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The EU budget is an important tool that puts EU policies into practice. It finances actions that Member States cannot fund on their own or that they can fund more economically by pooling their resources.
The EU budget is adopted through a democratic procedure: it is prepared by the European Commission (the EU’s executive body) and is then discussed and agreed by the Council of the EU (representing EU Member States, including the Czech Republic) and by the European Parliament (where the democratically elected Czech representatives sit).
Once adopted, the budget is then managed either jointly by the EU Member States and the Commission, or directly by the Commission.
In practice, 80 % of the EU budget is managed by national or regional governments. Through grants, loans and other forms of financing, the EU budget provides financial support to hundreds of thousands of beneficiaries such as students, scientists, NGOs, SMEs, farmers, towns and regions.
The EU budget is largely financed by ‘own resources’ which are based on three kinds of sources:
This system has been unanimously decided on by the EU Member States for a 7-year period, and has been ratified by all the national parliaments. Its aim is to provide a reliable and sufficient level of revenue for the EU budget, while at the same time taking into account the Member States’ ability to pay. Each Member State thus contributes in line with its wealth.
The other sources of revenue for the EU budget include taxes on EU staff salaries, fines on companies for breaching competition laws and bank interest, etc. There is no direct EU tax. EU countries remain in control of their taxes.
Some 94 % of EU money is spent on the various EU policies, and most of it goes back to Member States. In many cases the EU budget supports large and complex projects. One of them is the European Partnership Action against Cancer, where collective European effort helps to prevent the disease and find a cure for it.
Approximately 6 % of the EU budget is spent on the functioning of the EU institutions. This is used to pay for the salaries and pensions of EU employees, translation and interpretation, security, buildings and IT systems etc. This expenditure is necessary in order to allow the EU to work.
There are around 55 000 EU civil servants and other employees serving 508 million Europeans and countless people in need around the world. By comparison, the German Finance Ministry alone employs more people than the European Commission’s services responsible for financial affairs, taxation and budget (1 850 v 1 542).
Furthermore, in order to adapt to the harsh economic situation in Europe, the EU institutions are also cutting costs: the Commission’s wide-ranging staff reform is expected to save EUR 8 billion by 2020, reducing its staff by 5 %, while at the same time increasing its working hours.
The charts below provide an overview of how much the EU invested in each of its Member States in 2013, and show the contribution of European funding to each country’s wealth. In the Czech Republic, EU funding represents 3.5 % of the country’s income (Gross National Income).
The Commission has put into place robust internal control measures in order to ensure that funds are spent efficiently and effectively.
As 80 % of the EU budget is managed by national or regional governments, Member States also play an important role in ensuring that rules are observed, and in detecting and addressing irregularities and fraud.
Additionally, the European Court of Auditors reviews the EU accounts every year. For several years the Court has confirmed that the EU accounts are properly kept, but also points out errors in procedures (e.g. accounting errors by national programme participants or claims for non-eligible costs). Errors do not mean that EU money is lost, wasted or affected by fraud. A large part of the money spent in error is recovered.
In addition, the European Parliament approves how the Commission has spent the budget following the end of every financial year.
If you want to see which entities have received EU funding, the financial transparency system will show you who received payments from the Commission.
Although the EU budget is adopted every year, it must be established within the limits of the multiannual financial framework (MFF). The MFF is an expenditure plan setting the maximum annual amounts which the EU can spend in different fields of activities over a 7-year period. It therefore shapes the EU’s political priorities for 7 years.
For the 2014-20 funding period, the EU wants to meet the targets of the Europe 2020 growth strategy, focusing on what Europe needs in order to overcome the economic and financial crisis and concentrating on areas where it can make a genuine difference. Some of the Commission’s proposals for radical reform were watered down by the Member States, but very important changes remain. Key elements of the 2014-20 MFF include:
In 2012, the Czech Republic public expenditure amounted to around CZK 1 710 billion (EUR 68 billion) – that is much less than the CZK 3 494 billion (EUR 136 billion) EU budget for the same year. However, it represented 48 % of the country’s GNI whereas the EU budget for the 27 Member States at that time was roughly 1 % of the Union’s GNI.
The EU and national budgets serve different, yet complementary purposes. The EU budget targets areas where EU money can generate added value. For example, a project of such magnitude as the European satellite navigation system Galileo could not be financed by a single Member State alone.
Unlike the budget of the Czech Republic – or any other national budget – the EU budget does not fund defence expenditure or social protection, but is mostly investment spending. For example, EU funding ensures that the Czech Republic is at the forefront of key research through a new extreme light infrastructure (ELI) project near Prague to create the largest laser equipment in the world or a new Central European Institute of Technology (CEITEC) in Brno, expected to boost the region’s employment and innovation.
The Czech Republic is one of the EU Member States that receives more from the EU budget that it contributes, and it will remain in this position throughout the next financial period. In the current period, the Czech Republic has been a country with the highest per capita allocation from the EU budget. In addition to these financial transfers, bear in mind that many benefits brought by EU membership, such as peace, political stability, security and freedom to live, work, study and travel anywhere in the Union cannot be measured.
Thanks to the internal market, which makes it easier for EU countries to do business with each other, Czech companies have access to a huge European market. More than 80 % of Czech exports go to other EU countries – one of the highest percentages of all EU members.
Operating budgetary balance: the difference between what a country receives from and pays into the EU budget. There are many possible methods of calculating budgetary balances. In its financial report,the Commission uses a method based on the same principles as the calculation of the correction of budgetary imbalances granted to the United Kingdom (the UK correction). It is, however, important to point out that constructing estimates of budgetary balances is merely an accounting exercise of the purely financial costs and benefits that each Member State derives from the Union and it gives no indication of many of the other benefits gained from EU policies such as those relating to the internal market and economic integration, not to mention political stability and security.
Of the money that the Czech Republic received from the EU budget in 2012, the largest share (72 %) went to its regions through the European regional policy. The policy aims at reducing the economic, social and territorial disparities between Europe’s regions. It invests in projects supporting job creation, competitiveness, economic growth, improved quality of life and sustainable development. The environment and transport have been top priorities for the Czech Republic. For example, regional funds are financing the connection of the city of Zlín to the national motorway network. They are also helping the city of Brno create a cleaner environment with a modernised sewerage system.
In 2012, the European Commission suspended the payment of some EUR 450 million (CZK 11.5 billion) of EU funding because of concerns of irregularities in the management of EU funds. It is important to note that most irregularities were related to public procurements and not to fraud. Since then, the country has strengthened its management and control system, allowing the European Commission to restart payments to most programmes.
The second largest area of expenditure is agriculture and rural development. EU agricultural policy supports farmers and promotes safe and good food, but it also looks after the environment and stimulates rural economies. Agricultural income increased by 76 % between 2004, when the Czech Republic joined the EU, and 2012. A biogas station producing electricity from biodegradable materials provided by local farms in Dešov is an example of an EU-funded project that is both environmentally friendly and helping to keep the rural population economically active.
EU countries have made agriculture a European rather than a national policy. It is the only policy almost entirely funded by the EU. That is why it represents a large proportion of the EU budget. It is also less costly for EU countries as a whole, than implementing 28 different national policies.
The common agricultural policy has undergone a major reform, whereby its share of the EU budget has fallen from 70 % in 1985 to around 40 % today, and is set to continue falling to 33 % in 2020. A new reform which comes into force in 2014 further strengthens European agricultural competitiveness, making it more environmentally friendly and reducing the gap for countries, like the Czech Republic, receiving less money than the EU average.
All values in national currencies have been converted using exchange rates from October 2013.
The Zlín is now connected to the national motorway network via two new road construction projects: a four-lane motorway and a new expressway road. The infrastructural work cuts driving times, improves road safety, reducer congestion and helps boost the region's economic growth. (EU funding: CZK 7.03 billion — EUR 272.2 million)
The EU approved an investment of CZK 8.5 billion (EUR 330 million) in a project to extend the main metro line in Prague. The project will see 6 km of new line, including 4 extra stations being built. More than 127 000 citizens will be served by the extended route that will significantly improve traffic in the city.
The first natural gas pipeline interconnection between Poland and the Czech Republic started operating in April 2012, strengthening the security of supplies, particularly in emergency situations and the integration of the energy markets in the region. The project also increased gas flows in both directions. (EU funding: CZK 360 million — EUR 14 million)
EU agricultural funds contributed to the development of a biogas station which converts bio inputs (mainly from pig manure, maize and livestock slurry) into electricity, providing a long-term economic diversification option for the farming sector. (EU funding: CZK 28.2 million — EUR 1.1 million)
Thanks to an EU grant, the Agrofyto farm was able to build a new cowshed and infrastructure providing more comfort for their cattle in the Vsetin district. ‘We believe that this results in milk and meat with better quality and taste,’ says the managing director. High animal welfare standards can also help the farm become certified as an ecological food producer. (EU funding: CZK 2.7 million — EUR 104 600)
The EFEKT project helps disadvantaged jobseekers (mainly people under 25 and over 50). Key activities include motivational sessions and courses in computer and business skills. Employers who agree to engage project participants receive financial support. Throughout the 2-year duration of the project (between 2010 and 2012) 160 participants are expected to receive training. (EU funding: CZK 5.4 million — EUR 208 699)
The ‘Second Hand, Second Help’ project gives people with mental disabilities the opportunity to enjoy paid work in a suitable environment. Around 15 workers with disabilities are employed in a second-hand clothes shop in Pilsen where they receive, clean, repair and sell clothes. (CZK 4.9 million — EUR 191 121)
Some 7 004 Czech students studied or worked abroad in 2011-12 thanks to the Erasmus exchange programme. The experience enriches students’ lives academically and professionally, but also improves language and intercultural skills, self-reliance and self-awareness. Young Czechs received an average monthly grant of CZK 5 523 (EUR 215) from the European Commission towards the extra costs of living abroad.
The EU contributed CZK 141 million (EUR 5.5 million) to the reconstruction and modernisation of the radiology department of the Liberec Regional Hospital. The hospital now owns several new devices that make medical examinations for the 470 000 patients treated every year both faster and more effective.
Based in Brno, the new Central European Institute of Technology (CEITEC) will soon host more than 600 researchers in life sciences and advanced material and technologies. Expected to boost the region’s employment and innovation, the project will also strengthen relations between Czech science and top international research institutes and companies. (EU funding: CZK 5.3 billion — EUR 208 million)
Czech researchers have joined a European research team looking to demonstrate that 70 % of today’s polymers can be derived from biomass, reducing dependence on petroleum-based plastic production. The Biocore project will conceive and analyse the industrial feasibility of converting by-products such as straw, forestry residue etc. into a wide range of products, including biofuels, chemical products, polymers and materials. (EU Funding: CKZ 357 million — EUR 13.9 million)
The EU invests over CZK 4.6 billion (EUR 180 million) per year in cancer research? A major part of this budget is used to encourage key players from across Europe and beyond to join forces in collaborative research projects, so that they may find new ways to fight cancer and help patients.
The EU is contributing CZK 971 million (EUR 37.8 million) to the completion and modernisation of the sewerage network in the Brno area. The upgraded system will reduce the amount of pollution discharged into local waterways and make it possible to connect more than 3 000 additional inhabitants to the sewerage system.
Fifteen European countries, including the Czech Republic, participated in the FLAPP project (Flood Awareness and Prevention Policy in border areas). The project enabled experts from regions experiencing regular flooding to share knowledge and experience on how to prevent and forecast floods, evacuate people and limit damage. The project received CZK 28.3 million (EUR 1.1 million) from the EU.
The Czech Republic received CZK 3.3 billion (EUR 129 million) in 2002 from the EU Solidarity Fund and CZK 131 million (EUR 5.1 million) in 2010 to help it recover from severe floods. The Czech Republic will also receive support from the EU Solidarity Fund for June 2013 floods.
All values in national currencies have been converted using exchange rates from October 2013.