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Did you know...

  • ...EU investment is a major boost to the country’s economy: it represents 5.5 % of Estonia’s wealth in 2013?
  • ...the EU budget focuses on overcoming the crisis by investing in growth and jobs, by increasing support for innovation and student exchanges, helping women start businesses, and with the new multi-billion-euro fund tackling youth unemployment in the EU’s hardest-hit regions?
  • ...the EU budget makes sure Estonia’s regions develop to their full potential through a diverse range of projects, such as the modernisation of Estonian hospitals and reconstruction and building of roads and railways?
  • ...the EU budget is YOUR budget: from scientists to farmers, from jobseekers to businesses, we all benefit from projects funded by the EU.

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 Estonia) and by the European Parliament (where the democratically elected Estonian 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 Estonia, EU funding represents 5.5 % of the country’s GNI.

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 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:

  • 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.
  • A Higher quality of 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 and by introducing a new youth employment fund.
  • Reduced administrative expenditure growth thanks to cuts in staffing numbers at European institutions.

The EU budget and Estonia

In 2013, Estonia’s public expenditure amounted to around EUR 7 billion – way less than the EUR 144 billion EU budget. However, it represented 40 % of the country’s GNI, whereas the EU budget for the 28 Member States 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 Estonia’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, as an effective transport network is essential for a healthy economy, the EU contributed EUR 24 million to the modernisation of Tallinn’s airport and the overall transport sector has received nearly EUR 800 million funding from the EU in 2007-13.

Estonia is one of the EU members receiving more from the EU budget than it contributes, and will remain so throughout the next budgetary period (2014-20). Bear also in mind that 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. In addition, European investments are intended to benefit the EU as a whole, and European funding in one country can benefit other EU members as well.

Moreover, Estonian companies gained unlimited access to a huge single market counting 508 million consumers. The country is also steadily catching-up with the European average in terms of development: after it entered the EU, the Estonian GDP per person increased from 58 % in 2004 to 72 % of the EU average in 2013.

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.

Regional policy

The biggest share of the money Estonia receives from the EU budget goes to its regions (70 %). EU regional policy aims to reduce the economic, social and territorial disparities between Europe’s regions and countries. It invests in projects supporting job creation, competitiveness, economic growth, improved quality of drinking water and waste water treatment throughout Estonia. The environment and innovation have been top priorities for Estonia. For example, regional funds helped improve the water system in Kirde-Eesti and Narva. They also helped make the North Estonia Medical Centre in Tallinn a top quality medical institution.

Agriculture

Some 24 % of the EU funds Estonia receives go to agriculture. The EU agricultural policy supports farmers and promotes safe and good food: thanks to EU support, agricultural income more than doubled between 2004, when Estonia joined the EU, and 2012. However, farming is not just about food, but also about the countryside, its rural communities and natural resources. Thus an important part of agricultural policy is stimulating rural economies and protecting the environment through projects supporting local businesses, attracting tourists, making life in the countryside easier or preserving landscapes and natural resources.

Too much money spent 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 environmentally friendly and reducing the gap for countries receiving less money than the EU average.

EU projects near you

Infrastructures

Train travel in style

Train operator Elekriraudtee bought 18 new state of the art trains to replace old rolling stock. Passengers now enjoy air conditioning, disabled access, Wi Fi and faster journeys. The new equipment is also more environmentally friendly. (EU funding: EUR 70.6 million)

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Facelift for Tallinn airport

The passenger terminal at Tallinn airport has undergone renovation work, enabling it to meet Schengen area requirements and to accommodate increasing passenger numbers. The airport can now cater for 2.4 million passengers a year. Security has also been stepped up to include five security gates. (EU funding: EUR 24 million)

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Faster and safer roads

All bigger road reconstructions and constructions in Estonia are implemented with EU co financing. Projects which improve the safety of major traffic junctions are rather expensive. For example, the EU has supported the construction of the Ülemiste crossing in Tallinn with EUR 65.4 million, the Pärnu ringroad with EUR 31.5 million, the Mäo crossing and Kose–Aruvalla road with EUR 67 million and the Tartu eastern ringroad with EUR 38.2 million.

Did you know?

The EU will invest EUR 33 billion in its new Connecting Europe Facility in 2014–20 to improve Europe’s transport, energy and digital networks, thus creating jobs and boosting Europe’s competitiveness. It will make Europe’s economy greener by promoting cleaner forms of transport, high speed broadband connections and the use of renewable energy. This project should also finance building of the Rail Baltic fast railway connection from Tallinn to Warsaw, thus linking Baltic countries and Finland better with the rest of the EU.

Agriculture and rural development

A new fishing port in Orjaku

In the village of Orjaku, locals were unable to moor boats or access the sea due to a lack of infrastructure and amenities. EU funds helped develop the area, which is now a working fishing port. The project helped protect local fishing jobs and will also benefit other sectors, such as tourism. (EU funding: EUR 355 536)

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Rural tourism for disabled guests

Oxforell fishing resort is Estonia’s first ‘fishing platform’ for disabled anglers. The project involved the construction of specific facilities and accommodation adapted to the needs of disabled people. This furthered development within Harju county while giving disabled people the opportunity to resume or start a hobby in a safe environment. (EU funding: EUR 78 951)

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Health and Research

State-of-the-art medical centre in Tallinn

The extension and the renovation of the North Estonia Medical Centre will improve access to cardiac, cancerology and other advanced forms of treatment in Estonia. Besides the construction of new buildings and the refurbishment of existing ones, the hospital will also be equipped with more modern equipment. (EU funding: EUR 66.8 million)

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New lead on stroke treatment

Scientists from the Tartu University Hospital are taking part in an EU-funded research project investigating a new treatment for strokes. The new technique involves cooling the patient’s brain and could significantly reduce the number of stroke-related deaths and disabilities. (EU funding: EUR 10.9 million)

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Growth and Jobs

Young mothers set up shop

Employers are often reluctant to employ young mothers with childcare obligations. As a result, rural female employment in Estonia is only 33 %. In response, the Tamsalu municipality launched the ‘Young enterprising women for job creation’ project. Some 60 women received training in IT, business, and accountancy skills. As a result, companies making wooden sleighs as well as jewellery and handicrafts are now in business. (EU funding: EUR 49 502)

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Getting former prisoners back to work

Re-entering the job market after a spell in prison can be very challenging. In Ida-Virumaa, a project offered prisoners training while still in prison, such as in sewing, painting and woodwork. It helped prisoners improve their qualifications while still serving their sentence and to apply for jobs in private companies. A team also supported them as they became reacquainted with the routine of working. (EU funding: EUR 989 550)

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Education and Culture

The Erasmus programme

Over 1 153 Estonian 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. Just one of many examples is Helen Margus from Tallinn, who studied psychology in Greece for five months: ‘I feel that the experience of sharing everyday life with different people has given me more understanding, courage and confidence in my work and social life,’ she says.

Did you know?

Erasmus is not only for students. The Erasmus for Entrepreneurs programme allows new entrepreneurs to spend time in an enterprise in another EU country, where they acquire the skills needed to manage a small or medium-sized enterprise. The stay is partly financed by the European Commission.

Tallinn European capital of culture

About 7 000 cultural events took place in Tallinn as part of the European capital of culture in 2011. The Cultural Cauldron (Kultuurikatel) – a former industrial site transformed into a cultural center – attracted 40 000 visitors and continues to serve as an event venue and as a hub for the cultural and creative industries. (EU funding: 1.5 million)

Environment and Energy

Safe drinking water

Water supply systems in the Kohtla-Järve area are undergoing major renovation work. Once the work has been completed, 54 000 people will be connected to a modern and reliable water network and will enjoy better quality drinking water. (EU funding: 30.7 million)

Super ship fishes out marine pollution from Estonian waters

Estonia has purchased a multifunctional ship ‘Kindral Kurvits’ capable of removing the source of marine pollution within 48 hours. It can be out at sea immediately, allowing crews to intervene before waves carry oil to the shore. The vessel can also be used to monitor the marine environment, helping to prevent potential ecological disasters. (EU funding: EUR 29.8 million)

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Did you know?

Estonia got nearly EUR 1.3 million from the EU Solidarity Fund to help it deal with the consequences of heavy winds which caused significant damage in northern Europe in January 2005.

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European Social Fund: a personal story (video)

Mentoring business
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