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1. Introduction

The focus of the budget of the European Union has evolved over the years. In the beginning, in 1958, common funds were used strictly for administration. Then agriculture became dominant, and later cohesion and solidarity. Today, growth and employment take a lion’s share of the EU budget.

All citizens of the European Union benefit from the EU budget in one way or another. All member states have agreed which activities are funded through the common budget. Taxpayers’ money is used to build roads, fund research, clean the environment, keep all of Europe inhabited, ensure safe food and support a myriad of other causes, directly or indirectly.

In principle, EU funding should only be used when pooling resources makes sense for the Union’s member countries.

The EU’s annual budget amounts to some €130 billion. This is roughly one percent of the economic wealth generated by the member countries each year – or €235 per each citizen per year.

A maximum spending limit is agreed by the member states’ governments and parliaments. The limit is currently set at 1.24% of the Union's gross national income. This corresponds to approximately €293 per EU citizen on average.

The budget covers the spending of all the Union's institutions. It fixes income and expenditure for the year, lists all the activities that are to be funded and sets out the total amounts of money and staff available for each. It also cites how each payment must be authorized.

Each year, the European Commission puts forward a blueprint for the following year’s spending plan. The budget is decided on by the Council and the Parliament. Its use is controlled by the Commission services and the European Court of Auditors. Finally, each year, in a process called the Discharge Procedure, the European Commission and the other EU institutions are accountable to the European Parliament for the use made of the resources at their disposal.

The Commission implements the budget, but the management of each individual project is shared with the member states. All income and expenditure must be accounted for.

So, EU spending is limited by the Treaties and by the maximum spending limit, but also by a multi-annual agreement between the European Parliament, the Council of Ministers, and the European Commission. This agreement contains a "multi-annual financial framework". The current one covers spending plans for from 2007 to 2013.

The biggest slice of the budget – 45% of total spending in 2008 – goes to making the EU economy more competitive and dynamic, and to increasing the cohesion of the EU, i.e. narrowing the gap between richer and poorer member states and regions. Agriculture is another major area of expenditure: in 2008 it took some 32% of the budget. A further 11% of the budget goes to rural development and environment. Administrative costs of running the EU amount to 6% of the total expenditure.

In recent years, great emphasis has been based on the transparent and cost-effective use of EU funds.

See here for the detailed budget documents for recent years. You might also want to check out the History of the EU budget.

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