Ursula von der Leyen has revealed an ambitious proposal for the European Union’s budget for 2028-2034, valued at €2 trillion. This marks a significant increase from the €1.21 trillion budget agreed upon in summer 2020. Von der Leyen described the budget as one designed for a “new era” that meets Europe’s evolving challenges and bolsters the continent’s autonomy. The proposal is structured around three main pillars: €865 billion for agricultural, fisheries, and social policies; €410 billion for competitiveness, focusing on research and innovation; and €200 billion for external action, including a substantial €100 billion earmarked for Ukraine. To enhance revenue without increasing member states’ contributions, the proposal includes plans for new EU-wide taxes on electric waste, tobacco, and corporate profits.
One notable aspect of this budget proposal is the emphasis on the rule of law; funding allocations will be contingent on compliance to ensure accountability and responsible spending. This adjustment, particularly in light of democratic backsliding in countries like Hungary, represents a fundamental shift in how the EU approaches budgetary governance. Von der Leyen emphasized the necessity of the rule of law and the accountability it ensures. However, the proposal’s unveiling is expected to ignite intense negotiations among member states and the European Parliament, with each party vying for funding based on their particular priorities.
Von der Leyen’s budget strategy reflects lessons learned during her previous tenure, where she faced multiple crises, including the COVID-19 pandemic and Russia’s invasion of Ukraine. These challenges necessitated a rethinking of the EU’s financial structure, aiming for greater flexibility and responsiveness to unforeseen events. This new approach, referred to as the Multiannual Financial Framework (MFF), abandons the rigidity of past budgets in favor of a more strategic and transparent allocation process.
A key change in von der Leyen’s proposal is the merging of agricultural and cohesion funds into a single envelope worth €865 billion. This substantial alteration would reduce the share of funding traditionally allocated to these areas, drawing ire from southern and eastern EU member states that rely heavily on agricultural subsidies and cohesion policy. Conversely, western and northern countries have long advocated for prioritizing innovation, security, and climate action within the budget. This proposal also aligns with recommendations from former Italian Prime Minister Mario Draghi, who called for transformative changes to bolster the EU’s global competitiveness against rivals like the US and China.
The new European Competitiveness Fund, totaling €410 billion, is another innovative component of the budget aimed at leveraging private investment. This initiative seeks to optimize public funding, often criticized as inadequate for meeting contemporary demands. Additionally, a new delivery mechanism for foreign policy expenditures will consolidate various instruments under the “Global Europe” banner, allocating €200 billion and establishing a dedicated €100 billion fund to aid Ukraine’s recovery.
The proposal also accounts for €292 billion in other expenditures, primarily intended for repaying COVID-era debt, which could cost between €25 and €30 billion annually. Previous commitments suggested that recovery fund grants should be reimbursed through “own resources,” such as customs duties and newly proposed taxes, totaling an estimated €58.2 billion per year. However, gaining approval for these own resources remains challenging, as they face opposition from member states. As such, the economic landscape of the EU remains complex and fraught with challenges that will unfold in the negotiation phase ahead.
