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Did you know that...

  • ...is very small compared to the European Union’s wealth – around 1% of it?
  • ...focuses on overcoming the crisis by investing in growth and jobs, with projects such as the “innovation incubator” of Lüneburg University and a new EUR 6 billion fund to tackle youth unemployment in the EU’s hardest-hit regions?
  • ...is being modernised to ensure that EU funds are spent more effectively on projects producing tangible results in terms of growth and jobs?
  • ...is investing heavily in German research, a key area for the country’s competitiveness – and that of Europe?
  • ...supports German regions through projects such as the new high-speed railway line between Erfurt, Halle and Leipzig?
  • ...is reducing administrative expenditure growth within EU bodies to reflect the current austerity context?

What is the EU budget?

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 Germany) and by the European Parliament (where the democratically elected German 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 and towns and regions.

Where does the money come from?

The EU budget is largely financed by ‘own resources’ which are based on three kinds of sources:

  • customs duties on imports from outside the EU and sugar levies,
  • a small part of the value added tax (VAT) levied in the EU,
  • gross national income (GNI): each Member State transfers a standard percentage of its GNI to the EU. This forms the largest source of income to the EU budget (74% in 2013).

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.

Where does the money go?

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.

Too many EU civil servants?

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 Germany, EU funding represents 0.5 % of the country’s GNI. Relative to other countries, Germany gets the most out of the EU funding on research and innovation (EU budget "competitiveness" heading).

Who keeps an eye on EU spending?

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 has received payments from the EU budget.

The EU multiannual framework 2014-20 in brief

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 activity 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. Key elements of the 2014-20 MFF include:

  • A focus on growth, jobs and competitiveness with increased investment in education and research, and a new Connecting Europe Facility fund to boost pan-European infrastructure projects for transport, energy and information and communication technologies.
  • Better spending thanks to simpler rules for EU funds, a clear focus on investments producing tangible results, as well as the possibility of suspending EU-funding if a country fails to implement sound economic and fiscal policies.
  • A reformed common agricultural policy for a more competitive and environmentally friendly European agriculture.
  • Fight against climate change as a key component of all major EU policies and devoting 20 % of the 2014-20 MFF to actions against climate change.
  • Solidarity with the poorest EU countries and regions by concentrating the largest portion of regional funding in those parts of the EU. In addition, a new Youth Employment Initiative worth EUR 6 billion has been launched in order to tackle the high youth unemployment in several EU Member States.
  • Reduced administrative expenditure growth thanks to cuts in staffing numbers at European institutions.

The EU budget and Germany

In 2013, Germany’s public expenditure amounted to around EUR 1 223 billion) – that is 44 % of the country’s public GNI. On the other hand, the EU budget for the 28 Member States was around EUR 144 billion, roughly 1 % of the Union’s GNI. This means that the EU budget is roughly nine times smaller than Germany’s public expenditure.

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 Germany’s budget – or any other national budget – the EU budget does not fund defence expenditure or social protection, but is mostly investment spending. For example, the EU contributed EUR 49.9 million to the construction of the new railway line between Erfurt, Halle and Leipzig – almost half the investment required. This has improved traffic between Berlin and Munich, but is also a crucial link in the Berlin-Messina (Sicily) route across Europe.

Germany is the main contributor to the EU budget. In addition, the country pays more into the EU budget than it receives from it. However, this net balance does not accurately reflect the many benefits of EU membership. Many of them, such as peace, political stability, security and freedom to live, work, study and travel anywhere in the Union cannot be measured.

The German contribution to the EU budget is therefore an investment that brings back major returns. Thanks to the single market, which makes it easier for EU countries to do business with one another, almost two-thirds of German exports go to European countries, while exports to the newer EU countries are growing much faster than exports to the rest of the world.

In addition, European investments are intended to benefit the EU as a whole, and European funding in one country can benefit other EU members. For example, the German company Berger Bau GmbH received a separate contract worth EUR 125 million for the construction of a part of the expressway Szczecin-Gorzów Wielkopolski in Poland. This project was significantly co-financed by the EU.

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.

Agriculture and Rural development

Most of the money that Germany receives from the EU goes to agriculture, rural development and nature conservation (51 % in 2013). EU agricultural policy supports farmers and promotes safe and good food, but it also looks after the environment and stimulates rural economies. The EU-funded ‘glass organic dairy’ project meets many of these goals: by welcoming tourists and school trips, the project promotes sustainable regional food production and consumption, and has already increased its production capacity and created jobs.

Too much money on agriculture?

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 came into force in 2014 further strengthens European agricultural competitiveness, making it more environment-friendly and reducing the gap for countries receiving less money than the EU average.

Regional Policy

The second biggest share of the money that Germany receives is spent on its regions through the European regional policy. This 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. For example, regional funds supported the construction of a biogas station in Feldheim, which helped the hamlet to achieve complete energy independence.

Due to the reunification with West Germany in 1990, East Germany was the first post-communist region to benefit from the EU budget via the regional and agricultural funds. Following the big EU enlargement of 2004, where 10 new countries entered the Union, East Germany is no longer one of the European regions that needs the most help. Even so, Germany’s eastern regions still receive European support within a special, EU-funded scheme.

Research

Germany is also the top recipient of EU funding for research; an area crucial for its competitiveness and economic development. Germany has the highest number of patent applications with the European Patent Office among EU countries. German researchers are involved in more than 70 % of the projects financed by the EU research programme, and the country is a leader in biotechnologies and nanotechnologies. For example, German researchers are taking part in an EU-funded research project on graphene – an ultra-light and flexible material expected to become as important as steel and plastics.

EU projects near you

Infrastructure

New motorway

As part of the improvement of the A72 motorway between Chemnitz and Leipzig, a new four lane stretch was built between Rathensdorf and Borna. Local motorway users, as well as foreigners (mainly from the Czech Republic and Poland), now enjoy improved connections and accessibility and reduced travel times. The project also reduces CO2 emissions. (EU funding: EUR 76.5 million which represents 56 % of the total costs)

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High-speed railway between Erfurt and Leipzig/Halle

The new railway line between Erfurt, Halle and Leipzig is part of an important new high speed rail route between Nuremberg and Berlin, and is a crucial link in the route between Berlin and Messina (Sicily). Once completed, the travel time between Erfurt and Leipzig will be cut by 2 hours, lowering the Munich–Berlin trip to around 4 hours. It should also help to shift traffic from the roads to more environmentally friendly rail transport. (EU funding: EUR 49.9 million which represents about 47 % of the total costs)

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Danube bridges

The new railway bridge over the Danube, between Landshut and Bayrisch Eisenstein, allows larger vessels to navigate this section of the river. This has improved inland waterway transport in the region and in central Europe in general, especially for freight. It is also a reliable and greener alternative to other transport modes. (EU funding: EUR 5.7 million)

Agriculture and Rural development

Transnational cooperation in the wine sector (Moselle)

The EU is helping wine producers from the Moselle valley, which covers three EU countries (Germany, France and Luxembourg), to work together to promote their wines and tackle shared difficulties. Producers from the three countries will gain greater European and international visibility from this collaboration. (EU funding: EUR 202 861)

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Glass organic dairy (Brandenburg-Berlin)

The EU co-financed the construction of this transparent organic dairy. From a glass walkway through the facility, visitors can trace the production of dairy products, from delivery to the finished product. The project made a huge contribution to the promotion of sustainable, regional food production and consumption, increasing production capacity and creating jobs. (EU funding: EUR 2 million)

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Education and Social Inclusion

Innovation incubator

The ‘innovation incubator’ is a unique collaboration between Lüneburg University and the local economy. Through innovative research projects and partnerships tailored to the needs of local businesses, the incubator creates and secures jobs in sustainable industries within the region, strengthening the research and development potential of local SMEs and providing highly qualified graduates. (EU funding: EUR 63.6 million)

The Erasmus programme

A significant number of 34 891 German students studied or worked abroad in 2012-13 thanks to the Erasmus exchange programme. They received a grant from the European Commission towards the extra costs of living abroad. The experience enriches students' lives academically and professionally, but also improves language and intercultural skills, self-reliance and self-awareness.  Similarly, foreign students visiting German universities with an Erasmus scholarship contribute to the valuable academic and cultural exchange, to the benefit of 'Standort Deutschland'.

In the MFF 2014-20, the new programme for education, training, youth and sport is called Erasmus+. It combines all the EU’s current schemes for education, training, youth and sport. The programme is aimed at boosting skills and employability and supporting the modernisation of education, training and youth systems.

Health and Research

Revolutionary new material (17 EU countries)

Graphene is set to become the wonder material of the 21st century, becoming as important as steel or plastics. Key applications include fast electronic and optical devices, flexible electronics, functional lightweight components and advanced batteries. The Graphene project brings together academic and industrial research groups, including the German company AMO, to investigate and exploit the unique properties of the material. The project will receive EUR 54 million) from the EU.

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The ‘living’ heart valve replacement (Germany, Hungary, Netherlands, Switzerland, Austria)

The LifeValve project focuses on children born with congenital heart defect. The team is seeking to develop a heart valve made from the patient’s own cells that can be implanted without open-heart surgery. This valve will then grow with the children and thus minimise the need for future surgical interventions. The first ‘living valve’ could be implanted into a patient as soon as 2014. (EU funding: EUR 9.9 million)

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Mini solar-power systems (Germany, Italy, Malta, Sweden)

The German company Narva is taking part in the EU-funded Digespo project to develop small solar power systems which will allow homes and workplaces to generate their own electricity and meet their heating and cooling requirements. (EU funding: EUR 3.3 million)

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Did you know that the EU invests 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, to find new ways to fight cancer and help patients.

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Environment and Energy

Hamlet becomes energy independent

The hamlet of Feldheim has developed complete energy independence for its inhabitants by combining wind, solar and biomass energy sources. The project managed to reduce the average household energy bill by 10-20 %. Some 300 other villages are now looking to replicate this success, helping the EU achieve its goal of bringing renewable energy to 20 % of total energy consumption by 2020. (EU funding: EUR 621 000)

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Re-introduction of extinct fish species to the Rhine

Since 2006, a German-French project has been breeding and reintroducing the Allis shad fish to the Rhine. Around 60 years after its disappearance, a few of them were caught in the lower Rhine, giving hope that the Allis shad will slowly regain its place in the river’s ecosystem and become once again commercially important for the Rhine fishermen. (EU funding: EUR 478 000)  

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European Social Fund: a personal story (video)

Learning for a new life
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