EU Budget and Policy Domains

Definition: Rules concerning the single market and related policies.
Flanking policies include:
- Competition policies
- Social policies
- Environmental policies (including external dimensions)

Definition: Allocation of resources from the EU budget to social groups or regions.
Primary mechanisms include:
- Agriculture subsidies
- Cohesion subsidies

Definition: Policies aimed at guaranteeing the economic, social, and political rights of EU citizens.
Areas of focus:
- Asylum
- Migration
- Police cooperation
- Judicial cooperation

Definition: Policies representing the EU as a unified actor in relation to the rest of the world.
Areas of focus include:
- Trade
- Development
- External security
- Defence

1970s-1980s Negotiations:
- French agricultural interests vs. UK’s regional funding and rebate demands.
- Tensions between the European Commission, European Parliament, and Council of Ministers led to multi-annual budgetary programs that shape annual budgets.
Notable periods of multiannual financial programs:
- 1988 – 1992: Delors I
- 1993 – 1999: Delors II
- 2000 – 2006: Agenda 2000
- 2007 – 2013: Multiannual Financial Framework 1 (MFF 1)
- 2014 – 2020: MFF 2
- 2021 – 2027: MFF 3
Current Negotiation Issues:
- Budgetary ceilings and negotiations between net contributors (e.g., Germany, France) vs. net recipients (e.g., southern and eastern European countries).
- Expenditure considerations related to:
  - Agriculture subsidies
  - Structural funds and economic development
  - Migration
  - Climate change
  - Post-pandemic recovery
  - Consequences of the Ukraine conflict.

1988 – 1992 (Delors I):
- Increased EC financial resources.
- Introduction of GNI-based contributions as an "own resource".
- Limits set on CAP expenditure.
- Continuation of the UK rebate and doubling of structural fund expenditure.
1993 – 1999 (Delors II):
- Continuation of the UK rebate.
- Set maximum levels of expenditure.
- Increased financial flows to poorer regions.
2000 – 2006 (Agenda 2000):
- Focused on consolidation of resources without an increase.
- Ongoing UK rebate and adjustments in contributions from various member states.
2007 – 2013 (MFF 1):
- Phased adjustments of the UK rebate.
- Shift from agriculture spending to economic development.
2014 – 2020 (MFF 2):
- Slight reduction in budget as a result of member states’ reluctance.
- Prolonged discussions on the UK rebate and consistent shifts towards economic development funding.

Description of the EU budget size in relation to member states:
- Projected 2025 EU budget: approximately 200 billion Euros, plus around 72 billion Euros from NextGenerationEU.
- This accounts for roughly 1% of the total GNI of EU member states.

Different types of income sources for the EU budget include:
- Agricultural Levies: Taxes on imports of agricultural products.
- Customs Duties: Approximately 12% of budget revenues.
- VAT Contributions: Harmonized tax not exceeding 1% of EU GNI, around 10% of revenues.
- Member State Contributions: 70% based on GNI calculations, including lump sum corrections for countries like Denmark, Austria, Germany, Sweden, and the Netherlands despite the UK's exit.
- Complementary Resources: About 8%, including external revenues and new taxes such as non-recycled plastic packaging taxes.
Future Options for Revenue Generation:
- Carbon Border Adjustment Mechanism (CBAM).
- Tax on large multinational corporations.
- Extension of the Emission Trading System (ETS).

The European Commission drafts the preliminary budget proposal.
The Council of the European Union adopts the draft budget.
The European Parliament reviews the draft: can propose amendments.
The Council evaluates the amended draft and revises accordingly.
The European Parliament reviews the revised draft.
Final budget is adopted or rejected by the Parliament based on all previous readings.

The European Commission implements the approved annual general budget.
The Court of Auditors reviews budget execution and submits an annual report.
The Council examines the report and proposes recommendations.
The European Parliament grants discharge to the Commission based on the Council's recommendations.

First Commission Proposal scheduled: July 2025.
Anticipated Budget Increase to €2,000 billion, which is 1.26% of EU GNI.
Expected Changes:
- Increased flexibility and simplification in budget categories.
- Strengthening of partnerships between national governments and EU.
- Enhanced focus on rule of law conditionality.
- Potential reallocation of funds from traditional areas (e.g., agriculture) towards competitiveness and defense-related spending.

The transition into the next MFF will be crucial for determining the future efficiency and effectiveness of EU spending, particularly in light of recent geopolitical challenges and societal shifts. Discussions on funding priorities reflect deep ideological divides within the Union, impacting both immediate policies and long-term integration goals.