European Commission president Ursula von der Leyen on Wednesday (17 July) proposed a new seven-year EU budget of two trillion, or 1.26 percent of the bloc's GNI.
That's an increase of almost €800bn compared to the EU's current €1.2 trillion cash pot (which represents 1.13 percent of GNI).
Calling it the "most ambitious" EU budget ever proposed, von der Leyen described it as "larger, smarter, and sharper," tailored for a world where "crises are no longer the exception but the norm."
The plan is meant to simplify EU spending by replacing 52 separate programmes with just 16 funds organised around three main pillars.
The largest share—€865bn—would go to national and regional partnership plans, merging the common agricultural policy (€294bn) with cohesion, fisheries, social, and rural funding (€453bn) into a single instrument per country.
Another €450.5bn would be channelled into a new European Competitiveness Fund, which is designed to boost the EU's industrial base and reduce dependence on foreign (especially Chinese) technology.
The fund includes €131 for strategic technologies such as space, defence; €67bn for energy (a fivefold increase), €175bn for Horizon Europe research and innovation, and €55bn for digitisation.
“This is real money,“ said clean industry commissioner Stéphane Séjourné in Brussels, by which he meant paid for by governments, not businesses.
“But we also need private money to achieve our targets,” he added.
The commission is also tightening rules on green and social spending. Under a system of "mainstreaming," national plans must earmark at least 34 percent of total spending—around €700—for climate and biodiversity, and 14 percent for social objectives.
This is inspired by the EU’s €723bn pandemic recovery fund (RRF) launched in 2021, which required member states to spend at least a third of their recovery money on climate-related investments.
Von der Leyen described the one-off fund as “extremely successful.” It taught EU policymakers “the benefits of investment” and “proved effective in advancing the EU’s ambitions.”
But in a report published last year, the European Court of Auditors warned that the performance of the RFF “cannot be measured” because milestones and targets “largely focus on outputs rather than results.”
Member state reports “generally do not capture the support’s effects on recipients or the change in their situation. Moreover, none of them refer explicitly to impact.”
Still, the RRF has become a model for large parts of the next EU budget, if the commission has its way. Von der Leyen also announced a new €400bn crisis facility based on joint debt, similar to the RRF.
“It’s not for spending, but to be accessed if an unforseen crisis hits,” von der Leyen said.
She added it could be triggered “as a shortcut” during periods of “extreme crisis,” but it would require unanimous approval from member states.
Some countries have already signalled their displeasure.
"As far as the Netherlands is concerned, new instruments for joint debt are therefore not on the table,” Dutch finance minister Eelco Heinen said on Wednesday.
Other areas flagged for substantial increases include migration and border management, which would see its budget tripled to €34bn, and disaster response, through a reinforced EU Solidarity Fund.
The EU's external spending instrument, Global Europe, would be allocated €200bn, including €100bn for Ukraine and a flexible reserve for future enlargements.
To support strategic investments, the commission wants to scale up the use of EU budget-backed loans (€150bn), offering member states—particularly those in the financial periphery that often pay higher interest rates—access to cheaper financing.
Civil society and media freedom initiatives would be supported via the competitiveness fund and a new 'AgoraEU' programme, which is set to receive €49bn.
While national contributions would remain stable, the commission wants to raise €58bn a year—or €406bn over seven years—through five new EU-wide taxes (also known in EU jargon as 'own resources').
This includes taxes on packages from non-EU countries and polluting companies, a fee on discarded electronics or e-waste, a tobacco levy, and a fixed annual charge for big companies operating in the EU, with an annual net turnover above €100m.
The proposal drew immediate pushback from the European Parliament.
"We will reject any attempt by the commission to renationalise the common agricultural policy and regional policy," warned Romanian centre-right MEP Siegfried Mureșan.
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Wester is a journalist from the Netherlands with a focus on the green economy. He joined EUobserver in September 2021. Previously he was editor-in-chief of Vice, Motherboard, a science-based website, and climate economy journalist for The Correspondent.
Wester is a journalist from the Netherlands with a focus on the green economy. He joined EUobserver in September 2021. Previously he was editor-in-chief of Vice, Motherboard, a science-based website, and climate economy journalist for The Correspondent.