Fact Sheets on the European Union
European Parliament
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The budgetary procedure

Parliament’s role in the budgetary process has progressively expanded since the 1970 and 1975 Budgetary Treaties. In 2009, the Treaty of Lisbon gave Parliament an equal say with the Council over the entire EU budget.

Legal basis

Objectives

The exercise of budgetary powers consists in determining the overall amount and distribution of annual EU expenditure and the revenue necessary to cover it, as well as exercising control over implementation of the budget. The budgetary procedure itself involves the preparation and adoption of the budget (1.4.1 for details on EU revenue, 1.4.2 for details of expenditure, 1.4.3 for details of the multiannual financial framework, 1.4.4 for details of implementation and 1.4.5 for details of budgetary control).

Description

A. Background

The European Parliament and the Council together form the budgetary authority. Prior to 1970, budgetary powers were vested in the Council alone, with Parliament having only a consultative role. The Treaties of 22 April 1970 and 22 July 1975 increased Parliament’s budgetary powers:

  • The 1970 Treaty, while maintaining the Council’s right to have the last word on ‘compulsory expenditure’ resulting from Treaty obligations or from acts adopted under the Treaty, gave Parliament the final say on ‘non-compulsory expenditure’, which initially amounted to 8% of the budget;
  • The 1975 Treaty gave Parliament the right to reject the budget in its entirety.

Until the Treaty of Lisbon came into force, the Council and Parliament each undertook two readings in the course of the budgetary procedure, at the end of which Parliament could either adopt the budget or reject it in its entirety.

No substantial modifications were introduced by subsequent Treaties until the major changes brought by the Treaty of Lisbon, which introduced a simpler and more transparent budgetary procedure (budgetary codecision). The modifications derive mainly from the removal of the distinction between compulsory expenditure and non-compulsory expenditure. This allows for equal treatment of all expenditure under the same procedure, which has been further simplified, with only one reading in each institution, based on the draft budget presented by the Commission.

B. The stages of the procedure

Article 314 TFEU sets out the stages and time limits applicable during the budgetary procedure. Current practice, however, is for the institutions to agree on a ‘pragmatic’ calendar each year prior to the start of the budgetary procedure.

1. Stage one: submission of the draft budget by the Commission

Parliament and the Council lay down guidelines on the priorities for the budget. The Commission draws up the draft budget and forwards it to the Council and Parliament (no later than 1 September under Article 314(2) TFEU, but according to the pragmatic timetable, by the end of April or beginning of May). The Commission may modify the draft budget at a later stage to take account of new developments, but no later than the point at which the Conciliation Committee (see below) is convened.

2. Stage two: adoption of the Council’s position on the draft budget

The Council adopts its position on the draft budget and forwards it to Parliament (under Article 314(3) TFEU it must be submitted by 1 October at the latest, but according to the pragmatic timetable it is sent by the end of July). The Council must inform Parliament in full of the reasons why it adopted its position.

3. Stage three: Parliament’s reading

Parliament has 42 days in which to respond. During this period, it may either approve the Council’s position or decline to take a decision, in which case the budget is deemed finally adopted, or else Parliament can propose amendments if they are adopted by a majority of its members, in which case the amended draft is referred back to both the Council and the Commission. The President of Parliament, in agreement with the President of the Council, must then immediately convene a meeting of the Conciliation Committee.

4. Stage four: meeting of the Conciliation Committee and adoption of the budget

From the day on which it is convened, the Conciliation Committee (composed of equal numbers of representatives of the Council and of Parliament) has 21 days to agree on a joint text. To do so, it must take its decision by a qualified majority of the members of the Council or their representatives and by a majority of the representatives of Parliament. The Commission takes part in the Conciliation Committee’s proceedings and takes all the necessary initiatives to seek to reconcile the positions of Parliament and the Council.

Should the Conciliation Committee fail to find an agreement on a joint text within the 21 days referred to above, a new draft budget must be submitted by the Commission. If the Conciliation Committee agrees on a joint text within the deadline, then Parliament and the Council have 14 days from the date of that agreement in which to approve the joint text. The following table summarises the possible outcomes at the end of that 14-day period.

Process of approval of the conciliation joint text

Positions on the joint text Parliament Council Outcome
+ = adopted
− = rejected
None = no decision taken		 + + Joint text adopted
− Back Parliament position, possibly[1]
None Joint text adopted
None + Joint text adopted
− New draft budget from Commission
None Joint text adopted
− + New draft budget from Commission
− New draft budget from Commission
None New draft budget from Commission

5. Supplementary and amending budgets

In the event of unavoidable, exceptional or unforeseen circumstances (in accordance with Article 44 of the Financial Rules), the Commission may propose draft amending budgets to amend the budget adopted for the current year. These amending budgets are subject to the same rules as the general budget.

Role of the European Parliament

A. Powers conferred by Article 314 TFEU

In 1970, Parliament gained the right to have the last word on non-compulsory expenditure. The proportion of non-compulsory expenditure rose from 8% of the budget in 1970 to more than 60% in the 2010 budget, the last year in which the distinction was made. With the abolition of the distinction between compulsory and non-compulsory expenditure, Parliament now has joint powers with the Council to determine overall budget expenditure. Parliament’s position can even be considered stronger than that of the Council since the latter can never impose a budget against the will of Parliament, while Parliament may in some circumstances have the last word and impose a budget against the will of the Council (see B.4 above). However, this is rather unlikely and it would be more appropriate to say that the new budgetary procedure is based, for the most part, on a genuine (albeit specific) codecision procedure in which Parliament and the Council act on an equal footing, covering all Union expenditure. Parliament has rejected the budget in its entirety on two occasions (in December 1979 and December 1984) since acquiring the power to do so in 1975. Under the new rules agreed in the Treaty of Lisbon, the Conciliation Committee has failed to reach agreement on three occasions (on the 2011, 2013 and 2015 budgets). In all three cases, the new draft budget presented by the Commission, reflecting the near-compromise in conciliation, was finally adopted.

In the case of the 2023 budget, Parliament and the Council reached a provisional agreement on 14 November 2022, within the deadline of the conciliation period. The Council adopted the final agreement on the budget on 22 November and Parliament adopted it in plenary the following day, with the President of Parliament then signing off on the final text.

As agreed between Parliament and the Council, the 2023 budget sets an overall level of appropriations of EUR 186.6 billion in commitments and EUR 168.6 billion in payments.

Parliament fought for and obtained better support in the 2023 EU budget – over EUR 1 billion more than the Commission’s original proposal – to address the consequences of the war in Ukraine, energy, climate and the recovery from the pandemic.

B. The interinstitutional agreements on budgetary discipline (IIAs) and the multiannual financial frameworks (MFFs) (1.4.3)

Following repeated disputes about the legal basis for the implementation of the budget, the institutions adopted a joint declaration in 1982, which also laid down measures designed to ensure smoother completion of the budgetary procedure. This was followed by a series of interinstitutional agreements covering the periods 1988-1992, 1993-1999, 2000-2006 and 2007-2013. The interinstitutional agreement for 2021-2027 entered into force in December 2020. These successive agreements provided an interinstitutional reference framework for the annual budgetary procedures that considerably improved the way the budgetary procedure works.

The current IIA aims to enforce budgetary discipline, improve the functioning of the annual budgetary procedure and cooperation between the institutions on budgetary matters, and ensure sound financial management. It is also designed to deliver cooperation and set out a roadmap towards the introduction, over the course of the 2021-2027 MFF, of new own resources sufficient to cover the repayment of the EU Recovery Instrument established under Council Regulation (EU) 2020/2094.

Although MFFs do not replace the annual budgetary procedure, the interinstitutional agreements have introduced a form of budgetary codecision procedure, which allows Parliament to assert its role as a fully fledged arm of the budgetary authority, to consolidate its credibility as an institution and to direct the budget towards its political priorities. The Treaty of Lisbon and the Financial Regulation also stipulate that the annual budget must comply with the ceilings set in the MFF, which must itself comply with the ceilings established in the decision on own resources.

C. The European Semester

On 7 September 2010, the Economic and Financial Affairs Council approved the introduction of the ‘European Semester’, a cycle of economic policy coordination at EU level with the aim of achieving the Europe 2020 targets. This is a six-month period every year during which the Member States’ budgetary and structural policies are reviewed to detect any inconsistencies and emerging imbalances. On the basis of the analytical economic assessment, the Commission provides policy guidance and/or recommendations to the Member States on fiscal, macroeconomic and structural reforms. The aim of the European Semester is to strengthen coordination while major budgetary decisions are still under preparation at national level. In addition to coordination between national budgets, Parliament also seeks to exploit synergies and strengthen coordination between the national budgets and the EU budget.

For more information, see the website of the Committee on Budgets.

 

[1]This occurs if Parliament confirms some or all of its previous amendments, acting by a majority of its members and three-fifths of the votes cast. If Parliament does not reach the required majority, the position agreed in the joint text is adopted.

Eleanor Remo James