How is the budget raised The own resource system – The overall amount of own resources needed to finance the budget is determined by total expenditure less other revenue. The total amount of own resources cannot exceed 1.24 % of the gross national income (GNI) of the EU. Own resources can be divided into the following categories 1 (the figures below refer to the 2007 budget): 1 Traditional own resources (TOR) consist of customs duties, agricultural duties and sugar levies. These own resources are levied on economic operators and collected by Member States on behalf of the EU. However, Member States keep 25 % as a compensation for their collection costs. Customs duties and agricultural duties are levied on imports of products coming from third countries, at rates based on the Common Customs Tariff. TOR account for around 15 % of total EU revenue. The own resource based on value added tax (VAT) is levied on Member States' VAT bases, which are harmonised for this purpose in accordance with Community rules. The same percentage is levied on the harmonised base of each Member State. However, the VAT base to take into account is capped at 50 % of each Member State’s GNI. This rule is intended to avoid that the less prosperous Member States pay out of proportion to their contributive capacity, since consumption and hence VAT tend to account for a higher percentage of a country's national income at relatively lower levels of prosperity. The VAT-based resource accounts for around 15 % of total EU revenue. The resource based on gross national income (GNI) is used to balance budget revenue and expenditure, i.e. to finance the part of the budget not covered by any other sources of revenue. The same percentage rate is levied on each Member States' GNI, which is established in accordance with Community rules. The GNI-based resource accounts for around 69 % of total EU revenue.

Who gives what

How is the budget spent Total expenditure DescriptionBudget 2006% Of total expenditure 1. Agriculture ,54% 2. Structural operations ,83% 3. Internal policies ,94% 4. External action ,80% 5. Administration ,94% 6. Reserves ,41% 7. Pre-accession strategy ,58% 8. Compensation ,96% Total Expenditure ,00%

Who gets what

Allocated EU Expenditure (%EU)

Nation Contributio n to the EU budget 2003 (million euro) Contributio n as a % of overall EU Budget Contribution s to the EU Budget 2005 (million euro) Contributio n as a % of overall EU Budget Nation Contributio n to the EU budget 2003 (million euro) Contributio n as a % of overall EU Budget Contribution s to the EU Budget 2005 (million euro) Contributio n as a % of overall EU Budget Germany 16, , Portugal 1, , France 14, , Ireland 1, , Italy 10, , Luxembour g UK 7, , Poland 2, Spain 6, , Czech Republic Netherland s 3, , Hungary Belgium 2, , Slovakia Sweden 2, , Slovenia Austria 1, , Lithuania Denmark 1, , Cyprus Greece 1, , Latvia Finland 1, , Estonia Malta

EU Budget At the EU Summit held on the December 2005 the Member States reached a final agreement on the Budget: -The Budget was increased to (established at) billion Euros: percent of EU Gross National Income; -A comparison with the latest UK proposal – an increase of 13 billion Euros; -Compared to Luxembourg June 2005 proposal – there is still a decrease of 22 billion Euros; -CAP spending provides for about 40% of the EU Budget, while at the same time the agricultural sector provides for only around 5% of the jobs in the entire EU; -Around 72% from 405 billion Euros will be provided for Agriculture during the period of ;

CAP How much are the new Member States going to receive? The 10 New Member States are going to receive 5.1 billion Euros from the EU between ; There is going to be a 10 year transitional period after which a full size EU subsidy will be established; For 2004 the New Member Sates (CEECs) have received 25% from the amount that the Old Member States (EU 15) have received; For 2005 the New Member States have received 30% from the amount that the Old Member States (EU 15) have received; For 2006 the New Member States have received 35% from the amount that the Old Member States (EU 15) have received;

Top up payments to the farmers by the New Member states The CEECs will be allowed to top up the agricultural payments by 30% for 2004 thus making the total payments to the farmers up to 55% from the level in the EU 15; The CEECs will be allowed to top up the agricultural payments by 35% for 2005 thus making the total payments to the farmers up to 60% from the level in the EU 15; The CEECs will be allowed to top up the agricultural payments by 40% for 2006 thus making the total payments to the farmers up to 65% from the level in the EU 15;

From 2004 the top up payments can be raised up to 40% of the rural development funds – the remaining part has to be co financed by the National Budgets; Special Conditions about co financing: -EU can co finance no more than 80% of the additional amount – the rest has to be paid by the National Budgets of the New Member States; -No more than 20% of the Rural Development budget can be used for adding to agricultural payments to farmers; - After 2007 the New Member States can continue to finance the additional amounts to the original phasing-in levels but no more than 30% of those original. These levels have to be financed entirely by National Budgets; - The top up amounts cannot exceed 100% of what the farmers in the EU 15 currently receive;

The New Member States are going to receive over 5 billion Euros for Rural Development for the period of ; The package is adapted to the conditions in the New Member States – more favorable than previously for the Old Member States; The package constitutes a major investment in the rural development process of the CEECs (including the newest members Bulgaria and Romania 2007); The size of the investment is two times the per capita levels in the EU 15;

Agreement for additional increases for some New Member States The European Council established some additional increases to the originally planned Rural Development payments for the New Member States; Examples: -Slovenia: by 150 million Euros thus creating a total amount of 250 million Euros; -Czech Republic: by 100 million Euros thus creating a total amount of 482 million Euros; - Slovakia: by 90 million Euros thus creating a total amount of 352 million Euros;

Estimates made by the Commission The Commission has made the estimate that the average increase in the farmers’ income for 2004 has been around 50%; Overall agricultural income for 2004 has been around 54%; Examples: -Increase in farmers’ income for the Czech Republic: around +108%; -Increase in farmers’ income for Poland: around +74%;

Did the distribution of the budget among the Old Member States change and how? The Old Member States (EU 15) will not be really affected by the Eastern Enlargement. Old Member States like France, Spain, Portugal and Greece which are net beneficiaries’ from the CAP Budget are not going to receive less than before 2004 and Countries like Spain imposed a condition on the Eastern Enlargement: Spain stated that there would be no support for the accession of the new member states if it is going to receive less money than before.

EU newcomers: Farm facts

Structural and Cohesion Funds Greatly affected by the Enlargement More than a third of the EU population lives in MS that qualify for Cohesion Funds assistance Almost all regions of the new MS qualify for Structural Funds

Future Changes A new own resources system by 2014 Main principles – equality, simplicity and solidarity Abolition of VAT, GNI will be used primarily CAP reform European tax?

Structural Funds More involvement of the MS with their own funds More money given for regional development Simpler and more efficient, less instruments => less bureaucracy to deal with

Research and Development More will be given each year for research to fill the gap with the USA € 7.8 bln for nuclear and renewable energy resources

Further Enlargement? Turkey - 2.9% of EU25 GDP by 2015 if growth is 5% per year Large agricultural sector, need for heavy funding of regions Will get 11% of EU27 budget Other countries – negligible effect in terms of contribution and use of the budget (small economies, new 10 level of development)

The End