Ursula von der Leyen Unveils Ambitious EU Budget Proposal
Ursula von der Leyen, President of the European Commission, has introduced a groundbreaking budget proposal for the European Union, set to span from 2028 to 2034. The proposed budget totals €2 trillion, marking a significant increase from the €1.21 trillion approved in 2020. In her address on Wednesday, von der Leyen emphasized that this new plan is “more strategic, more flexible, and more transparent.” She highlighted the importance of investing in the EU’s capacity to respond to challenges and enhance its independence.
The budget is structured around three main pillars, each with a specific allocation:
- €865 billion for agricultural, fisheries, cohesion, and social policy.
- €410 billion for competitiveness, including research and innovation.
- €200 billion for external action, including humanitarian aid.
This restructuring aims to provide a more adaptable financial framework while ensuring accountability and responsible spending. Von der Leyen also proposed new EU-wide taxes on electric waste, tobacco, and revenues of big corporations, which could help Brussels generate additional revenue independently.
Rule of Law as a Priority
A critical aspect of the proposal is the conditionality of all financial envelopes on compliance with the rule of law. This measure is particularly aimed at addressing democratic backsliding in Hungary. Von der Leyen stressed that the rule of law is non-negotiable, stating that the EU must ensure responsible spending and full accountability through strong safeguards, clear conditions, and appropriate incentives.
The launch of this budget proposal has already sparked political debates between member states and the European Parliament. The negotiations are expected to be lengthy and intense, as each group strives to secure funding for its priorities.
Lessons from Past Challenges
Von der Leyen’s proposal is heavily influenced by the challenges she faced during her first mandate. From the onset of the COVID-19 pandemic to navigating the aftermath of Russia’s invasion of Ukraine, managing energy price surges, inflation, and competition from China, her leadership has been tested repeatedly. These experiences have shaped her vision for a more flexible budget that can adapt to changing circumstances both within and outside Europe.
The current budget structure, known as the Multiannual Financial Framework (MFF), has been criticized for being too rigid. Under von der Leyen’s plan, the number of ongoing programs will be reduced from 52 to just 16, allowing for greater flexibility in fund allocation. Additionally, a special mechanism of up to €400 billion in loans will be available for member states only when an unexpected crisis occurs.
Key Reforms and Controversies
One of the most notable changes in the proposal is the merging of the Common Agricultural Policy (CAP) and cohesion funds under the first pillar, National and Regional Partnerships. This consolidation, totaling €865 billion, represents a significant reduction compared to the previous budget, where these two areas accounted for over 60% of allocations. Southern countries, concerned about potential backlash from the agricultural sector, and Eastern countries, reliant on cohesion policy, are likely to oppose this move. Conversely, Western and Northern countries may support it, advocating for a focus on modern priorities such as climate action, defense, and innovation.
The second pillar introduces the European Competitiveness Fund, worth €410 billion, designed to leverage private capital to amplify the impact of public funds. This initiative aligns with the recommendations of a landmark report by former Italian Prime Minister Mario Draghi, who called for radical changes to boost the EU’s competitiveness.
The third pillar combines all foreign policy instruments under Global Europe, allocating €200 billion. A separate €100 billion fund is dedicated exclusively to supporting Ukraine’s recovery and reconstruction. This follows the approval of the €50 billion Ukraine Facility in early 2024, which aimed to make aid more reliable and predictable.
Additional Allocations and Repayment Plans
Beyond the three main pillars, the budget includes €292 billion for other expenses, such as civil protection, the single market, justice affairs, and administration, as well as €49 billion for the Erasmus student exchange program.
In addition, the Commission plans to start repaying the €24 billion in debt accumulated during the pandemic, a factor not present in previous budgets. Brussels insists that this repayment should come from own resources, including customs duties, VAT, the Emissions Trading System (ETS), and new taxes, generating approximately €58.5 billion annually.
However, the implementation of these own resources faces resistance from member states, making the goal of collecting €58.5 billion per year uncertain. Despite this, von der Leyen remains committed to fulfilling the EU’s financial obligations while addressing its modern priorities.