European Commission explains the effects of the crisis on the EU financial resources

The EC spokesperson for the Commissioner for Budget and Financial Planning, Dalia Grybauskaitė, answered a series of questions asked by HotNews.ro about the effects the international financial crisis will have of the EU budget. „Unless this financial framework is modified, the EU budget will be executed as foreseen until 2013, without any reduction notably for the cohesion instruments”, said the official.

Q: The most of the EU budget (69% in 2007) revenues come from the member states contributions – a percentage applied to MS gross national income. What is the percentage for 2009, 2010, 2011?

A: Revenue from the EU budget includes:

– traditional own resources (16% of revenue in the preliminary draft budget for 2009 – PDB 2009) ;

– the VAT-based own resource (17% of revenue in the PDB 2009) ;

– the GNI-based own resource (66% of revenue in the PDB 2009) ;

– and other revenue (1% of revenue in the PDB 2009).

Q: Member States’ contributions include both the VAT-based and GNI-based own resources (i.e. around 83% of total EU budget revenue).

A: The GNI-based own resource represents around 2/3 of EU budget revenue. The percentage applied to Member States’ GNI for the purpose of this resource is 0.59% in the PDB 2009. The percentages for 2010 & 2011 are yet unknown because (a) the actual size of the budget is unknown and (b) the expected revenue from the other sources is also unknown (since the GNI-based own resource is calculated as a residual).

However, the maximum authorized total size of the EU budget until 2013 is already established in the financial framework (as available on page 10 of the following document:

http://eur-ex.europa.eu/LexUriServ/LexUriServ.do?uri=COM:2008:0152:FIN:EN:PDF).

The maximum amounts (0.97% of EU GNI in 2010 and 0.93% of EU GNI in 2011) are only slightly higher than the 0.90% in the PDB 2009. Member States’ GNI contributions should not increase significantly in the next couple of years.

Q: Due to the financial international crisis, it is very possible that some EU MS will face a decrease of growth for GDPs in the next year, maybe even 2-3 years. This means also a decrease of GNI and of their contributions to EU budget. What will happen to EU budget? Is it expected to decrease ?

A: It is the size of the budget that automatically determines the financing, not the other way around. After European Council and European Parliament fix the budget, the GNI contribution is adjusted automatically to secure budget balance.

Q: Supposing some national economies face even bigger problems, as a consequence of the financial crisis and won’t be able to pay their contributions. What measures could EC take in these circumstances?

A: Several financial crisis already occurred in the past and Member States never failed to eventually pay their contribution to the EU budget.

In the very unlikely case that a payment default would occur, the Commission could sue the Member State before the European Court of Justice for breach of legal commitments (notably under Council Regulation 2000/597, as ratified by all Member States, which established the system of EU budget own resources).

Q: If the EU budget revenues decrease, does it mean that the expenditures – for example for the Cohesion Instruments – could they be reduced? In other words – the structural funds could be reduced?

A: The EU budget has been established until 2013 under the financial framework (see above). Cohesion funding has been secured in a legal basis. Unless this financial framework is modified, the EU budget will be executed as foreseen until 2013, without any reduction (notably for the cohesion instruments). No political agreement was yet reached for the period after 2013, so it is not possible to say whether the EU budget will decrease or increase after 2013.

Note: The answers were sent vie e-mail by Cristina Arigho, spokesperson for Dalia Grybauskaitė.

Mentions on the Gross Domestic Product and the Gross Domestic Revenue: according to an official document, the contributions are no longer decided on the grounds of the GDP, but taking into account the national revenue. In very opened economies, the two indicators may differ significantly. It is the case of Ireland or Luxembourg, where the GDP per capita is at a much higher level than the EU average, still the GDR is at the European average because of the income spent on non-EU residents.