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The EU's budget has developed over several decades in pace with the evolution of the European Union. It ensures the financing of programmes and actions in all EU policy areas, from agriculture and regional policy, to research, enterprise and space.
Since 1988, the EU functions with so-called long-term budgets, also referred to as multiannual financial frameworks (MFF).
Long-term budgets provide a stable framework, with overall spending limits to:
align spending with the EU's political priorities
increase predictability of EU finances for co-financers and beneficiaries
ensure EU budgetary discipline
make adoption of the annual EU budget easier
Annual EU budgets are established within the limits provided by the multiannual financial framework.
EU expenditure: multiannual financial framework (MFF)
Commitments and payments: examples
Commitments and payments usually differ for multiannual projects, for example the building of a bridge. The commitment would be made in one year while payments would be spread over several years.
Commitments and payments are identical for expenditure which must be made in the same year, for instance, direct financial support to farmers.
A multiannual financial framework usually covers a period of five to seven years.
It sets the limits (ceilings) for EU annual expenditure for:
total commitments in a given year
total payments in a given year
payments and commitments in each area of EU spending (headings)
Total commitments: the maximum amount of legal obligations – such as contracts or grants – that the EU can enter into in a given year. The amounts are not necessarily paid out in the same year but may be spent over several financial years.
Total payments: the actual amounts spent in a given year. They arise from legal commitments made in previous years.
The purpose of these limits is to:
manage the overall size of the EU budget
protect the amounts for each area in line with the EU’s priorities
However, the budget also requires flexibilityto deal with unforeseen needs – such as crises and emergencies – and changing circumstances.
The MFF therefore includes provisions and ‘special instruments’ to make sure that, even in unplanned circumstances, money can be used when and where it is most needed.
What is the EU's multiannual financial framework (MFF)?
How does it work?
Take a look at this video animation to discover how the EU's long-term budget works and what are its benefits. It also explains the decision-making process, in which the European Council and the Council play a key role.
More about the EU's long-term budget and how it is decided:
The EU's expenditure is financed by revenue from different sources:
own resources
surplus EU revenue – what remains after payments from the previous year
other sources: mainly fines on companies infringing EU competition law, refunds and taxes on salaries
The EU’s own resources make up most of the EU's revenue. They have remained the same over the last decades and consist of:
traditional own resources: mainly customs duties and sugar levies
value-added tax (VAT) based contributions from member states
gross national income (GNI) based contributions from member states, which are adjusted to balance revenue and expenditure
The share of the different EU sources of revenue varies slightly from year to year. In 2018, for instance, the EU's total revenue of 144.8 billion euros was:
97% – own resources
1% – surplus
2% – other sources
The Council decides the maximum amount of own resources and their types at the same time as the limits for expenditure within the multiannual financial framework.
Once they have been agreed, these resources are automatically directed to the EU budget, without the need for any further decision by the national authorities.
Some countries receive reimbursements – or rebates – that serve to reduce the difference between what they pay into the EU budget and what they receive from it.
The EU's annual budget lays down all the EU's expenditure and revenue for one year.
Commitments and payments have to respect the ceilings laid down in the multiannual financial framework. In practice, they are usually budgeted below the MFF ceilings to leave room for manoeuvre – or a margin – in case of unforeseen needs.
In every EU annual budget, revenue and expenditure must always be in balance.
The EU budget has always evolved with the needs of the Union, responding to changing political, social and economic contexts. Its history is a fascinating story of evolution and adaptation, of compromise and of a vision for a shared future. It is a story of transformation in Europe and of positive impact on the lives of millions of people. Discover the history and the stories which explain how the long-term EU budget works for Europe.
See full infographic
