EU budget and Multiannual Financial Framework (MFF)

Study Notes

The European budget is an annual financial plan detailing revenues and expenditures for one fiscal year.
The MFF is a long-term financial framework setting maximum spending limits for various policy areas over a minimum of five years.
Current MFF spans 2021-2027, guiding the formulation of annual budgets while ensuring long-term financial discipline.

Timeframe: European budget applies to one fiscal year; MFF covers multiple years (e.g., seven years for 2021-2027).
Detail: The European budget outlines specific allocations for a single year; MFF establishes broader spending categories and ceilings without detailing individual allocations.
Approval Process: The annual budget is proposed by the European Commission and requires approval from the Council of the EU and the European Parliament each year; MFF proposals need unanimous approval from the Council and consent from the Parliament.

The MFF for 2021-2027 has a budget of €1,074.3 billion (2018 prices) to address long-term EU priorities.
The Next Generation EU (NGEU) recovery package, totaling €750 billion in grants and loans, was approved to tackle socio-economic challenges from the COVID-19 pandemic.

Traditional Own Resources: Includes customs duties on imports and sugar levies.
VAT Based: Set at 0.3% of Member States' standardized VAT bases; Germany, Netherlands, and Sweden apply 0.15%.
GNI Based: A percentage (approximately 0.7%) of each Member State's gross national income.
Other Revenue: Encompasses taxes from EU staff salaries, bank interest, fines, and contributions from third countries.

Unity: Requires all EU revenues and expenditures to be in a single budget document for comprehensive oversight.
Budgetary Accuracy: Demands reflection of true financial figures without revenue overestimations or expenditure underestimations.
Annuality: The budget is prepared and executed annually, with limited carryover of unspent funds.
Equilibrium: Total planned revenues must equal planned expenditures; borrowing to finance the budget is not permitted.
Unit of Account: Budget transactions and reporting are denoted in euros for consistency.
Universality: All revenues are pooled to finance expenditures without specific earmarks, allowing financial flexibility.
Specification: Each item in the budget is dedicated to specific purposes to prevent misallocations.
Sound Financial Management: Funds must be utilized efficiently and effectively, focusing on minimizing costs, maximizing outputs, and achieving intended outcomes.
Transparency: Budget execution and reporting should be clear and accessible to public scrutiny to foster accountability.

The EU budget is crafted through a procedure involving the European Parliament and the Council.
It must adhere to the limits established in the MFF and Own Resource Ceiling.
The European Commission submits the draft budget by September 1 each year, while the Council adopts its position by October 1.
If the European Parliament accepts the Council's position or fails to decide within 42 days, the budget is adopted automatically.