The topic of the final paper is the fiscal policy and the budget of the European Union. Numerous economic problems are related to the implementation of a successful fiscal policy, and it is a fundamental stabilizer of the impact of business cycles on the national economy. The introductory part gives a brief overview of the concept of fiscal policy and its functions, goals, principles, and effects. As in other Member States, the Republic of Croatia is making great strides in economic development thanks to its fiscal policy. The budget is analyzed below as the only centralized instrument of the European Union, which is implemented from a part of the gross national income of all member states. The budget system has certain principles that must be adhered to, some of which are determined by law. The procedure for adopting the budget, managing the budget and the structure of expenditures and revenues in the budget are also explained. As a member of the European Union, the Republic of Croatia has been obliged to pay funds into the budget of the European Union since 2013, which leads to a significant net plus. The concept of the European Semester is also discussed as an annual cycle of coordination of budgetary and economic policy in the European Union, which is mandatory for all Member States. The European Semester cycle is a complex process, containing several phases which are explained in detail in the chapters. European funds related to financial instruments for the implementation of public policy of the European Union of the member states also play an important role in the analysis of the European Union budget. The most important funds of the European Union are the Cohesion Fund, the European Regional Development Fund, the European Social Fund, the European Agricultural Fund for Rural Development and the European Maritime and Fisheries Fund. It is necessary to know and thoroughly analyze fiscal policy to understand it as accurately as possible, due to its importance at the level of the entire European Union. The aim of this paper is a simple and concise way to explain the role of fiscal policy, and one of its essential components, the budget.