BRUSSELS — The European Commission made its opening play in what will be two years of haggling over the bloc’s spending plan for the seven-year period from 2028.
European Commission President Ursula von der Leyen insisted the €1.8 trillion plan would make the EU’s cash pot “larger,” “smarter” and “sharper,” and that the budget was “the most ambitious ever proposed.”
But, in a sign of the heated negotiations to come, disappointed lawmakers were quick to contradict von der Leyen’s claims, saying the Commission has misleadingly represented adjustments to the — major — inflation in recent years as an increase in the EU’s budget.
“The European Commission will present different budgetary lines, which have increased. But, of course, if the budget remains at the same level, then that means that several budgetary lines would have to decrease,” Romania’s Siegfried Mureșan, a member of the center-right European People’s Party, said.
All national capitals, as well as the European Parliament, must agree on the plan before it is approved. As battle lines get drawn, POLITICO’s drawn up a handy guide to who’s up — and who’s down — in the initial proposal.
Loser: Farmers
Farmers are furious.
In the last EU long-term budget, the Common Agricultural Policy (CAP) came in at €386.6 billion. This time, €300 billion has been set aside for agriculture.
To add insult to injury, while the CAP used to form a standalone section of the budget, it has now been merged with funding for other policies in a cash pot for “National and Regional Partnership Plans.”
Under those plans, European countries need to spend a minimum €300 billion on agriculture and could spend more should they choose to do so. But the farmers groups protesting outside the Parliament and Commission are not feeling optimistic.
Loser: Tobacco
While the vast majority of the budget will come from EU countries’ own contributions, the also Commission proposed three new taxes targeting electric waste, large companies and tobacco products such as cigarettes and cigars. These goods are currently being taxed by individual countries, who keep the revenues for themselves.
The aim is to generate from €25 billion to €30 billion per year that will be used to repay EU joint debt that was used to finance its post-Covid recovery.
Cigarette prices are already set to rise across the EU under a long-awaited update to the Tobacco Tax Directive, with rough estimates saying the price of a pack will rise by €1-2. For the first time, alternative products such as e-cigarettes and heated tobacco will be subject to a minimum rate, albeit lower than for traditional cigarettes.
Loser: Nature
Biodiversity is set to lose its dedicated slice of the EU budget, instead being absorbed into a broader “climate and environment” target that would amount to 35 percent of the budget, reaching roughly €700 billion.
Previously — on top of the 30 percent climate spending target — 7.5 percent of annual spending was to be allocated to biodiversity objectives in 2024, ramping up to 10 percent in 2026 and 2027.
The new “climate and environment” target would serve all six of the EU’s environmental objectives, spanning from climate and biodiversity to the circular economy and pollution prevention.
The LIFE program — dedicated funding for the environment and climate action — has also been absorbed into the “National and Regional Plans,” as well as the €410 billion “Competitiveness Fund” that bundles several existing funding programs.
Some NGOs are warning the changes could mean that biodiversity funding loses out. The EU is already facing an estimated €37 billion annual biodiversity funding gap, according to the European Commission.
Winner: Eastern countries and Ukraine
Eastern countries scored a major victory Wednesday when the Commission announced that the eastern regions, and particularly those bordering Ukraine, Russia and Belarus, will receive more funds than the others to meet both their security and economic needs.
They also won another battle: Although the EU was desperate for fresh money for its coffers, it did not include the revenue from an already-planned extension of the EU emissions trading scheme to buildings and road transport in its proposed basket of new sources of revenue.
Finally, the EU proposed supporting Ukraine’s reconstruction and its path to EU membership with an additional €100 billion.
Winner: Electricity bill payers
Under the proposal, the EU would dramatically ramp up support to modernize the bloc’s electricity grids to bring down power prices, which were singled out in a report by former European Central Bank chief Mario Draghi as Europe’s Achilles’ heel in competing with the U.S. and China.
The Connecting Europe Facility, a fund that can be used to upgrade infrastructure and invest in new technologies, will see its energy budget rise to €30 billion from just €6 billion. Additionally, grids will get to tap into a massively expanded €410 billion competitiveness fund in a bid to reduce wastage and slash bills for industry and households.
Draghi warned that “infrastructure investment is slow and suboptimal,” while persistently more expensive energy is forcing manufacturers to cut production or relocate.
Winner: Digital technologies
The Commission wants to multiply the bloc’s money for digital technologies by a factor of five, von der Leyen said. This would bring digital funds to €54.8 billion in the next budget.
That is a whopping increase in an area where, already, the EU was investing considerable funds for research and innovation. But the stakes have increased, with regions from the U.S. to China competing fiercely over transformative technologies — most notably artificial intelligence.
Digital is one of four pillars of a new, comprehensive Competitiveness Fund, which has a headline figure of €410 billion.
Winner: Defense
The proposal of the Commission is to allocate at least €131 billion for defense and space, which means “five times what we have today” said von der Leyen.
Separate budgets will also be used to boost the bloc’s defense readiness. The proposal “shows welcome ambition” said Hannah Neumann, a German Green MEP who sits in the European Parliament Defense Committee. The figure is in line with the needs identified early on by Defense Commissioner Andrius Kubilius when he first spoke to POLITICO late last year.
Winner: Research and culture
The bloc’s flagship research and development program, Horizon Europe, is set to nearly doubling to €175 billion. It is currently already one of the world’s largest such funds, with a €95 billion budget — though one group of experts has argued the EU should boost its research and development spending to €220 billion in order to stay competitive.
The allocation for the EU’s flagship program for student mobility, Erasmus+, was increased by 50 percent to over €40 billion. The Commission also announced a new “AgoraEU” program worth €8.6 billion that will support culture, media and civil society organizations.
“It’s a ground breaking day for Europe’s culture and creative sectors,” Education & Sports Commissioner Glenn Micallef told POLITICO.
Jury’s out: Military mobility
The Commission wants the bloc to set aside €17.7 billion for military mobility, according to Transport Commissioner Apostolos Tzitzikostas. On paper, that looks like a major win compared with the €1.7 billion military mobility budget in the current budget.
In reality, it falls well short of the €75 billion or even €100 billion that Tzitzikostas had said was needed.
While parts of the civilian transport budget may support dual-use infrastructure — and additional defense funds might be tapped — military needs still appear only partially addressed.
The Commission proposed that the future Connecting Europe Facility, the EU’s funding vehicle for infrastructure, should total €81.4 billion. About €51 billion would be earmarked for transport.
Jury’s out: Cities and regions
The EU’s cohesion funding scheme is meant to boost growth in the bloc’s poorer regions and reduce inequality. It currently accounts for more a third of the EU’s current budget. But rather than be a standalone policy in the 2028 budget proposal, cohesion funding is instead addressed through so-called National and Regional Partnership Plans developed by national governments.
In a last-minute agreement, the Commission is promising that the bloc’s poorest regions will receive €218 billion in the next budget, which was a key demand of the regions commissioner Raffaele Fitto. But no such guarantees have been made for the rest of the EU, prompting fears that the overall amount allocated for regional development will be smaller than under the current budget. That’s bad news for cities and rural areas that rely on cohesion cash to finance everything from roads to public libraries.
Moreover, local and regional leaders are worried about the proposed budget’s bid to give central governments outsized power to manage and distribute EU cash via the partnership plan scheme, and concerned that national leaders could punish political rivals by withholding access to the funds.
Hanne Cokelaere, Leonie Cater, Pieter Haeck, Jacopo Barigazzi, Martina Sapio, Rory O’Neill, Lucia Mackenzie, Giovanna Faggionato, Gabriel Gavin, Aitor Hernández-Morales and Gregorio Sorgi contributed reporting.
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