European Commission proposes budget for 2004, May 2003

The proposed annual budget for a European Union with twenty five Member States was adopted by the European Commission on 30 April 2003. The 2004 EU budget envisages a volume of expenditure of €100.6 billion, up only 3.3.% on the EU's budget in 2003.

Accounting for the first enlargement of the EU to take place on 1 May rather than at the beginning of the year, the preliminary draft budget contains two separate estimates: one for the EU-15 that will take effect at the start of 2004 and one that will follow on 1 May 2004 when ten candidate countries join. As the major priority for the EU in 2004 is the enlargement process, €5 billion is allocated for expenditure in the ten new Member States with significant increases in expenditure in the structural funds and for internal policies. However, the increase in the total annual budget is relatively small because the volume of expenditure for the current Member States is expected to fall by 2%.

The proposal for the 2004 budget is the first to be adopted under a new system of activity based management, introduced by the European Commission in 2001, as part of its efforts to improve European governance. Following on from the adoption of the Annual Policy Strategy in February, which identifies the EU's political priorities for the coming year, the Preliminary Draft Budget that is adopted in April or May specifies the detailed forecasts for the allocation of resources.

The 2004 budget had been at the centre of a dispute between the European Parliament and the Council of the European Union over the financing of enlargement until MEPs finally signaled their approval in a plenary vote on 9 April 2003. The members of the Assembly were angered by the Council's annexing of budgetary provisions, agreed at the Copenhagen European Council in December 2002, to the Treaty of Accession. The European Parliament claimed that this infringed on its rights to participate as an equal partner in determining the EU's budget and also voiced concerns that it discriminated against future Member States, by fixing their budget funds in contrast to funding for current Member States. A compromise was finally reached on 8 April 2003 whereby Member States agreed to provide an extra 540 million for the 2004-2006 period, with most of the funds devoted to 'internal policies' covering areas such as energy, transport and consumer protection.

The European Commission's proposed budget remains within the limits of the financial framework negotiated at the Copenhagen European Council and is far lower - €10.9 billion - than the ceiling agreed for 2004. There are five key areas of spending:

• Agriculture: Requirements for the EU-15 total €45.8 billion with a further €2 billion allocated to the ten new Member States. There is a significant increase in spending on rural development and whilst the mid term review of the Common Agricultural Policy may affect expenditure in feedingstuffs and the milk sector, the real impact is not expected to be felt until 2005.

• Structural measures:The volume of commitment appropriations for the Structural Funds is up 20.8% in 2004 for the EU-25, with €6.7 billion planned for the new Member States. This expenditure will largely consist of advances. Cohesion fund expenditure in Portugal, Spain, Ireland and Greece is not expected to rise in 2004.

• Internal policies: €8.63 billion has been allocated in commitment appropriations in 2004 bearing in mind that this area is influenced by all three of the EU's political priorities in 2004, namely enlargement, stability and sustainable growth. In addition to funds to extend existing Community programmes to all new Member States and to strengthen the administrative structures in these areas, there is also a significant increase in funds to achieve measures such as an area of security and an area of freedom and justice and to increase research in line with the Lisbon goals.

• External aid: The expenditure for foreign policy measures will remain the same as in 2003 - €5 billion - but since financial support for Cyprus, Malta and Turkey is no longer financed from this heading the amount available for other operations will be increased by 4.5%. Particular areas pinpointed to receive additional help are the Mediterranean countries, Central Asia and Afghanistan. The Common Foreign and Security Policy will also receive additional funds to support programmes such as the police mission in Bosnia.

• Administrative expenditure: The estimated expenditure of the institutions in 2004 is 14% higher than in 2003 at €6.11 billion, reflecting the costs of new Commissioners, publishing official legislation in the nine new official languages and additional administrative expenditures resulting from enlargement. However, €20 million will be saved if the new staff regulations take effect as planned on 1 January 2004.

Commenting on the European Commission's budget proposal the European Commissioner responsible, Michael Schreyer, said:

'2004 is a historical year for the EU budget. In addition to the expenditure for the current Member States, the budget contains appropriations for ten new Member States. However, the EU's expenditure quota will drop to less than 1%. This shows that there is a firm foundation for the financing of enlargement. We have managed to reconcile ambitious expenditure programmes for the enlarged Union and budget discipline'.

Under the budgetary procedure, the proposal will now be forwarded to the Council and the European Parliament. The first reading of the proposal by the Council is expected to take place under the Italian Presidency in July 2003, followed by Parliament's first reading in October. The budget for the current EU Member States up to 1 May 2004 should be adopted in December 2003 when agreement should also be reached on the figures for the enlarged Union.

Links:
European Commission:
	30.04.03:	Press Release: EU budget for 2004: first budget for the enlarged Union [IP/03/606]
	DG Budget: Documents for further information [Detailed proposals should be available here in the future]
European Sources Online: Topic Guides
	The budget of the European Union
European Sources Online: In Focus
	Enlargement: European Parliament gives the go ahead for accession, April 2003
	Enlargement: European Parliament and Council fail to agree on accession budget, April 2003
	European Commission adopts its Annual Policy Strategy for 2004, March 2003

Helen Bower

Compiled: Thursday, 1 May 2003

The European Commission adopted its preliminary draft budget on 30 April 2003, the first annual budget that will have to provide for an 'EU of 25' from 1 May 2004.