The European Commission last week set out its initial proposals for the EU for 2005 - the first budget covering the expenditure for 25 member states over the whole year. The budget envisages expenditure of €109.5 billion – up €9.7 billion on 2004, but still rather less than the €114.2 billion maximum fixed under the EU's long-term spending plans, the financial perspectives.

In presenting the proposals, European Budget Commissioner Michaele Schreyer said: "We have to fulfil the Union's commitments fixed in the Agenda 2000 decision, the accession treaties and the reform of the agricultural sector. We will increase the support to the new member states, enhance the Community policies for security and meet our responsibility in the external sector. Nevertheless, we have managed to propose a budget volume which stays again far below the ceilings of the financial perspectives and in line with the principle of budgetary discipline."

The expenditure foreseen is equivalent to 1.03% of the gross national income of the EU-25. The financial framework agreed for the enlarged Union provides for a maximum of 1.08% of GNI for the EU budget.

The increase against 204 is due largely to the full incorporation of the new member states (+€3.9billion), the reform of the common agricultural policy (+€1.3 billion) and the improved use of the structural funds (+€2.7 billion).

Total agriculture requirements for the EU-25 come to €50.7 billion, of which €6.8 billion is projected for rural development (15% more, the largest increase). The estimate for the new member states is €3.6 billion, of which €1.9 billion is for rural development. The amount for market and veterinary expenditure in the new member states has substantially increased but is still relatively low as direct aid is being phased in: 2005 will be the first year for the payment of direct aids to the new member states.

Spending in the enlarged EU's second largest category of expenditure, the structural funds, is also up in the enlarged Union, by 3.3%. And out of the €42.4 billion total, € 7.7 billion will be allocated to the new member states. Expenditure is up here mainly due to the doubling of the amount to be spent in the new member states.

An additional €139 million are budgeted for the dismantling of the nuclear power stations of Ignalina in Lithuania and Bohunice in Slovakia. The new external borders and the larger area of free movement will be protected by actions supported from the customs programme, and over €530 million for justice and home affairs, including the visa information system and the refugee fund. €336 million remain available for the new member states' control of external borders, and €13 million for a transitional facility for Kaliningrad.

In line with the accession treaty, €1.3 billion will be provided for the new member states in the 2005 budget as compensation, to ensure they will still be net recipients after accession. This sum is approximately €100 million lower than in 2004.

The pre-accession strategy now embraces Romania, Bulgaria and Turkey, and assistance to all three countries will be increased. The pre-accession aid for Romania and Bulgaria will be increased to €1.55 billion, while €300 million in commitment appropriations are available for Turkey. Payments of some €1.54 billion will also still go to the new member states under the "pre-accession" heading, for terminating pre-accession programmes begun in 2003 or earlier. And for Northern Cyprus, the Commission aims to come back soon with appropriate proposals.

Meanwhile, after the years of reconstruction in the Balkans, the level of aid will decrease to €554 million. But the Commission proposes that the appropriations for the Common Foreign and Security Policy be programmed at €55 million – partly to fund the joint police mission in Bosnia and Herzegovina and the former Yugoslav Republic of Macedonia.

EU ministers will look at the proposals in July 2004, followed by Parliament's first reading in October. The second readings will be in November and December.