Budget
The EU budget provides the financing needed to implement the Union’s policies. The budget for 2006 is €112 billion. The annual budget is relatively small in comparison with the Union's overall Gross National Income and the size of the public finances of its Member States.
Revenue
The revenue of the EU budget, coming from the Member States, is referred to as own resources. The maximum amount of own resources cannot exceed 1.24% of the Gross National Income of the EU-25. In practice, the EU budget has remained clearly below the set limit. One of the most important principles governing the EU budget dictates that the budget cannot be in deficit and, therefore, the EU cannot borrow.
Expenditure
EU expenditure is classified as compulsory and non-compulsory expenses. The Council makes decisions on the compulsory expenses which are based on obligations defined in the Treaties. Compulsory expenses include spending on agriculture, external relations and aid to Member States and part of the Union's development aid. The compulsory expenses account for about 45% of the EU’s budget.
Decisions on non-compulsory expenses are made by the European Parliament. Non-compulsory expenses include spending on structural funds, internal market policies and the Union’s administrative costs.
| EU expenditure in 2006: | |
| Agriculture | 46% |
| Regional and structural measures | 32% |
| External action | 7% |
| Internal policies | 8% |
| Administration | 6% |
Union expenditure is governed by a long-term spending plan, also known as a Financial Perspective, agreed upon by the European Parliament, the Council and the European Commission. The financial spending plan limits annual EU expenditure and can only be changed with the joint assent of the Council and the European Parliament.
The main guidelines governing the spending plans for the period between 2007 and 2013 were agreed upon in December 2005 during the UK Presidency of the EU. Final agreement on the Financial Perspectives for 2007-2013 was reached between the Council, the Commission and the European Parliament in April 2006.
Decisions on the budget for 2007 will be negotiated and made during Finland's EU Presidency.
