The cost of Europe
November 6, 2012
The joint budget of the 27 members of the European Union is 129 billion euros ($165 billion) this year. It is used to subsidize the European agricultural sector, structural and regional aid, and programs in the fields of science, research and culture as well as some industries. In addition, it has to cover the costs for the EU institutions such as the European Commission, the courts, the European Parliament and numerous other smaller organizations. Around 80 percent of the budget funds flow back to the member states as subsidies.
Contributions from the 27 member states fill the EU's coffers, as does income from customs duties and a portion of value-added taxes. Member contributions now constitute an ever-increasing portion of EU revenues, while so-called capital resources from customs duties are decreasing.
Redistribution of poor and rich
The member states are divided into two camps over the budget negotiations. There are 12 net contributors and 15 net recipients. Net contributors receive less money from Brussels than they pay into the joint coffers. Net recipients receive more grants and benefits than they pay to Brussels. According to the European Commission, the largest net contributors include Germany (at 9 billion euros), France (6.4 billion), Italy (5.9 billion), Great Britain (5.6 billion) and the Netherlands (2.2 billion). The leading net recipients are Poland (11 billion), Greece (4.6 billion), Hungary (4.4 billion), Spain (2.9 billion), and Portugal (2.9 billion). Calculating that for each individual EU citizen, however, the picture looks different: Danes pay the most into EU coffers at 150 euros each, while Hungary receives the biggest payout - 442 euros per capita in aid money from Brussels.
Net contributors want to make cuts
The shares in this redistribution system are a regular cause of strife within the EU. Since the end of the 1980s, a multi-year budget has been negotiated among members with income and expenses laid out for a seven-year time frame. Currently, EU leaders are negotiating the budget for 2014-2020, with the European Commission calling for some one trillion euros ($1.3 trillion) for the seven-year period starting in 2014. Net contributors, including Germany, say that's too much and want to see a reduction in the Commission's suggestion by 100 billion euros. British Prime Minister David Cameron wants to go even further and reduce the sum by 200 billion. But despite the sums of billions of euros, the common budget is minimal compared to overall economic performance: it comprises only around one percent of total European Union economic activity.
Many receive discounts
In 1985, Great Britain was able to haggle out a discount on its contribution, because it receives very little in agricultural subsidies. Since then, other net contributors have received rebates, including Germany. But the UK rebate is nominally the largest discount, which the other member states then have to make up. That's why the rebate, which former Prime Minister Margaret Thatcher punched through with the words "I want my money back!," is frequently the subejct of debate.
Rescue funds for indebted nations do not come out of the shared EU budget. So far, only a small portion of the rescue loans for Greece has been taken from EU funds. The European Financial Stability Facility and the European Stability Mechanism are financed separately by eurozone nations. In addition, a special fund for EU development aid exists, with payments structured slightly differently than for the overall EU budget.