The EU budget: where does the money come from and where does it end up?

Ahead of Friday's summit in Brussels the EU found itself struggling to find agreement on a new budget. But what is this budget? Well, it's almost a thousand billion euros to be spent in the five year period from 2007 to 2013.

Photo: European Cimmission

EU expert Johannes Pollack from the Austrian Academy of Sciences says this large amount of money goes off in a number of directions:

"The EU budget is to fulfil all the promises that the EU has given in its treaties. It ranges from agricultural policy, to common research, to subsidies, to infrastructure - nearly everything that a state does to invest in its own society."

All 25 states of the EU pay into the budget but some get more back than they pay in. Poland, Hungary, the Czech Republic, and Slovakia - relatively recent members - are looking forward to big injections of EU money into infrastructure projects and regional development. This EU money is raised in a number of ways:

"There are basically three main sources of the European Union budget. The first is a share of the Value Added Tax paid by every European citizen in its member state. Secondly, the European Union is a customs union and taxes have to be paid for all the goods imported into the EU. The third source is a certain share of the cross national product."

Photo: European Cimmission

One of the main problems in reaching agreement on the Budget has been the dispute between Britain and France - France insisting Britain give up its rebate and Britain insisting France review farm subsidies. But things are changing in the EU. This was the first summit for Angela Merkel as German Chancellor and she has already indicated she will not follow the same path as her predecessor, Gerhard Schroder. Katinka Barysch from the Centre for European Reform says Angela Merkel's arrival on the scene is the start of some big changes in Europe:

"The EU has run out of steam a little under its old guard - Blair, Chirac, Berlusconi, and Schroeder. Now new leaders are expected in all the big European countries. Germany was the first one but Italy is heading for elections next year and then France. So, she is very much the new kid on the block. She has promised to try and restore Germany's traditional balancing function in the European Union. Schroeder was very close to Jacques Chirac and that upset the traditional balance in Europe a bit because it helped to split Europe into two camps. I think Angela Merkel will be a more balanced leader in that respect."