ABSTRACT
This chapter examines the essential aspects of the development of the European Union (EU) system. It presents the various institutions and the original way in which they relate to each other. The chapter describes the structure of expenditure and receipts and the way budgetary powers are executed. The five most important institutions of the EU are the Commission, the Council, Parliament, the Court of Justice and the European Council. EU institutions are endowed with powers largely exceeding those of an intergovernmental international organisation like the OECD, but falling short of those of a strong federal government. The EU institutional set-up in general and the qualified majority voting in the Council in particular do represent very efficient forms for reducing the transaction costs of reaching cooperative agreements. The cost of international institutions is almost invariably paid from member states’ contributions, each country paying a fixed percentage of total expenses.
