Myths about the EU budget

8/6/2019 Myths about the EU budget

1/6

142-2011 29 juin 2011

Myths about the EU budgetand the Multiannual Financial Framework

The EU budget is often written about, but not always correctly. This Memo sets out a number of

commonly held misconceptions and provides the real facts and figures about them.

1. The EU budget is enormous.

No, it is not.

The EU budget was around 140 billion in 2011, which is very small compared to the sum of national

budgets of all 27 EU Member states, which amount to more than 6,300 billion. In other words, total

government expenditure by the 27 Member States is almost 50 times bigger than the EU budget!

To put this in perspective, the average EU citizen paid only 67 cents on average per day to finance the

annual budget in 2010. This is less than half the price for a cup of coffee hardly a large expense given thehuge benefits that the EU brings citizens.

In fact, the EU budget is smaller than that of the budget of a medium-sized Member State like Austria or

Belgium.

You can also look at it another way: the EU budget represents around 1% of EU-27 Gross Domestic

Product the total value of all goods and services produced in the EU whereas Member States budgets

account for 44% of GDP on average.

The EU budget is always balanced, which means no single euro is spent on debt. And 94% of what is paid

into the EU budget is spent in Member States on policies and programmes that benefit citizens directly.

2. The EU budget is constantly on the rise whereas national governments reduce their

spending.

Wrong.

National budgets are NOT decreasing, they are increasing:

- Between 2000 and 2010, national budgets in the EU increased by 62 % while EU budget increased

by 37% over the same period.

- In 2011, 23 national budgets out of 27 are increasing.

-

In 2012, 24 national budgets out of 27 are due to increase according to the latest estimations.


2/6

3. The bulk of EU expenditure goes on administration.

This is absolutely wrong. The EU's administrative expenses amount to less than 6% of the total EU budget,

with salaries accounting for around half of that 6%.

More than 94% of the European budget goes to citizens, regions, cities, farmers and businesses. The EU

budget focuses on bringing growth and jobs, tackling climate change, migration, cross-border crime and

other challenges that affect us all. It helps boost prosperity, for example by better interconnecting

Europeans through energy, transport and ICT infrastructure, by supporting less well-off regions to create

growth and jobs both there and in the rest of the EU, and by pooling our efforts in areas like research. It is

also about securing our own food supply. And finally, it is about making the EU's size count in the world -

just as the US and China make their size count, and pooling our efforts to help the world's poorest people.

The salaries are paid to staff delivering and managing valuable EU policies that have a direct positive

impact on citizens.

Think of air traffic liberalisation, passenger rights or cheaper roaming charges. Or think of the

Commission's decisions in antitrust and cartel cases, where consumers have been cheated of millions of

euros through illegally inflated prices. In 2010, the estimated customer benefits resulting from the

Commission's cartel decisions was at least 7.2 billion.

Commission staff are in charge of negotiating trade agreements that help to bring down prices of

consumer goods and offer a wider choice of affordable products. They are also involved in helping the EU

to draw the right lessons from the financial and economic crisis through better regulation and supervision of

financial markets. Administrative costs have been stable for a long time, and over the past five years

serious efforts have been made to keep them low. The Commission has conducted a zero growth policy in

relation to staff numbers. It has dealt with new competences and priorities through redeployment of existing

staff and has asked for no extra staff beyond those resulting from enlargement. The Commission also

decided to freeze its administrative expenditure in 2012, a 0% change.

Just seven years ago, the European Commission undertook a major reform of its administration. This

included lower recruitment salaries, creation of a contract agent category with lower salaries, higher

retirement age, lower pension rights and higher pension contributions. This reform has already saved the

EU taxpayer 3 billion, and is expected to generate another 5 billion in savings by 2020.

4. The EU budget is riddled with fraud.

The European Court of Auditors gives our accounts a clean bill of health and says that they correctly reflect

how the EU budget is spent.

It is true that is some policy areas, the Court of Auditors still has a problem to sign off our payments. In

cohesion policy for example the error rate is still slightly above 5% though this represents a considerable

reduction. The Court estimates the Commission error rate at between 2% to 5% in our payments,

depending on the policy area, whereas the threshold set by the Court is a 2% error rate.

However:

- A 2% to 5% error rate is not big. It means that a minimum of 95% of our payments are correct. So we

are not doing badly at EU level.

- Errors don't mean fraud. Suspected fraud affects only a very small part of the budget, accounting for

0.2% of the EU budget.

Last May, the Commission proposed steps to improve accountability via the review of the financial

regulation, by which the Member States' national paying agencies for regional aid would be required to

issue management declarations of assurance on EU funds (as is already the case in agriculture), subject to

an independent audit. So far, the reaction from Member States has not been enthusiastic.

2


3/6


4/6

the budget review are not about extra money for Brussels. It is not about adding to the tax burden of

citizens. It is about changing the mix of resources that finance the EU budget. Every euro that is collected

under a reformed system reduces the national contributions of Member States and makes the new budget

fairer and more transparent.

Did you know that any decision on EU financing requires the unanimous agreement of Member States and

subsequent ratification according to their constitutional requirements? Implementing rules require, in

addition, the consent of the European Parliament. This means that EU own resources are subject to strongparliamentary control and that Member States' sovereignty and democratic rights are fully assured.

9. Most of the EU budget goes to farmers.

Wrong.

In 1985, around 70% of the EU budget was spent on agriculture. In 2011, direct aid to farmers and market-

related expenditure amount to just 30% of the budget, and rural development spending to 11%. This

declining path continues.

Moreover, this relatively large share is entirely justified. Agriculture is the only policy almost entirely funded

from the EU budget. That means that European spending replaces to a large extent national spending,

which is why it accounts for a substantial proportion of the EU budget. The EU budget pays what national

budgets do not pay anymore since there is a Common Agricultural Policy (CAP).

Successive reforms of the Common Agricultural Policy have moved support away from production to direct

income support for farmers, provided they respect certain health and environmental standards, and for

projects to stimulate economic activity in rural areas. So the CAP is constantly developing.

The EU has also seen the accession of 12 new member states, most of which have large agricultural

sectors. But there has been no increase in the CAP budget to cover these additional costs.

10. Because food and commodity prices are high, we can scrap our farm subsidies.

On the contrary.

The rise and fluctuation in food and commodity prices highlights the importance of investing in agriculture in

order to better match supply to demand. High prices mean that demand is stronger than supply. Global

food demand is predicted to rise by 50% by 2030 as population growth is accompanied by changes in

dietary patterns in many emerging economies. The issue therefore is a global one, which underlines the

fundamental challenge of food security and the importance that Europe maintains its agricultural

production potential in all areas in order not to become over-dependent on food imports.

Furthermore, since in Europe there is little room for expanding the production area, productivity growth has

to come through innovation and research. The EU's rural development policy can help our farmersembrace new production possibilities and accelerate technology transfer.

11. The Common Agriculture Policy creates food surpluses and hurts farmers in the worlds

poorest countries.

The days of wine lakes and butter mountains are long gone.

We have seen 10 years of reforms to make our agricultural policy more development-friendly. Today,

developing countries have excellent market access with low or zero tariffs and market distortions are

significantly reduced. Today, around 70% of the EU's agricultural imports originate from developing

countries. Furthermore, export subsidies have been reduced drastically: 15 years ago, we spent 10 billiona year on export subsidies. In 2009, we spent no more than 350 million. In the context of the WTO

4


5/6

negotiations, the EU has offered to eliminate all export subsidies by 2013. By 2011, 90% of direct support is

non-trade-distorting (not linked to production).

Did you know that the average EU farmer receives less than half of what the average US farmer receives in

public support? And did you know that the EU is not only the biggest donor of development aid in the world

but also the largest trade partner for Africa? Almost 40% of African exports go to the EU. And the value of

EU imports of agricultural products from developing countries is 20% higher than the figures for the USA,

Canada, Japan, Australia and New Zealand put together.

12. Cohesion policy is expensive charity.

Cohesion policy helps poorer regions and countries catch up and connect to the Single Market. It is a

future-oriented investment policy that clearly benefits the rest of Europe by creating growth and jobs across

the board.

For example, intra-EU exports have gone up considerably to regions benefiting from cohesion funds. There

is a clear link between cohesion policy and growth in the EU. Studies have shown that GDP in the EU-25

as a whole has been 0.7% higher in 2009 thanks to cohesion policy investments over the 2000-2006

period. This is estimated to rise to 4% by 2020. In the EU-15 alone, the estimate is a cumulative net effecton GDP of 3.3% by 2020. In other words, regional investment is European development. Growth in one

poorer region leads to the purchase of goods and services from another, richer region. This boosts the

development of the Single Market, which represents between 60% and 80% of Member States' exports,

considerably more than to third countries like China, India or the US.

Cohesion Policy over the 2000-2006 period resulted in a return of 2.1 for each euro invested. By 2020, the

return is estimated at 4.2 per euro invested. Cohesion Policy also helped to increase the level of

employment. Estimates for 2009 are that the number employed was 5.6 million higher as a result of policy

in 2000-2006, or an average of 560,000 more a year than without the Cohesion Policy.

In the aftermath of the recent downturn and debt crisis, cohesion policy has a key role in the economic and

social recovery, leveraging investment in growth sectors like energy efficiency. It also helps people trainand improve their skills to find a job.

13. The Multiannual Financial Framework is another example of the EU's path towards a

centralised planning economy.

Certainly not.

The Multiannual Financial Framework (MFF) defines the EUs long-term spending priorities in line with the

agreed political priorities and sets annual maximum amounts to be spent on each priority. The financial

framework stretches over several years (for example from 2000-2006 and from 2007-2013) to ensure

sound and responsible financial planning and management.

With such a multiannual financial framework, annual EU budgets cannot grow out of hand and must focus

on real priorities.

The EU budget never runs a deficit, never builds up debt and only spends what it receives. It is always

balanced.

The EU budget explained:http://ec.europa.eu/budget/explained/index_en.cfm

The Multiannual Financial Framework explainedhttp://ec.europa.eu/budget/reform/index_en.htm

5
http://ec.europa.eu/budget/explained/index_en.cfmhttp://ec.europa.eu/budget/reform/index_en.htmhttp://ec.europa.eu/budget/reform/index_en.htmhttp://ec.europa.eu/budget/explained/index_en.cfmhttp://ec.europa.eu/budget/reform/index_en.htm


6/6

6

Documents

Myths about the EU budget