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The EU budget is an important tool putting 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 Lithuania) and by the European Parliament (where the democratically elected Lithuanian 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.
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 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.
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 LTL 28 billion — 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 Lithuania, EU funding represented 5.6 % of the country’s GNI (Gross National Income), one of the highest proportions among EU members in 2013.
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 which entities have received payments from the EU budget.
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 2013, Lithuania’s public expenditure amounted to around LTL 41.4 billion (EUR 12 billion) – that is much less than the LTL 497 (EUR 144 billion) EU budget for the same year. However, it represented 36 % 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 Lithuania’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 successful economy, the EU contributed LTL 39.4 million (EUR 11.4 million) to the modernisation of Kaunas airport. The project would have been ‘impossible without EU assistance’,evaluators reported.
Lithuania is one of the EU members receiving more from the EU budget than it contributes; this will remain the case throughout the next budgetary period (2014-20). It should also be borne 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, so that European funding in one country can benefit other EU members as well. Lithuania is also steadily catching-up with the European average in terms of development: since it entered the EU, the country's growth rate increased from 52 % of the EU average in 2004 to 74 % 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.
The biggest share of the money that Lithuania receives from the EU budget goes to regional policy. 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 life and sustainable development. The environment and transport have been top priorities for Lithuania (due to the necessity to meet EU membership obligations and develop infrastructure). For example, regional funds financed the restoration of the coast near Palanga. They are also helping Vilnius to improve traffic flows and create a better environment for its inhabitants thanks to a new bypass diverting traffic from the city centre.
Some 33 % of the EU funds received went to agriculture in Lithuania in 2013. The EU agricultural policy supports farmers and promotes safe and good food: thanks to EU support, agricultural income almost doubled between 2004, when Lithuania joined the EU, and 2013. 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 helps to diversify rural economies and protects the environment through projects supporting local businesses, attracting tourists, making life in the countryside easier or preserving landscapes and natural resources. A young farmer from Laičiai is just one example of this EU funding in action: he was able to purchase equipment to establish his forage crops farm and make it viable and competitive.
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 like Lithuania that receives less money than the EU average.
All values in national currencies have been converted using exchange rates from October 2013.
The new Vilnius city southern bypass currently being built will help to improve traffic flows and road safety. It will also divert transit traffic, notably heavy vehicles, from the city centre, creating a much more resident-friendly city and reducing the number of accidents. (EU funding: LTL 176.4 million – EUR 51.1 million)
Thanks to EU funding, Kaunas Airport has been modernised and has secured the status of an international airport. The brand new passenger terminal has made it possible to cope with more flights, and popular low-cost companies have increased their activity, bringing more tourists to the region. (EU funding: LTL 39.4 million – EUR 11.4 million)
The Druskininkai Snow Arena is an indoor skiing resort where visitors can enjoy winter activities all year round. With its ski slopes, snowboard park, ice-hockey rink and restaurants, the Snow arena attracted 450 000 visitors during its first year alone. (EU funding: LTL 40.1 million – EUR 11.6 million)
EU agricultural funds helped a young farmer from the village of Laičiai to get his farm up and running, producing forage crops for livestock. The project co-financed the purchase of machines and technology, reducing maintenance costs, increasing production stability and improving the quality of the forage. (EU funding: LTL 35 533 – EUR 10 291)
A dairy cooperative from the village of Varanauskas was able to purchase modern milk transportation vehicles with EU support, enabling it to operate more cost-effectively, to increase its competitiveness and thus to safeguard jobs. (EU funding: LTL 448 011 – EUR 129 753)
The RAIN project has improved rural broadband access, bringing coverage to 98 % of rural Lithuanian areas. Some 4 400 km of broadband cables have been laid, with network infrastructure and connection points installed. As a result, 660 000 citizens, 2 000 businesses and 9 000 public institutions can benefit from the powerful broadband tool. (EU funding: LTL 147 million — EUR 42.6 million)
Lithuanian medical technology company Vittamed is developing an ultrasound technology to measure intracranial pressure. The device will enable non-invasive, safer, faster and more accurate measurements for patients with brain injuries. (EU funding: LTL 4.5 million — EUR 1.3 million)
A major share 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.
More than 50 000 people followed training courses on how to use the Internet, provided by the association 'Window to the future' between 2006 and 2008. Particular efforts were made to reach the elderly, disabled persons and rural residents. The project made a significant contribution, along with other projects and measures, in helping 50 % of Lithuanians become computer literate. (EU funding: LTL 9.3 million — EUR 2.7 million)
Lithuania received over LTL 3.5 billion (EUR 1 billion) from the European Social Fund (ESF) in 2007-2013. The ESF supports employment and helps people to improve their education and skills. Investing in people is essential if Europe is to address today’s major challenges, such as the need for new skills, computer technologies, globalisation, the ageing population and the difficulties faced by young people looking for a first job. It is a long-term investment bringing back major returns.
Some 3 529 Lithuanian 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.
The EU contributed LTL 85 million (EUR 24.6 million) to the construction of the National Open Access Scholarly Communication and Information Centre at Vilnius University. The new library houses over 2 million texts as well as individual and group work spaces, reading rooms, conference halls and a play centre for children. The building forms part of a combined business and academic centre under construction in the area.
Erasmus + is not only for students. The programme allows new entrepreneurs to spend some time in an enterprise in another EU country in order to acquire the relevant skills for managing a small or medium-sized enterprise. The stay is partly financed by the European Commission.
The coastline near Palanga, which has been threatened by erosion, enjoyed a makeover thanks to a restoration and preservation project co-financed by the EU. The coast is home to diverse fauna and flora and is a popular tourist destination. (EU funding: LTL 8.6 million — EUR 2.5 million)
Fifteen European countries, including Lithuania, participated in the FLAPP project ('Flood awareness and prevention policy in border areas'). The project enabled experts from regions regularly experiencing flooding to share knowledge and experience on how to prevent and forecast floods, evacuate people and limit damage. The project received LTL 3.8 million (EUR 1.1 million) from the EU.
Lithuania received LTL 1.3 million (EUR 378 910) from the EU Solidarity to help it deal with the consequences a windstorm which caused significant in northern Europe in January 2005.
All values in national currencies have been converted using exchange rates from October 2013.