How we are financed

The European Union budget funds the policies and the expenditures of all the EU Institutions. The budget is negotiated between the European Parliament and the Council of Ministers on a basis of a proposal by the Commission.

For 2007, the EU budget runs to about €126 billion. This corresponds to only around € 0.70/day per person. The money comes from four different sources:

• 69% from a uniform rate applied to Gross National Income of each EU country;
• 15% from a share of the harmonised value added tax (VAT);
• 15% from customs duties, agricultural duties and sugar levies;
• 1% from unspent amounts from previous years, contributions of EU staff, etc.

What does the money get spent on?

According to opinion polls, a quarter of the public (wrongly) believes that the greatest part of the EU budget is spent on administration. In fact, the administrative expenses of the Union will total 6.9 billion euro in 2007, less than 6% of EU spending. The European Commission uses less than a half of this (3,3 billion €); the rest covers the cost of running the other EU institutions, for example the European Parliament.

So where does the rest of the money go?

Mostly back to Member States, in the following ways:

• 43 % to enhance competitiveness and cohesion, by investing in research and development, small and medium-sized enterprises, information society, integrated infrastructures and trans-European networks for transport and energy;
• 34 % to modernise agricultural production and ensure safe and high quality food;
• 11% to foster rural development and protect the environment;
• 5% for EU projects on the world stage (global cooperation, humanitarian or development aid, pre-accession funds);
• 6% for other expenses, including the administrative ones;
• 1% to make Europe a safer place to live in, by preventing and fighting again terrorism, combating public health threats from animal diseases, etc.