The EU's annual budget

What is the EU annual budget?

The annual budget lays down all the EU's expenditure and revenue for one year.

Annual budgets have to fit within the expenditure limits (‘ceilings’) set in the EU's long-term budget, the multiannual financial framework (MFF). The EU usually sets its annual budget at a lower level to leave a margin in case of unforeseen needs.

The annual budget ensures that the EU receives the revenue it needs to finance its spending. In every annual budget, revenue and expenditure must always be in balance.

• The EU long-term budget

How is the annual budget adopted?

The European Commission proposes a draft annual budget. It is then the Council and the European Parliament who agree on the budget on an equal footing.

First, the Council adopts its position on the draft annual budget. The Parliament can then adopt amendments to the Council's position. If their views diverge, a conciliation committee is convened to find a compromise within three weeks.

In case of an agreement, the Council and the Parliament have 14 days to formally approve it.

If the Council and the Parliament do not reach an agreement, the Commission has to present a new draft annual budget.

If the annual budget is still not adopted at the beginning of the year to which it refers, the system of ‘provisional twelfths’ applies. This means that not more than one twelfth of the budget appropriations for the previous year or of the draft budget proposed by the Commission – whichever is smaller – may be spent each month for any chapter of the budget.

The budget adoption procedure is laid down in Article 314 of the Treaty on the Functioning of the EU.

Can the annual budget be amended?

The Council, together with the Parliament, can amend the adopted annual budget. For this the Commission proposes a draft amending budget, which is adopted under the same procedure as the annual budget.

The annual budget can be amended, for instance, if additional means are necessary to meet unexpected needs, for example to deal with the consequences of a natural disaster in a member state.

Amending budgets are also adopted to incorporate the budget surplus of the previous year or to adjust the forecast shares of revenue from the different types of own resources.

Who implements and controls the annual budget?

It is mostly the Commission and the member states who implement the budget. The member states implement about three quarters of the budget. This means that the Commission directly pays out only a small part of the budget. However, the Commission bears the ultimate responsibility for the implementation of the entire annual budget of the EU.

Member states, in cooperation with the Commission, are obliged to ensure that the appropriations are used in accordance with the principles of sound financial management. All parties involved in implementing the budget have to comply with a solid set of rules defined by the EU legislators.

Discharge procedure

The implementation of the EU's annual budget is verified as part of the so-called budgetary discharge procedure. The Parliament decides whether to approve how the budget for a specific year has been implemented on a recommendation from the Council. It decides whether to 'grant the discharge'.

For its recommendation, the Council examines:

• the EU's accounts for a given financial year, the financial statement and the evaluation report on the EU's finances based on the achieved results – all submitted by the Commission
• the annual report and the statement of assurance by the European Court of Auditors – the EU's external auditor