European Union

Virginia Gómez Argenti

2º ADE      12/12/2014

Practice 6: The budget of the EU

1. Following table 1 comment on the evolution of expenditures in the European financial perspectives.

This table shows the changes of the structure of expenditure along the twenty-five years that elapse between 1980 and 2006. We can see in this table the evolution of the process of European integration and budget priorities.

The financial perspective sets the budgetary ceilings for the major categories expenditure in order to keep them within the limits of the own resources available. Up to 2006 it has include 8 headings, which we can see in the table.

Firstly we see the increase in absolute terms of total expenditure. In 1980 it was 16.290,4 million €, however in 2006 it was 106.575,5 million €. It supposed an increase until 654, 2% about the total expenditure of 1980.

Loss of importance of agriculture is the most important change. Agriculture lost 22.6 percentage points, however increases weight of structural actions 15.1 percentage points. Along with agriculture, compensations lost 4.2 percentage points of the weight of spending in relative terms nevertheless in absolute terms increases spending.

This loss about compensations is the consequences of the suppression reimbursement to Member States for the costs of collecting own resources, spite of the existence of compensation newcomers States if they receive.

All other expenditure headings gain weight in relative terms of spending, especially the one of internal policies. This reflects the development effort cohesion policies (social and regional) and other internal policies (education and health). With less important increases the proportion of external actions and administrative expenditure.

It should be mentioned that there has been a long history of conflicts between the EU institutions and between the Member States to prevail their interests.  Relations between institutions became strained during 1975-88 leading to an open conflict. Raising resources and budgetary discipline with hardly any practical effect because of growing disputes between Parliament and Council,  and finally overcome with the signature in 1988 of the Interinstitutional Agreement on budgetary discipline and improvement of the budgetary procedure. Binding all three institutions involved  Which included the financial perspective 1988-92 (known since 2006 as the Multiannual Financial Framework) which fixed: expenditure and revenue ceilings for the Community, global amount and distribution of expenditure for a multiannual period. Renewed interinstitutional agreement with their corresponding financial perspectives for 1993-99, 2000-06, 2007-13 and 2014-20.

Standardized multiannual financial planning with major advantages: Reduced uncertainty for European institutions, member states and economic and social agents. Diminishing of political stresses linked to the budget adoption, a more rigorous budget management (spending and financing) and an increasing flexibility as major spending decisions may spread through several years avoiding concentration. The budget for each of the years covered by the agreement was adopted on time without major conflicts between institutions. It was helped clearly at the beginning by favourable economic conditions and moderate increase of some expenditure.

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