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Grants and loans from the European Union

A guide to


Part IPart IIPart IIIPart IVContents


General introduction
Part one - Economic and social cohesion of the European Union
Part two - Growth, competitiveness and environmental protection
Part three - A people's Europe
Part four - Europe and the world

General introduction

V Purpose of the guide
V The Community budget
V Some general principles
V Structure of the guide

Purpose of the guide

The European Commission decided to produce this guide in response to a request from the European Parliament. It can also be seen as the product of the new information policy and the new openness towards the European citizen as voter, taxpayer and the person Community spending is ultimately supposed to benefit.

The guide is intended as both an introduction and a supplement to the many publications currently on sale or obtainable free of charge. It provides an overview of the wide range of Community projects, shows what is being done with the funding available and gives practical information on how to apply for it. It should be of use to central, regional and local authorities and other agencies in the private and public sectors as a source of basic guidance on where to send ideas for projects and how to apply for financial assistance.

For more detailed information, however, readers with a particular interest in specific funds should refer directly to the more specialized publications and the relevant legislation. References to sources such as the Official Journal of the European Communities, the Bulletin of the European Union, annual activity reports and other specialized publications can be found at the appropriate place in the text. Access to these information sources should become even more open as the Commission makes increasing use of data-communication networks.


The Community budget


The Community budget may seem a rather unlikely place to start, but this formidable document is the most authoritative, reliable and complete source of information on projects funded by the Union. While the average member of the public looking for general information is likely to find it somewhat impenetrable, it is an indispensable guide for the initiated.

Each year the details of all Community revenue and expenditure appear in the general budget (Final adoption of the general budget of the European Union for the financial year 1995' - OJ L 369, 31.12.1994). Each item of expenditure is accompanied by remarks on its objectives and scope, eligible projects, legal bases and, of course, the amount allocated.


What do you need to know about the budget?

Size of the whole and the separate parts

The 1995 budget contains a total of ECU 79.84 billion in commitment appropriations (source: preliminary draft budget for 1996 - COM(95) 300,
15 .5. 1995, p. 13), divided between the following five headings:

ECU billion %
1. Common agricultural policy 36.90 46.22
2. Structural operations 26.32 32.97
3. Other internal policies 5.05 6.33
4. External actions 4.87 6.10
5. Administrative expenditure 4.00 5.00
Other (reserves and compensation) 2.70 3.38
Total 79.84 100.00

The budget has grown considerably over the past few years - from
ECU 42.9 billion (or ECU 112 per person) in 1987 to ECU 79.84 billion (ECU 212 per person) in 1995.



The Union's revenue comes from four sources, listed below in order of size:

  • Community value-added tax (the percentage accruing to the Community will fall from 1.4 to 1% of the VAT base in 1999);
  • customs duties on imports entering the European Union;
  • agricultural levies; and
  • a fourth resource, based on the size of each Member State's GNP.

Stats [1995 Community budget - ECU 79.8 billion]

VAT is still the biggest source of revenue (48.5%), followed by the GNP resource (31.1%), customs duties (17.1%) and, lastly, agricultural levies (2.6%).

The richest countries are the biggest net contributors to the EU budget.


The impact of the budget


The whole Community budget is equivalent in size to no more than 2 to 4% of the sum of the national budgets, and it accounts for 1.184% of Community GNP. This may seem small, but, ultimately, its economic impact is far more significant. Community spending has a significant multiplier effect. In certain policy areas it generates two or three times the amount of public and private funding.



Purpose of the budget


The purpose of the budget is to enable the Union to fulfil certain fundamental objectives. For instance, it funds common policies (e.g. agriculture and fisheries), provides the Community contribution to economic and social cohesion, supports the internal and external policies of the Union and meets administrative costs.

The budget is the biggest single instrument for putting the principle of solidarity into practice and redistributing wealth within the Union: the poorest countries benefit most from Community funding (in terms of per capita expenditure).



Decision-making, implementation and auditing


Though the budget is adopted jointly by the Council and the European Parliament, it is the latter which has the final say. The European Commission has the power to propose and implement. It is accountable to Parliament and the Council, mainly through annual activity reports. Its management of the budget is subject to continual scrutiny by the Court of Auditors, whose reports are sent to Parliament and the Council. Lastly, Parliament is called upon each year to close the budget procedure by granting a discharge in respect of the previous financial year.


Some general principles


Targeted funding


All Community funding is channelled towards precise objectives and priorities under the various common policies, which, in turn, are based on provisions of the Treaties. Some 80% of the budget is spent on the common agricultural and fisheries policies and the structural policies. The remainder is used to finance other policies and meet the institutions' running costs.



Forms of funding


Community funding can be given in the form of grants (direct assistance, reimbursement, joint funding, help with interest), loans or guarantees.





The Council and Parliament jointly determine how the various operations are to be implemented. This involves deciding on matters such as the scope, forms of funding, degree of funding (total or partial), financial control, decision-making procedures, final recipients (private or public) and arrangements for financial management by the Commission. All these factors differ from one operation to another. It is, however, possible to formulate certain general rules for each of the budget headings:


(1) Common agricultural policy (CAP)

Most agricultural support measures are compulsory and are implemented almost automatically, which is to say that there is generally no discretionary element in the assessment of whether to give support or how much to give. This is a function of the very nature and objectives of the policies in question, which are concerned with the management of the markets in the agricultural products covered by the CAP. To enable the Community to react quickly to real situations as they arise, large volumes of detailed Community legislation have to be constantly updated. The funds ('appropriations' in budget parlance) are managed jointly by the Commission and the national authorities. First, payments are made to the relevant bodies in the Member States, which then pass them on to farmers, exporters, etc.

The Commission and the Member States have a certain amount of discretion over promotion measures, however. These are aimed at the production of certain types of fruit and vegetable, high-quality production, research, etc.


(2) Structural operations

Structural operations, aimed at increasing social and economic cohesion, usually form part of a multilevel, multiannual plan. This is drawn up by the Commission in partnership with the relevant national and regional authorities.

The plan specifies:

  • priority objectives at both national and regional level;
  • the measures required to achieve these priority objectives (social measures, capital investment, physical and economic infrastructure, etc.);
  • the funding for each part of the various programmes.


Implementation of the programmes is supervised by monitoring committees. The programmes themselves are published and are available to the public. Individuals, businesses and interest groups can apply to national or regional authorities or other designated organizations for funding under one of the various programmes. The Union very much welcomes involvement by the two sides of industry in every stage of the planning and implementation process at regional and local level.


(3) Other internal policies

Measures under this heading tend, with a few exceptions, to be given less funding and so have a smaller financial impact. They do, however, stimulate and encourage activity and can be of decisive importance. The most important projects are those connected with the research and technological development (R&TD) programmes, trans-European transport, energy and telecommunications networks, education, training and youth programmes and environment programmes. Funding is granted in response to individual requests from public or private bodies (universities, businesses, interest groups, etc.) or from ordinary people. Requests are selected according to criteria and other conditions laid down in the relevant regulations. Sometimes - with science research, for example - the Union invites applications through calls for proposals, giving practical details. These calls for proposals are published in the Official Journal of the European Communities. In other cases (trans-European networks, for example), applications may be submitted by the relevant organizations at any time.


(4) External actions

There are five main areas which may be of interest to the reader: relations with countries in Africa, the Caribbean and the Pacific (ACP countries), programmes for Central and Eastern Europe and the former Soviet Union, relations with southern Mediterranean countries, agreements with developing countries in Latin America and Asia and projects like the European Community Investment Partners (ECIP). There are also projects which are more theme-based, concerning food aid, emergency humanitarian aid and support for democracy and human rights in various countries, for example.


Structure of the guide


As a rule, the guide deals with each of the main areas in the order in which they appear in the budget. It should start with the common agricultural policy. However, it seemed inappropriate to go into the arrangements for this policy in any detail bearing in mind its rather special character. Although the CAP is a unique example of close Community integration, it has a consolidated legislative and administrative framework with which the people who benefit from the policy are well acquainted, since their incomes directly depend on it . Furthermore, they already have contacts with the various local and regional authorities in connection with the different market organizations.



Structural cohesion policies


Part One of the guide will therefore deal with the structural policies concerned with economic and social cohesion, one of the European Union's priority objectives. The EC Treaty explains cohesion as follows: 'In order to promote its overall harmonious development, the Community shall develop and pursue its actions leading to the strengthening of its economic and social cohesion. In particular, the Community shall aim at reducing disparities between the levels of development of the various regions and the backwardness of the least-favoured regions, including rural areas'. (Article 130a of the EC Treaty.)

Cohesion is the clearest expression of Community solidarity, involving the redistribution of large sums of money to help the least-prosperous countries, regions and groups. Around two thirds of Structural Fund resources are targeted on the less-developed regions (Objective 1 regions), which account for around a quarter of the Union's population.

There are significant disparities between the 15 Member States and the 200 regions which make up the Union. Here are some examples:

  • per capita GDP in the 10 poorest regions is 30 to 40% of the Community average, compared with 127 to 194% in the 10 richest;
  • in 1994 the unemployment rate in the 10 worst-hit regions was eight times the rate in the 10 least-affected regions;
  • the size of the road network in Greece and Spain is only 23% of the Community average and in Portugal 42%, compared with 300% for Belgium and 200% for Luxembourg and the Netherlands (fifth periodic report on the social and economic situation in the regions of the Community, European Commission, 1994);
  • the four countries which spend least on scientific and technological research spend less than half the Community average in gross terms; Greece and Portugal spend only a third of the average (Article 130d of the EC Treaty), the unemployment rate among the under-25s is twice as high as that among the over-25s; it ranges from 10% in Germany and Luxembourg to over 30% in certain regions, particularly those in the south of the Union.

The Treaty calls for all national and Community policies to be conducted in such a way as to help attain the objective of cohesion. It also states that the Community is to promote cohesion through the various Structural Funds and instruments - the European Regional Development Fund (ERDF), the European Social Fund (ESF), the Guidance Section of the European Agricultural Guidance and Guarantee Fund (EAGGF) and the Financial Instrument for Fisheries Guidance (FIFG) - and the other financial instruments, essentially the European Investment Bank (EIB).

In addition, the Treaty on European Union provided that a new Cohesion Fund should be set up (Council Regulation (EC) No 1164/94 of 16 May 1994 establishing a Cohesion Fund).

Structural operations were allocated ECU 176 billion at 1992 prices for the period from 1993 to 1999, which was significantly up on the ECU 67 billion for 1988-92.

The Cohesion Fund, formally set up in 1994, is exclusively for countries whose GNP is less than 90% of the Community average, i.e. Greece, Ireland, Portugal and Spain. The purpose of the Fund is to contribute to investment in transport infrastructure and environmental improvements and to help the countries in question to control their budget deficits - one of the requirements for economic and monetary union (EMU). Assistance from the Cohesion Fund will only be given to countries that satisfy the EMU convergence criteria.

The Structural Funds have been operating for longer and form the core of the cohesion policy. In 1988 there was a review of the way the Funds work. Since then, they have been deployed in a more coordinated way. The Funds have grown in size considerably in recent years. They have been allocated ECU 141.4 billion for 1994-99.

Around two thirds of this will be spent on the less-developed regions, especially those in the four poorest countries. Resources allocated to Greece, Ireland, Portugal and Spain under Objective 1 of the structural policies and the new Cohesion Fund will double between 1992 and 1999 (Article 12(1) to (3) of Council Regulation (EEC) No 2052/88, as amended by Regulation (EEC) No 2081/93).

The remaining funds will be spent on restructuring in areas badly affected by industrial decline, rural development and measures to combat unemployment and the problems resulting from industrial change.




Part Two of the guide is concerned with Community activities aimed at improving Europe's competitiveness and the environment. Both areas are essentially the preserve of the Member States. The Union intervenes only where it is more effective than the Member States acting alone.

European integration is an irreversible process, but Europe is not without its problems: for example, the lack of investment in sunrise technologies and the stubborn barriers which still surround national markets make the Union's activities that much less effective.

The European Commission is aware of this general problem and made it the main subject of its White Paper on growth, competitiveness and employment, published in late 1993. In the White Paper, the Commission gives its analysis of Europe's problems as the year 2000 approaches and sketches out a strategy for dealing with them. This involves investing more in research and technological development, achieving sustainable development while respecting the environment, promoting capital investment and job-creation and building up trans-European transport, energy and telecommunications networks. The White Paper also contains a few preliminary ideas on the information society.

The main items of expenditure in these areas in the period from 1994 to 1999 will be as follows:

  • ECU 12 300 million on research and technological development;
  • ECU 2 400 million on trans-European networks; and
  • ECU 500 million on LIFE (an environment programme) (see the Commission proposal presented to the Council and Parliament in April 1995 - COM(95) 135 final, 12.4. 1995).


A people's Europe


Part Three of the guide deals with measures catering directly for the people of Europe and their basic requirements. With the exception of 'human resources', allocated ECU 1 964 million for the period up to 1999, most of the operations in this field do not involve large sums and are more of symbolic importance. European integration and the new legal framework defining the citizen's rights are of more practical value to individuals than the funding.

Thirty-five years after the principle of the free movement of people was first enshrined in the Treaty of Rome, the Treaty on European Union created a direct link between European integration and participation by the citizen. It also introduced the concept of European citizenship, which is the basis for all European civil rights, i.e. the right of residence, the right to vote and stand for election and the right of every citizen of the Union to claim diplomatic protection. (Articles 8-8c of the EC Treaty.)

The Treaty also gave citizens the right to petition the European Parliament. (Articla 8d of the EC Treaty.) Although this is somewhat peripheral to the guide's subject matter, it seems appropriate to point out that, of the Union's institutions, it is Parliament which represents the people, who can use it to exercise democratic control over the Union. Parliament has recently acquired important new legislative powers over and above the powers it already had concerning the adoption and scrutiny of the budget.

The citizens of the Union are also represented by the Committee of the Regions, which gives the people's local elected representatives the chance to participate fully in the institutional life of the Union. The new Committee undoubtedly helps to bring the institutions and its citizens closer together.



A Union open to the world


Part Four of the guide is devoted to Europe's relations with the rest of the world. The European Union is not a fortress, sealed off from the world outside. The Union does have relations with non-member countries in those areas of activity falling within the scope of the Treaties, particularly economic and trade relations.

The Member States are exploring ways of cooperating more closely to deal with the current world crises and have laid the foundations for a new common foreign and security policy, to be developed gradually.

The Union has its own aid schemes to supplement the bilateral programmes run by the Member States separately. It has built up a very broad range of programmes and projects, including:

  • the Lomé Convention for the ACP countries (countries in Africa, the Caribbean and the Pacific);
  • the programmes aimed at supporting the reforms in Central and Eastern Europe and the former Soviet republics (loan facilities and the PHARE and TACIS programmes);
  • trade, financial and cooperation agreements with the Mediterranean countries;
  • various forms of partnership and development aid for the countries of Latin America and Asia;
  • measures to promote European investment in, and exports to, non-member countries; and
  • humanitarian aid.

Half a century after the Community was set up, Europe is faced with new problems, particularly unemployment, which affects a large part of the population and poses a threat to society at large. Jacques Santer, the new President of the European Commission, has adopted as his own the analysis and the proposals set out in the 1993 White Paper examining the disappearance of the link between growth and employment. While stressing that a new balance has to be found between growth, competitiveness and employment, he draws attention to the urgent need for a coherent strategy, drawing on all means available, both at national and Community level.

The Commission has embarked on a long-term project aimed at assessing the effectiveness of Community measures designed to address these new challenges.

These are general strategic measures. This guide, on the other hand, is more practical, relating specifically to projects at microeconomic, local and even individual level. It is meant to enhance their chances of success. We hope that it will help readers, those working in both the public and private sectors and indeed individual citizens to identify the forms of help the Union can give them in finding effective solutions to their problems. We sincerely hope that you will find here the impetus you need to set you on the right track.