About · The European Union

How the European Union works

What the Union is, where its powers come from, which institutions hold them, how a law is made, and how a euro moves from a budget line to the person or organisation that receives it.

Member states: 27
People: ~450m
Official languages: 24
Treaty institutions: 7
Use the euro: 21
Of GNI is the EU budget: ~1%

Part 1

What the EU is

The European Union is a union of 27 countries that have agreed, by treaty, to exercise some of their sovereign powers together. It is not a federal state: it has no powers of its own except those the member states confer on it, and the treaties can only be changed with every member state’s agreement. Nor is it a conventional international organisation: its laws bind citizens and companies directly, it has a directly elected parliament, and its court’s rulings override conflicting national law.

Scholars call it sui generis, a system of its own kind. Since the Treaty of Lisbon it has a single legal personality, which means it can sign international agreements and join organisations in its own name.

Its legal base is two treaties of equal rank: the Treaty on European Union (TEU), which sets out the values, institutions and foreign policy, and the Treaty on the Functioning of the European Union (TFEU), which sets out the policies and procedures in detail. The Charter of Fundamental Rights has the same legal value as both.

What membership involves

Arrangement	What it is	Who is in it
Single market	Free movement of goods, services, capital and people under common rules.	All 27, plus Norway, Iceland and Liechtenstein through the European Economic Area
Customs union	One external tariff; no customs duties between members.	All 27
Euro area	A shared currency and monetary policy run by the ECB.	21 states. Not in it: Czechia, Denmark, Hungary, Poland, Romania, Sweden
Schengen area	No routine checks at internal borders.	29 countries: 25 EU states plus Iceland, Liechtenstein, Norway and Switzerland. Not in it: Ireland and Cyprus

Part 2

How it was built

The Union grew treaty by treaty. Each step either added members or moved decisions from national capitals to the common level, usually both.

1951Treaty of Paris. Six countries (Belgium, France, Germany, Italy, Luxembourg, the Netherlands) pool coal and steel under the European Coal and Steel Community.
1957Treaties of Rome. The European Economic Community and Euratom are created, with a common market as the goal.
1973First enlargement. Denmark, Ireland and the United Kingdom join.
1979First direct elections to the European Parliament.
1981–86Southern enlargement. Greece joins, then Spain and Portugal.
1986Single European Act. Majority voting is extended to complete the single market, which formally starts in 1993.
1992Treaty of Maastricht. The European Union is created, with a plan for economic and monetary union and new cooperation on foreign policy and justice.
1995Austria, Finland and Sweden join. The Schengen agreement takes effect.
1999–2002The euro. It launches as an accounting currency in 1999; notes and coins follow in 2002.
2004–07The largest enlargement. Ten countries join in 2004 and Bulgaria and Romania in 2007.
2009Treaty of Lisbon enters into force. The present institutional setup dates from here: a permanent European Council President, more powers for the Parliament, and a binding Charter of Fundamental Rights.
2013Croatia becomes the 28th member.
2020The United Kingdom leaves on 31 January. In July, leaders agree NextGenerationEU, the first large-scale joint borrowing.
2026Bulgaria adopts the euro on 1 January, becoming the 21st euro-area country.

Candidate countries include Albania, Bosnia and Herzegovina, Georgia, Moldova, Montenegro, North Macedonia, Serbia, Türkiye and Ukraine. Kosovo has applied. Joining requires unanimous approval by the member states and ratification in each of them.

Part 3

What it may do

The Union can act only where the treaties give it power. This is the principle of conferral: anything not conferred stays with the member states. The TFEU sorts the conferred powers, called competences, into three kinds.

Exclusive

Only the EU legislates. Member states act only if the EU empowers them to.

Customs union
Competition rules for the single market
Monetary policy for the euro area
Conservation of marine fish stocks
Common commercial (trade) policy

Shared

Both may legislate; national action is excluded once the EU has acted.

Single market
Cohesion (regional) policy
Agriculture and fisheries
Environment and energy
Transport and consumer protection
Freedom, security and justice

Supporting

The EU can only support or coordinate; it cannot harmonise national law.

Health protection
Industry
Culture and tourism
Education, youth and sport
Civil protection

Some areas sit outside these three lists. Economic and employment policy is coordinated, for example through the European Semester. The common foreign and security policy has its own rules, and most decisions in it need unanimity.

Three tests on every EU action

Conferral: Is there a legal basis in the treaties?
Subsidiarity: In shared areas, would action at EU level achieve the aim better than national action? National parliaments can object.
Proportionality: Does the action go no further than the aim needs?

Part 4

The institutions

Article 13 of the TEU names seven institutions. Four of them run the political cycle: they set direction, propose, amend and adopt. The other three are independent by design: they judge, set monetary policy and audit.

Who proposes, who decides. The Commission proposes laws and the budget (dashed arrows). The Parliament and the Council amend and adopt them as equals. The European Council sets direction but does not legislate. The bottom row sits outside this cycle.

European Parliament

Strasbourg · Brussels

The directly elected chamber. It makes laws and adopts the budget together with the Council, and holds the Commission to account.

720 MEPs, elected every five years; the last election was in June 2024
Elects the Commission President and approves the full College
Can dismiss the Commission with a two-thirds vote of censure
Grants the Commission “discharge” each year for how it spent the budget

Groups: At the start of the 2024–29 term: EPP 188, S&D 136, Patriots 84, ECR 78, Renew 77, Greens/EFA 53, The Left 46, ESN 25, non-attached 33
President: Roberta Metsola

European Council

Brussels

The heads of state or government of the 27 member states. It sets the Union's overall direction and settles the questions that ministers could not.

Meets at least four times a year and usually decides by consensus
Does not legislate
Nominates the Commission President and appoints the High Representative
In practice, reaches the political deal on each long-term budget

Members: 27 leaders, its President, and the Commission President (who does not vote)
President: António Costa, since December 2024 (a 2½-year term, renewable once)

Council of the EU

Brussels · Luxembourg

National ministers, meeting by policy area. It is the member states' chamber: it adopts laws and the budget with the Parliament.

Meets in 10 configurations, for example ECOFIN for finance and AGRIFISH for farming
The chair rotates every six months; Ireland holds it from July to December 2026
Ambassadors prepare its work in two committees, Coreper I and II
Unanimity is required for tax, foreign policy, the long-term budget and new members

Default vote: Qualified majority (see How a law is made)
Chair: The rotating presidency; the Foreign Affairs Council is chaired by the High Representative

European Commission

Brussels

The executive. It proposes almost all legislation, carries out the budget, and enforces the treaties.

Holds a near-monopoly on proposing new laws
Drafts the annual budget and manages or supervises its spending
Takes member states to court when they break EU law (infringement procedures)
Enforces competition law and negotiates trade agreements

College: 27 Commissioners, one per member state, for a five-year term
President: Ursula von der Leyen, second term from December 2024
Budget: Piotr Serafin, Commissioner for Budget, Anti-Fraud and Public Administration
Staff: About 32,000, organised in Directorates-General (DGs)

Court of Justice of the EU

Luxembourg

Ensures EU law is interpreted and applied the same way in every member state.

Court of Justice: 27 judges and 11 Advocates General
General Court: 54 judges, two per member state
Answers questions from national courts (“preliminary references”)
Hears infringement cases and actions to annul EU acts

Note: Since October 2024, some preliminary references in specific technical areas, such as VAT and customs, go to the General Court

European Central Bank

Frankfurt

The central bank for the euro area. Its mandate is price stability, and it aims for 2% inflation over the medium term.

Sets interest rates for 21 countries
Has supervised the largest banks directly since 2014 (the Single Supervisory Mechanism)
Independent by treaty: it may not take instructions from governments or EU bodies

Decides: The Governing Council: 6 Executive Board members plus the national central bank governors
President: Christine Lagarde (term to October 2027)

European Court of Auditors

Luxembourg

The Union's external auditor. It checks whether EU money was collected and spent legally, regularly and to good effect.

27 members, one per member state, for renewable six-year terms
Publishes an annual report on the EU budget, with a statement of assurance on whether the accounts are reliable and the spending was lawful
Estimates an error rate for spending each year. In recent years the rate has been above its 2% threshold for material error, driven mostly by cohesion spending
Publishes special reports on individual programmes. Its findings feed the Parliament's discharge vote
It audits but has no power to sanction; suspected fraud goes to OLAF or the EPPO

Three councils that are easy to confuse

European CouncilEU leaders. Sets direction. An EU institution.

Council of the European UnionEU ministers. Makes laws with the Parliament. An EU institution.

Council of EuropeA separate organisation of 46 countries in Strasbourg. It runs the European Court of Human Rights and is not part of the EU.

Part 5

How a law is made

Most EU legislation goes through the ordinary legislative procedure (Article 294 TFEU). The Commission proposes, and the Parliament and the Council must agree on the same text. Either one can block it.

01
Commission proposalUsually preceded by public consultation and an impact assessment. National parliaments have eight weeks to raise subsidiarity objections.
Commission
02
Parliament first readingA lead committee drafts amendments, and the plenary adopts the Parliament's position by simple majority. There is no deadline.
Parliament
03
Council first readingIf the Council accepts the Parliament's position, the act is adopted. If not, it adopts its own position and sends it to the Parliament.
Can end here
↔
Trilogues, alongside every readingInformal three-way talks between Parliament, Council and Commission negotiators. Most files are agreed this way at first reading, and the formal votes then confirm the deal.
All three
04
Parliament second readingThree months, extendable by one. The Parliament can approve the Council's position, reject it by an absolute majority (the act falls), or amend it.
Can end here
05
Council second readingThree months, extendable by one. If the Council approves all the amendments, the act is adopted. If not, conciliation begins.
Can end here
06
Conciliation committeeEqual delegations from the Council and the Parliament have six weeks, extendable by two, to agree a joint text.
Both
07
Third readingBoth institutions have six weeks, extendable by two, to approve the joint text without changes. If either does not, the act falls.
Ends here

Special legislative procedures apply in some areas. Under consultation, the Council decides and the Parliament only gives an opinion (tax is an example). Under consent, the Parliament can only accept or reject (international agreements, new members, the long-term budget).

What the Union can adopt

Act	Binding?	How it applies
Regulation	Yes, in full	Applies directly in every member state, with no national law needed. An example is the GDPR.
Directive	Yes, as to the result	Each member state must write it into national law (“transpose” it) by a deadline, choosing its own means.
Decision	Yes, on those it addresses	Binding on a specific state, company or person, or generally where no addressee is named.
Recommendation / opinion	No	Political guidance only.
Delegated / implementing actAdopted by the Commission	Yes	Detailed rules the Commission adopts under powers a legislative act gives it, overseen by the Parliament, the Council and committees of national experts.

How the Council votes

A qualified majority needs two thresholds at once. A blocking minority must include at least four member states.

Member states

55%

At least 15 of 27 must vote in favour. If the proposal did not come from the Commission, the threshold rises to 72%.

EU population

65%

The states in favour must represent at least 65% of the EU's population.

Part 6

How the money works

The EU budget is small compared with national budgets. It is capped at around 1% of the Union’s gross national income (GNI), while national governments together spend close to half of GDP. It works differently from a national budget: by law it must balance, it cannot run a deficit, and it is planned seven years at a time.

Three layers of budget

Layer	What it fixes	How it is adopted
Own resources decision	Where the money comes from, and the ceiling on how much can be called up each year.	Council unanimity, then ratification by all 27 member states.
Multiannual financial framework (MFF)	Spending ceilings per policy area for at least five years, in practice seven. The current MFF covers 2021–2027.	Council unanimity after the Parliament's consent (Article 312 TFEU).
Annual budget	Commitments (promises to pay) and payments (cash out) for one calendar year, within the MFF ceilings.	Commission draft by 1 September, then the Council, the Parliament and a 21-day conciliation (Article 314 TFEU). The 2025 budget: €199.4bn in commitments, €155.2bn in payments.

Where the 2021–2027 money goes

Two headings take 68% of the €1,074.3bn MFF. These are cohesion policy (regional development and social funds) and the Common Agricultural Policy, which sits under natural resources. The figures are in 2018 prices, as agreed in December 2020. They exclude NextGenerationEU and the 2024 mid-term revision, which added top-ups including the €50bn Ukraine Facility.

Where the money comes from

Source	How it works
GNI-based contributions	Each member state pays a uniform share of its gross national income. This is the largest source and the balancing item: it covers whatever the other sources do not. Denmark, Germany, the Netherlands, Austria and Sweden receive lump-sum reductions for 2021–2027.
VAT-based resource	A small uniform rate applied to a harmonised VAT base, which is capped.
Traditional own resources	Customs duties on imports from outside the EU. Member states collect them and keep 25% to cover collection costs.
Plastic packaging resource	€0.80 per kilogram of plastic packaging waste that is not recycled, paid by each member state since 2021.
BorrowingTemporary	For NextGenerationEU, the Commission borrows on the capital markets on the Union's behalf, to be repaid by 2058. The own resources ceiling was raised temporarily to allow this.

From budget line to recipient

Most EU money is spent by national and regional authorities, not by Brussels. Under shared management, which covers cohesion funds and most farm payments, member states choose projects, pay recipients and publish recipient data on their own portals. This is why tracing a euro means looking at 27 national systems as well as the EU’s own.

The three ways the budget is spent

Mode	Who chooses the recipient	Typical programmes	Where recipient data lives
Sharedabout 70%	National and regional managing authorities, under rules agreed with the Commission	Cohesion funds (ERDF, Cohesion Fund, ESF+, Just Transition Fund), CAP direct payments and rural development	National portals; aggregated in part by Kohesio and the Commission's CAP beneficiary links
Direct	The Commission and its executive agencies	Horizon Europe, Erasmus+ (partly), Connecting Europe Facility, LIFE	Financial Transparency System (FTS)
Indirect	Partner organisations the Commission entrusts: agencies, the EIB Group, UN bodies, national agencies	InvestEU guarantees, much external aid, parts of Erasmus+	Partly in FTS, partly with the partner

NextGenerationEU and the Recovery and Resilience Facility

NextGenerationEU was agreed in 2020 as a €750bn (2018 prices) recovery instrument financed by joint borrowing. Most of it, €672.5bn in 2018 prices, went to the Recovery and Resilience Facility (RRF). The RRF works differently from the rest of the budget: each country agreed a national plan of reforms and investments, and payments are released when milestones and targets are met, not when costs are reimbursed. At least 37% had to go to climate objectives and 20% to digital.

The RRF is closing now. Milestones had to be completed by 31 August 2026, and payments must be made by 31 December 2026. The final payment requests and assessments are among the most important spending data to follow this year. Since 2024, member states have also had to publish their 100 largest final recipients of RRF money.

Conditions and controls

Tool	What it does
Discharge	Each year the Parliament, on the Council's recommendation, decides whether to approve the Commission's management of the budget. It draws on the Court of Auditors' findings.
Rule-of-law conditionalityRegulation 2020/2092	Lets the Council suspend EU funds when rule-of-law breaches threaten the budget. It was first used against Hungary in December 2022, suspending €6.3bn.
Financial corrections	The Commission recovers money, or cuts future payments, when member states spent it irregularly.
OLAF	The European Anti-Fraud Office. It runs administrative investigations and recommends recoveries or prosecutions.
EPPO	The European Public Prosecutor's Office, operating since 2021. It investigates and prosecutes crimes against the EU budget in the 24 participating states (all except Denmark, Hungary and Ireland).

What comes next: the 2028–2034 MFF

In July 2025 the Commission proposed the next long-term budget: about €2 trillion in current prices, or roughly 1.26% of GNI once the repayment of NextGenerationEU debt is counted. The main structural change would merge cohesion and farm funding into one national and regional partnership plan per country, and group competitiveness programmes into a new European Competitiveness Fund. The proposal is still under negotiation and needs unanimity in the Council. If adopted, it would change how spending data is structured from 2028.

Part 7

Other bodies worth knowing

Body	Role	Relevance to public money
European External Action ServiceBrussels	The EU's diplomatic service, led by the High Representative (Kaja Kallas), with over 140 delegations worldwide.	Shapes external aid priorities
European Investment BankLuxembourg	The EU's bank, owned by the 27 member states and the largest multilateral lender. President: Nadia Calviño.	Loans and guarantees, often blended with budget money
European Economic and Social Committee	An advisory body of employers, workers and civil society (329 members).	Gives opinions on budget files
European Committee of the Regions	An advisory body of regional and local elected representatives (329 members).	Speaks for the authorities that manage cohesion funds
European OmbudsmanStrasbourg	Investigates complaints about maladministration by EU bodies.	Transparency and access-to-documents cases
European Data Protection Supervisor	Supervises how EU bodies handle personal data.	Sets limits on publishing recipient data
Decentralised agencies	More than 30 agencies, such as Frontex, the EMA, EFSA and ECHA.	Receive and spend budget money directly
European Stability MechanismNot an EU body	An intergovernmental rescue fund for euro-area states, set up by its own treaty.	Lends outside the EU budget

Two other frameworks govern national rather than EU money. The European Semester is the yearly cycle for coordinating national budgets and reforms. The Stability and Growth Pact, reformed in 2024, sets limits on national deficits and debt.

Part 8

Why this matters for following the money

There is no single ledger. About 70% of EU spending runs through national and regional authorities, so recipient data is spread across 27 national portals, in different formats and languages. That is the gap Europe Blueprint exists to close; see the national projects.

The EU budget is only part of the picture. At about 1% of GNI, against national spending close to half of GDP, it cannot tell the whole story. National budgets need a comparable classification (Eurostat’s COFOG) to be set side by side.

Commitments are not payments. Every figure should say which it is, which year’s prices it uses, and whether it includes NextGenerationEU.

The audit trail already exists. Court of Auditors reports, discharge resolutions and OLAF and EPPO findings add context to the raw figures and should be linked from them.

Where the data lives

Financial Transparency SystemRecipients of funds managed directly by the CommissionEU · direct
KohesioCohesion policy projects and beneficiariesEU · shared
Cohesion Open Data PlatformPlanned, committed and paid amounts per cohesion programmeEU · shared
National CAP beneficiary portalsFarm payments per recipient, published by each member stateNational · shared
Recovery and Resilience ScoreboardRRF milestones, payments and largest final recipientsEU · RRF
EU budget: spending and revenue dataYearly spending and revenue per member state and programmeEU · budget
Eurostat government finance statisticsNational spending by function (COFOG), comparable across countriesEU · national
European Court of Auditors reportsAnnual reports, error rates and special reportsEU · audit
Public procurement notices (eForms / TED)Contract notices and awards across member statesEU · procurement
EU Transparency RegisterOrganisations lobbying EU institutionsEU · context

Verified datasets are listed with links on the Sources page as they are added.

R.01 · Last reviewed September 2026. Figures are rounded, and the officeholders and counts reflect the position in mid-2026. If something here is out of date, it will be corrected in a new revision.