The EU budget unveiled by Ursula von der Leyen, the president of the European Commission, was more ambitious in scale than had been expected. But the furious reaction from those who fear they will lose out in the €2 trillion package means there will be a lot of political horse-trading if the final budget is to be agreed by member states and the European Parliament by the 2027 deadline.
Even though the commission touted a headline figure of €2 trillion, the actual amount to be allocated is just over €1.8 trillion, when Covid debt payments are factored in. This is still a considerable increase on the €1.2 trillion agreed for the EU budget in 2021, though it still only represents 1.23 per cent of EU GDP.
A sum of €300 billion was allocated for agriculture, compared to €386billion in the 2021 budget. What’s more, agriculture is no longer a standalone section in the budget. Farmer organisations have vowed to resist the reforms.
The spending priorities delineated by the commission reflect the challenges facing the bloc. One is a lacklustre economic performance. There were sizeable increases in allocations for research, innovation and the digital economy. The budget also directs more to eastern member states and allows for extra defence spending.
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To help fund this, the commission is proposing a list of new fund-raising measures, including a tax on big companies. These are sure to prove controversial. And with questions about the financing of the package as well as the direction of resources, what emerges may look very different from the initial plan.
Member states have ruled out bigger national contributions and many remain resistant to the idea of expanding common debt issuance to fund centralised spending. There are a lot of spending demands, in other words, but few easy ways to find revenue to meet them. Many member states will push for a smaller EU budget while the European Parliament will argue for more. These are the seemingly intractable problems that von der Leyen has to solve over the next two years.
