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Did you know that the EU budget...

  • ...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 research into biofuels 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?
  • ...strongly supports Finnish agriculture and the development of its rural areas and gives particular help to the sparsely populated northern and eastern regions?
  • ...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 Finland) and by the European Parliament (where the democratically elected Finnish 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 Finnish State employs about 80 000 people.

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 Finland, EU funding represents 0.77 % 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 hasreceived 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 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 Finland

In 2013, Finland’s public expenditure (state budget and municipalities) amounted to around EUR 113 billion – that is just slightly less than the EUR 144 billion EU budget for the same year. However, it represented 58 % 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 Finland’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 is co-financing a project aiming at raising the proportion of the Finnish population connected to high-speed Internet from 95 % to 99 %.

In 2012, the three main spending areas of Finnish budget (state budget and municipalities) were social protection, health and general public services.

In addition, Finland pays more to the EU budget than it directly receives. 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. 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. For example, Finnish company Lemminkäinen took part in three EU-funded road reconstruction projects in Lithuania in 2009-11, for which it received around EUR 13 million.

Moreover, thanks to the single market, which makes it easier for EU countries to do business with each other, over half of Finnish exports went to European countries in 2013. This represents some EUR 31 billion – or more than 51 times the Finnish net contribution to the EU budget.

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 Finland receives from the EU goes to its agriculture, rural development and nature conservation (60 % in 2013). Due to the country’s harsh weather and high production costs, EU support has a vital role in maintaining a viable agricultural sector in Finland. EU agricultural policy supports farmers and promotes safe and good food, but it also stimulates rural economies and looks after the environment. For instance, an EU-funded project bringing together farmers’ advisory organisations from around the Baltic Sea provides local farmers with methods and tools to reduce pollution from farming.

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.

Regional policy

The second largest share of the money received by Finland goes to its regions through the European regional policy. This policy aims at reducing the economic, social and territorial disparities between Europe’s regions. Because of their sparse population and remoteness, Finland’s northern and eastern areas also receive a special allocation from the EU. Regional funds invest in projects supporting job creation, competitiveness, economic growth, improved quality of life and sustainable development: they are helping the North Karelia region to reduce its dependence on oil by developing facilities for the production and distribution of biogas.

Research

The Union wants 3 % of its wealth to be invested in R & D by 2020. This investment will not only create jobs and growth, but is also essential to tackle the biggest issues of our time, such as energy, food security, climate change and an ageing population. Some 2 000 Finns have already received funding through the 2007-13 EU research programme. For instance Aalto University is taking part in a very ambitious pan-European research project on the human brain.

EU projects near you

Infrastructure

Fast Internet for all Finns

Thanks to a project co-financed by the EU, more than 99 % of the Finnish population, including those living in sparsely populated areas, will be connected to the Internet via fast fibre-optic or cable networks by 2015. The project will ensure that nearly all houses, businesses and public administration are no more than 2 km away from a 100 Mbit/s fibre-optic or cable network. (EU funding: EUR 24.6 million)

Agriculture and Rural Development

Smart agriculture for Baltic Sea region

The Baltic Deal project brings together farmers’ advisory organisations from around the Baltic Sea, including Finland, to boost expertise in agri-environmental practices. By helping farmers to reduce agricultural pollution, the project is tackling pollution levels in the Baltic Sea. (EU funding: EUR 3 million)

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Fishermen diversify into tourism

Finnish fishermen who wish to diversify into tourism to complement their income may do so thanks to a project part-funded by the EU. The training package includes courses and exams on safety issues as well as study visits to tourism companies. A major tourist resort in the Lapland region has already started to market winter net-fishing and summer river-fishing trips with local professional fishermen. (EU funding: EUR 30 186)

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Education and Social Inclusion

Coaching for young job seekers

Financed by the European Social Fund, the Haavi Project helps job seekers under 30-year-old to find jobs and education. The project provides different kinds of training and coaching tailored to the unique personal needs of the "customer" such as support to prepare CVs, applications and job interviews, computer training and career counselling.

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Fighting against early school-living

The Ungdomslotsarna project on the Finnish island of Åland is encouraging young people to pursue education and thus preventing long-term unemployment, marginalisation and social exclusion. The project cooperates with primary schools and social services and has already helped 144 participants to find a job, an internship or to continue in education. (EU funding: EUR 200 869)

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Older people for older people

The O4O project (Older people for Older people) developed alternative ways of providing support and services for older people living in rural areas of northern Europe by mobilising the elderly to help their peers. In Karelia, for instance, O4O recently produced a volunteering guide to help those caring for the elderly with dementia. In Koli, the project is putting transport assistance in place. (EU funding: EUR 1.2 million)

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Campaign promoting equal marriage

A group of eight young adults has organised a campaign called Tahdon2013/I do 2013 to support equal marriage law by collecting 167 000 signatures. Marriages in Finland are authorised only between a man and a woman, and the primary objective of the initiative is to ensure that same-sex partners will be allowed to marry in the future. The campaign started in January in the Parliament and is advertised on the Internet and in the press. Different events have been organised, such as seminars, debates and a rock concert (EU funding: EUR 6 100)

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Did you know?

Some 5 496 Finnish 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.

Growth and Jobs

E-medicine in remote areas of Finland

To address the lack of doctors in rural areas, the PrimCareIT project is implementing tele-consultation and tele-mentoring solutions. The aim is to show health professionals that, as a result of communication technologies, working in rural areas does not mean being professionally isolated. Ultimately, the initiative should help to increase access to primary healthcare in remote areas of the Baltic Region. (EU funding: EUR 2.5 million)

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Did you know?

The European Globalisation Fund (EGF) helps workers to find new jobs and develop new skills when they have been made redundant as a result of delocalisation, or as a consequence of the financial and economic crisis. With up to EUR 500 million available each year, the EGF has so far supported close to 100 000 European workers since 2007, including Finnish employees of the Salo Nokia plant.

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Research and development

New method to diagnose hereditary cancer risk

Thanks to several EU grants, Prof. Päivi Peltomäki’s of the University of Helsinki led a project focused on early detection and prevention of cancer. Her team devised a new, cost-effective method of diagnosing hereditary cancer predisposition – a particularly crucial tool since cancer is the second most common cause of death in the EU population. (EU funding: EUR 2.7 million)

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European researchers look into the mysteries of human brain

Scientists from Aalto University are part of the ‘Human brain' project, which is developing the most detailed model of the brain yet using supercomputing technologies. The results will ultimately help the development of new treatments for brain diseases, as well as revolutionary new computing technologies. (EU funding: EUR 54 million)

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From biofuels to bioplastics

Finnish 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 and forestry residue etc. into a wide range of products, including biofuels, chemical products, polymers and materials. (EU Funding: EUR 13.9 million)

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Revolutionary new material (17 EU countries)

Discovered by scientists at Manchester University, Graphene is set to become the wonder material of the 21st century, becoming as important as steel or plastics. The Graphene project brings together academic and industrial research groups, including Finnish universities, to investigate and exploit the unique properties of the material. (EU funding: EUR 54 million)

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Did you know?

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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Energy and Environment

Biogas replaces oil in North Karelia

The region of North Karelia aims to reduce its heavy dependence on oil by creating an economically viable model for producing and distributing biogas for transport. The goal is to have 100 % of renewable fuels produced from the region’s own raw material sources, including farming by-products, waste disposal and landfill gases. Two biogas upgrading plants and four fuel pumps will be installed. (EU funding: EUR 271 000)

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Save the Saimaa seals!

This Finnish project aims at improving the conservation status of the Saimaa Ringed Seal in the Saimaa lake complex, which is one of the world’s most endangered species. It will reduce disturbance by humans (especially during the breeding period) and minimise fishing-related risks (the seals are often accidentally killed). In order to help the seals adapt to climate changes, man-made snow drifts will be produced to improve their lairing conditions during mild winters. (EU funding: EUR 4 million)

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Did you know?

The EU invested EUR 2.1 billion in 2007–13 to support environmental and nature conservation projects via its LIFE + programme. Among other measures, it included communication and awareness raising campaigns and the protection of Europe’s most valuable natural sites (Natura 2000 sites) such as the Pihlajavesi lake harbouring ringed seals or the Finnish Archipelago islands.

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European Social Fund: a personal story (video)

Training is no drama for this film-maker
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