraging investment:
Connecting Europe Facility and innovative financial instruments
Key changes in research, cohesion, agriculture, external action
Limited in size, but redesigned
Budgetary rigour, administrative limits
Savings in some areas and more for areas that matter
Multi-purpose expenditure
New legitimacy of traditional policies
Reformed financing system:
New Own Resources linked to EU policies
Relief on Member States budget (via reduced contributions)
Simplification of existing correction mechanisms

27. Commission’s proposal*
Multiannual Financial Framework (EU 27)
*29/06/ COM(2011)500 final, page 5

28. What does constant in real terms mean?

29. What does constant in real terms mean?

30. Decreasing payment share

31. Commission’s proposal*
Outside the Multiannual Financial Framework (EU 28)
EUR million – 2011 prices
*29/06/ COM(2011)500 final, page 5

32. Despite restraint – significant re-distribution in key policy areas
EUR billion
commitment appropriations

33. Ambitious, but realistic…
EUR billion
commitment appropriations

34. Development of the Common Agricultural Policy and Cohesion policy share in the EU budget

35. Cohesion policy Common strategic framework for all structural funds
Investment partnership contracts with Member States
Stronger conditionality
Concentration on poorer and weakest regions
Thematic concentration

36. Connecting Europe Connecting Europe Facility 40 EUR billion
Energy, transport and digital networks
Cross-border multi-country investments to the benefit of internal market
Strong co-ordination with cohesion policy
Proposed use of EU project bonds

37. Cohesion policy proposal
Multiannual Financial Framework
EUR billion prices
Cohesion Fund*
68.7
Less developed regions
162.6
Transition regions
39.0
More developed regions
53.1
Cooperation
11.7
Extra allocation for outermost and northern regions
0.9
Total **
336.0
*Cohesion Fund will earmark 10 billion EUR for the new Connecting Europe Facility
** ESF minimum share: 25%

38. New architecture of cohesion policy
Three categories of regions
Less developed regions (GDP per capita < 75% of EU average)
Transition regions (GDP per capita between 75% and 90%)
More developed regions (GDP per capita > 90%)
Cohesion Fund for Member States with GNI per capita <90%
Territorial cooperation (3 strands: Cross-border Cooperation, transnational, interregional)

39. Agriculture Declining share in the EU budget until 2020
Greening of CAP - direct aid 30 % linked to environment measures
Progressive convergence of direct support towards EU average:
Close 33% of the gap with 90% of EU average
Financed by all Member States above the average
Market measures: Emergency Mechanism
European Globalisation Fund to help farmers adapt to globalisation

40. Administrative expenditure
Budget under restraint
Staff reduction up to 5%
Efficiency gains (increase working hours to 40 a week)
Reviewing certain benefits in line with similar trends in Member States
Administrative expenditure discipline for all EU institutions

41. Own resources past changes

42. … in other words considerable evolutions in EU financing
OR now mainly based on 'statistical aggregates' (GNI and VAT-based OR = 85%)
contributions seen as “expenditures” to be minimized by Member States
permanent tension on EU financing
development of corrections and focus on "allocated" expenditures
own resources disconnected from EU policies
in times of budgetary consolidation, necessity to find new ways to finance the budget

43. A new own resources system
Commission proposal
End current statistical VAT own resource as of 2014
Introduce 2 new own resources
Financial Transaction Tax
New VAT resource
Radically simplify the system of corrections

44. EU taxation of financial sector
Commission proposal
Introduce Financial transaction tax (FTT) from 1/1/2018 at the latest.
Applicable tax rates to be set at the moment of legislative proposal (Autumn 2011)
Advantages
Contributes to budgetary consolidation of Member States by reducing their contributions to the EU budget
Support in European Parliament, national parliaments, NGOs and public at large (Eurobarometer: 61% in favour and 50% or more in 20 Member States)
FTT more efficient at EU than at national level

45. New VAT resource Commission proposal Advantages
New VAT resource from 1/1/2018 at the latest.
Proposed rate: 1 %
Advantages
Link EU VAT policy and EU budget
Part of wider revision of VAT systems: fight against VAT fraud and reinforce harmonisation of VAT systems

46. Envisaged evolution of own resources structure

47. Correction mechanisms
Commission proposal
Replace all corrections mechanisms by a system of fixed annual lump sums for
Based on Fontainebleau principle:
"any member State sustaining a budgetary burden which is excessive in relation to its relative prosperity may benefit from a correction at the appropriate time."
Advantages
Fairness – lump sums based on relative prosperity
Simplicity and transparency
Lump-sum corrections aligned with expenditures (same duration as MFF)

48. Corrections lumpsum GROSS AMOUNT DE 2500 NL 1050 SE 350 UK 3600 TOTAL
Annual
lumpsum
GROSS AMOUNT DE
2500 NL
1050 SE
350 UK
3600
TOTAL
7500
(in million of euro
/ in current
prices)
LUMPSUMS ADJUSTED FOR RELATIVE
PROSPERITY

49. The EU Budget is unique, not comparable to any other government or federal budget.
Financed by the Traditional Own Resources (customs duties; Value added tax (VAT) and a MS contribution based on the size of their Gross National Income (GNI).
Revenues are used to finance activities of common interest to all MS, as specified in the Treaties.
The overall amount of the EU Budget is limited by a ceiling, currently 1.23% of the Union's GNI.
The Budget can not run a deficit, i.e. payments must match revenues in any budget year.
Commitments are programmed in advance in the Multi-annual Financial Framework (MFF).
Result - Little room to manoeuvre and a budget relatively well "protected" against fiscal disruptions.

50. Further information on:
Financial Programming and Budget website:
MFF website:
Thank you !