The EU Budget - Essay Example

The EU Budget: What are the major items of revenue and expenditure in the EU's budget' Assess how well this budget fits the priorities of the EU. ''We cannot run an ambitious Europe of tomorrow on an empty fuel tank' This is not the time to do Europe on the cheap.' - Pat Cox, European Parliament President, 2002-2004. Introduction The budgets' heart of the European Union has developed over the years. In 1958, general funds were utilised stringently for administration. Then agriculture prevailed, and later consistency and harmony. In the present day, development and employment receives a lion's share from the EU budget. The citizens of EU derive some kind of benefit from the EU budget. The member states have approved which actions should be financed from the common budget. It is agreed that Taxpayers' money must be utilised in building of roads, research financing, environment cleaning, entire Europe to be inhabited, assure safe food and back up a number of other causes either directly or indirectly. The main principle is that EU funding has to be utilised only when sharing resources looks sensible to the Union's member countries. The EU's yearly budget totals to around '130 billion. This is approximately 1% of the economic wealth yielded by the member countries every year. The budget determines income and expenditure for the year, lists all the actions that are to be financed and also fixes total amount of money and staff obtainable for each. The budget also determines the amount of each payment and its authorisation. A ceiling on the expenditure limit is accorded by the member states' governments and parliaments. The limitation at present is set at 1.24% of the Union's gross national income. The budget in the year 2008 has apportioned 45% of its total expenditure to make the EU economy more aggressive and lively. This year the EU budget has plans to narrow the space between the rich and the poor member states and regions. Agriculture is apportioned with 32% of the budget which is also a major area of expenditure. Rural development and environment takes 11% and the total cost for the administrative to run the EU works up to 6% of the total expenditure. How is the EU financed' (http://www.eu2008.si/en/ About_the_EU /Budget/ index. html accessed on 4th June 2009) The budget of the EU is dependent on 3 constraints: 1. The treaties, which influence the EU budget not to be in deficit which means that the total income has to cover the total expenditure. 2. An upper limit for expenditure which is agreed by the member states' governments and parliaments. This is the personal resources cap. This cap forms 1.24% of the Union's gross national income (GNI) which is to be used for payments. This amounts roughly to EUR 293 per EU citizen on average. 3. A fiscal structure established by the European Parliament, the Council of Ministers and the European Commission, would check the development of the EU budget set by expenditure category for a period of time. The present fiscal structure runs from 2007 to 2013. The EU has its individual resources to fund its spending. By law, these resources are of the Union. Member states who accumulate them in lieu of the EU and shift them to the EU budget. The 3 kinds of EU's own resources are: 1. Traditional own resources (TOR) which is made up of duties billed for imports from a non-EU state which approximated to around 15% of total revenue, in the year 2007. 2. Value added tax (VAT) is a consistent percentage rate which is applicable on each member state's harmonised VAT revenue forms yet another resource. This was around 15% of total revenue, for the year 2007. The gross national income (GNI) which is 0.73% and is applicable to the GNI of each member state. Even though it is a complementary item it is the prime source of revenue and amounted to around 70% of total revenue for the year 2007(http://www.eu2008.si/en/ About_the_EU /Budget/ index. html accessed on 4th June 2009). : Source: Commission of the European Communities Other sources of revenue are taxes paid by EU employees on their salaries, shares from non-EU countries towards some EU programmes. Also fines imposed on companies breaching competition or other laws add to the source. These sundry resources totals to about '1.3 billion which is 1% of the budget (http://www.eu2008.si/en/ About_the_EU /Budget/ index. html accessed on 4th June 2009). Source:EU Information Centre of the Riksdag Source:EU Information Centre of the Riksdag The Fundamental Features of the EU Budget Every budget of a nation state whether unitary or federal has numerous assigning. The fundamental purposes of the budget is to implement the fiscal strategy and channelising policy between the different regions or individuals. Fiscal policy relates to the budgetary revenues and expenditures. The outcome of fiscal policy on combined demand may be effected in various ways: (1) By the use of the en suite or mechanical stabilisers; (2) By optional measures from those in control of fiscal policy, (3) By the organisation of regulations or by using flexible policy formula (Jurkovi', 1989). The main feature is that first every budget has to be large when compared with the domestic product. Only then it will have an impact on movements in the economy. Second the budget should be able to develop budgetary shortages or excesses able to affect the business cycles. And finally the financial and monetary strategies has to be synchronized jointly to lead the economy in a given direction (Ja'i', 1982; Jurkovi', 1989; Peacock and Shaw, 1976). The EU resembles to some extent of an international organisation, and to some extent a federal state. The differences lies in: (1) The EU commands part of the sovereignty of the member states; (2) The EU has its own budgetary revenue and sources; (3) The EU can implement rules and regulations which has to be adhered to by its member states immediately (4) The EU is empowered to accede into accords with third-party states (Holmes, 1999). The conventional hypothesis of public finance, were the causes for the outline rules which has to be held on for the growth of a layer of decision making in fiscal matters (Musgrave, 1973; Oates, 1972). In accord to this, it was compulsory to create fiscal relationships which will allow the member states to retain a high level of political and constitutional sovereignty (Mihaljek, 1998, p.208). The current year (http://ec.europa.eu/ budget/budget_ detail/ current_year _en.htm). The Budget 2009 is gearing up for economic Retrieval The EU Budget for 2009 has apportioned the largest share that is 45% or '60 billion for research, innovation, employment and regional development programmes so that Europe will be able to recoup from the present economic crisis. Agriculture gets a fixed 40% of EU funding whereas expenditure on the environment and rural development is increased by 2.9%. '0.6 billion is apportioned for the '1 billion food capacity to aid developing countries with rising food prices. Quicker financing for Europe's regions: Financing for consistency will persist to develop in 2009 with almost '48.5 billion for Europe's regions which is a 2.5% increase over that of 2008. Structural Funds financing in 2009 will also be quickened to back up Member States which is hit by the disaster and enhance funding for small and medium sized enterprises (SMEs). Agricultural expenditure will be fixed for 2009 which is above '40 billion. The transfer within this strategy area for growth in rural areas also calls for increased expenditures on the environment to fight climate change. Reacting to global challenges The recent increase in food prices has struck worst the most susceptible in the world. The EU has plans to provide a Food Facility package of '1 billion over 2008, 2009, 2010. for this the maximum funds that is up to '568 million will be financed by the 2009 EU budget. The Eu as a global player will be able to channel more than '8 billion into external policies which is a 7% rise on 2008. Backing for the peace process in the Middle East, in Afghanistan and assuring stableness in Kosovo will be central investments in 2009. The funds to the tune of '361m for Palestine and '231m for Afghanistan and '261m for projects in Kosovo will be apportioned. Conclusion The EU budget is a moderately small but a very important tool for the execution of fiscal policy from the central or above the national level of the EU. Because of political and constitutional restrictions that subsist in the EU, in its crucial characteristics it is essentially different from the standard budgets of the nation states. Due to the complication of its vertical structure and its political decision making regarding financial issues in the EU the distribution of the confined resources is introduced on the accomplishment of the maximum amount of economic and social cohesion within the EU. Right from the beginning, a variety of changes has been introduced in the EU budgetary system, mostly the consequences of political forces from individual member countries. Regardless of the fact that the EU is still at a premature stage of incorporation, which means a lower redistributive role for the central level has to be implemented and only such an EU budget will be the best instrument in bridging over the economic and regional disputes among the member countries and for attaining larger and firmer consolidation. Reference: 1. Ardy, B. (2002) The EU Budget and EU Citizens, in Hatt, S. & Gardner, F.'Economics, Policies and People: A European Perspective, Macmillan, Basingstoke. 2. Begg, I (2005) 'Funding the EU', London: Federal Trust, http://www.Fedtrust. co.uk/default.asp'pageid=302&mpageid=302&groupid=6. 3. Europe's Money: Guide to the EU Budget (Spicers European Union Policy Briefings) by Paul F Clarke (Hardcover - Jun 1996) 4. European Economy, No 53, 1993, Stable Money - Sound Finances - Community public finance in the perspectives of EMU 5. Gower, J. (ed), (2002) The European Union Handbook, London: Fitzroy Dearborn. 6. http://www.eu2008.si/en/ About_the_EU /Budget/ index. html accessed on 4th June 2009. 7. Holmes, P., 1999. "The political economy of the European integration process" in D.A.Dyker, ed. The European Economy. New York: Addison Wesley Longman, 43-63. 8. http://ec.europa.eu/ budget/budget_ detail/ current_year _en.htm retrieved on 4th June 2009. 9. Jurkovi', P., 1989. Fiskalna politika u ekonomskoj teoriji i praksi. Zagreb: Informator. 10. Ja'i', Z., 1982. Bud'et i privredni razvoj. Zagreb: Narodne novine : Ekonomski institute. 11. Musgrave, R. A., 1973. Teorija javnih finansija. Beograd: Nau'na knjiga. 12. Mihaljek, D., 1998. "Theory and Practice of Confederate Finances" in P. B. Sorensen, ed. Public Finance in a Changing World. Basingstoke: Palgrave Macmillan, 193-220. 13. McDonald F & Dearden S (2004) European Economic Integration, 4th edition, Harlow: Pearson Education, ch 4. 14. Nello, S. S. (2005) The European Union: Economics, Policies and History, Maidenhead: McGraw-Hill, Ch. 9. 15. Oates, W. E., 1972. Fiscal federalism. New York: Harcourt Brace Jovanovic. 16. Peacock, A. and Shaw, G. K., 1976. The Economic Theory of Fiscal Policy. London: George Allen & Unwin Ltd. 17. Rethinking the EU Budget: Three Unavoidable Reforms (Centre for European Policy Studies) by Gabriele Cipriani (Paperback - 1 April 2008). 18. The Eu Budget: a Way Forward (Centre for European Reform policy brief) by John Peet (Unknown Binding - 2005). Read More