- The EU budget: shared revenues and differentiated benefits for members
- Western Europe pays, Eastern countries collect
- The rich countries of Western Europe are supporting Eastern Europe, but what is the use?
The EU budget: shared revenues and differentiated benefits for members
The European Union (EU) budget is quite unique. It is not financed by national taxes but by the EU's general revenue, made up of Member States' contributions based on their GDP and VAT receipts, import duties on goods from third countries, fines, and other EU revenues.
The EU budget is allocated in such a way as to fund programs, projects, and initiatives that benefit all member countries[1].
It is distributed through various funding programs, and the main areas of funding are: cohesion policy, the Common Agricultural Policy, science, research and innovation, education and youth programs, climate and environment, and support for less developed member countries.
As regards the latter, Member States with weaker economies, such as those in the eastern and southern parts of the EU, receive a larger share of the EU budget. This is based on GDP per capita, unemployment rates and socio-economic development needs.
In other words, each EU country receives funds according to its own needs, capacities, the projects it puts forward and the EU's overall strategic planning.
Western Europe pays, Eastern countries collect
Officially, the EU is said to enable member countries to achieve more together than they could on their own, but in this case, all member countries contribute to the EU budget and receive funds from it.
Some EU countries are the most obvious contributors, paying in more than they get back; others are net recipients, receiving more than they contribute. It is noticeable that the richer countries of Western and Northern Europe are the biggest contributors to the EU budget, while the countries of Central and Eastern Europe are the biggest recipients.
According to the European Commission (EC), in 2023, the biggest contributors to the EU budget are Germany with €33.8 billion, France with €25.8 billion, Italy with €18.8 billion and Spain with €13.6 billion.
However, in 2023, nine countries contributed less than €1 billion to the EU budget, with Malta paying the least - just €112 million, Cyprus €259 million and Estonia €355 million.
The countries that have contributed more to the EU budget than they have received are Germany, France, the Netherlands, Italy, Sweden, Spain, Austria, Ireland, Denmark, and Finland[2].
Poland was the biggest net beneficiary, followed by Romania, Belgium, Hungary and Greece.
The rich countries of Western Europe are supporting Eastern Europe, but what is the use?
The net contributors to the EU budget are mainly the richer countries of Western and Northern Europe, while the net beneficiaries are mainly the Central and Eastern European countries that joined the bloc in 2004 or 2007. Except Belgium and Luxembourg, the geographical distribution also reveals the East-West economic divide, even decades after the start of integration.
The situation also shows how the eastern countries can benefit from EU enlargement. Poland has benefited the most from the Community of all the eastern EU member states that have joined the EU since 2004. During this period, its economy also grew as the third fastest among all EU countries.
Poland's real GDP doubled between 2004 and 2022. This was more than any other Central and Eastern European country that joined the EU. Romania also recorded the second-highest growth rate, up to 80%. Meanwhile, Poland's neighbors Slovakia, Lithuania, and the Czech Republic grew by 78%, 74%, and 51%, respectively.
However, the EC stresses that some of the figures do not reflect the benefits of participation in the EU's common activities or the added value of the EU budget.
Spending that appears to be borne by only one Member State can benefit several or all Member States, as EU spending has significant spill-over effects. Spending can also be on European public goods that require co-financing.
According to the EC, the EU budget is primarily an investment instrument complementing national budgets. Its main objective IS to stimulate economic growth and increase competitiveness, not in one specific region but across the EU.
The rich countries of Western Europe can often be portrayed as extremely generous, helping their poorer eastern neighbours, who depend on EU subsidies and so-called EU "net contributors". In some cases, this has led to a narrative in the West that these Eastern countries are ungrateful recipients of aid: for example, the Eurosceptic rhetoric of their leaders, etc., is highlighted, even though Euroscepticism can also be prevalent in Western countries.
Indeed, everyone in the Community benefits financially. An agreement was concluded when the Eastern European countries started to join the EU. Eastern governments agreed to remove trade barriers so that Western companies could tap into the vast consumer resources eagerly waiting to benefit from the new capitalist way of life. In return, Western governments promised to transfer EU money to the East so that the former Soviet bloc could build the infrastructure it desperately needed[3].
Investment poured in, and Western companies took a good share of all sectors of the Eastern economy. As a result, advanced consumer goods entered Eastern households. This was seen as a success in the EU's cohesion policy: the East began to catch up with the rest of Europe, but Western European countries are still seen as the winners of this development, discovering new markets and millions of citizens trying to assimilate to the Western way of life.
