The European Union’s budget is determined by three elements. Firstly, the Financial Perspective sets out the EU’s spending parameters for a period of seven years. The Own Resources Decision sets out the maximum amount and the type of income in the EU budget. The annual budget remains within these boundaries, and both approves the specific funds and sets out how they are to be deployed in the individual areas.

The medium-term political priorities of the European Union are defined in the Financial Perspective. Given that the Financial Perspective represents the framework of reference for the annual budget procedures, it thus ensures controlled spending growth and and balanced revenue structures at the Community level. The Financial Perspective for 2007 to 2013 was adopted in 2006.

The European Union’s budget is chiefly financed by contributions from the Member States. These are known as own resources. They are essentially measured on the basis of the economic strength of the country concerned, which in turn is based on the Own Resources Decision. The Own Resources Decision thus has a significant impact on the share a Member State has to pay into the budget.

Own resources are made up of the following: Customs duties and agricultural duties, which constitute the traditional own resources, and fixed-rate portions of national VAT and of gross national income.

Fiscal and economic policy for more jobs and growth

The objective is to ensure growth, employment and prosperity in Europe on a durable basis. This will also enable the foundations of the European model of equality of opportunity based on education, health care and social security for all to be solidified.

• Better quality of public finances by shifting the emphasis to investment in the future: In Member States and at the EU level, greater effort must be made to deploy funds in an effective and efficient manner. Public budgets must be reviewed with respect to their structure, above all in the interests of enhancing productivity and innovation effects. This can also deliver strong impulses for growth and employment. The review of the EU budget, planned for 2009, should be based on this approach. The German presidency will intensify the exchange of information and experience between the Member States with a view to identifying starting points for improvement.

• The German presidency will also work towards further improvements in the framework conditions for innovation and entrepreneurship. To this end, it is planned to mobilise private sector investment in research and development, and the transfer of knowledge between universities, public research institutes and industry is to be made easier.