Proposed €2tn EU budget would increase funding for defence

Irish Times

16-07-2025

A bigger
European Union
budget of nearly €2 trillion would see more money pumped into efforts to jump-start Europe's economic competitiveness, finance the defence industry and toughen border controls, while overhauling subsidies paid to farmers.
The
European Commission
, the powerful executive that proposed the size and shape of the union's next long-term budget, said more funding was needed to meet major challenges facing Europe.
In a significant revamp of how the EU's budget works, different funds for farmer subsidies, roads and other development projects in poorer parts of Europe, border control, fisheries and social policy, would be rolled into one large national pot for each country.
Commission president
Ursula von der Leyen
said the proposed budget would 'ringfence' some €300 billion for subsidies paid to farmers.
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The
Common Agricultural Policy
(Cap), which accounts for about a third of the EU's current €1.2 trillion budget, some €378 billion in total, is worth nearly €2 billion a year to Irish farmers.
The
Irish Farmers' Association
(IFA), the main farming lobby group, criticised efforts by the EU executive to 'downgrade' the Cap in the next budget.
The commission's proposal is the start of what will be a tense two-year negotiation between the EU executive body, the European Parliament and national governments, to hammer out a final budget. The next seven-year budget will run from 2028 until the end of 2034.
The commission wants to set up a 'competitiveness fund' worth more than €400 billion to double research funding available under the EU's Horizon scheme, set more funds aside for digital investments, and significantly increase funding for defence and security.
The EU's popular Erasmus scheme, which allows for university student exchanges, would also see its funding increase substantially.
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The commission has floated the idea of a 'crisis' lever that would allow up to €400 billion in funding be raised to finance loans to EU states, to cope with unforeseen future emergencies, similar to the Covid-19 pandemic.
The commission's vision for the budget, which is the starting gun on what will be a protracted fight over its final size, was the result of marathon talks between the teams of Dr von der Leyen and the other 26 commissioners that ran through the night into the early hours of Wednesday morning.
The budget does not propose increasing the contributions EU states pay into the union's budget.
However, the commission proposed several ways it might raise money, including a tobacco excise duty and a charge on consumers to dispose of non-recycled electrical waste.
The commission suggested the EU could introduce a money-raising levy on large companies, which the Irish Government and others are likely to oppose.
The commission wants companies with an annual turnover of €100 million to pay the EU at least €100,000 a year, with higher rates charged for bigger firms.
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A majority of MEPs in the European Parliament need to approve the budget, as do all 27 national governments.
Traditionally frugal states, such as the Netherlands and Sweden, have already signalled opposition to the increased size of the budget.
The two biggest groups in the parliament, the centre right European People's Party (EPP) and the centre left Socialists & Democrats (S&D), pushed back on planned reforms of farm payments and regional development funding.
Speaking in Brussels, Dr von der Leyen said the next EU budget would be 'larger, smarter, sharper'.
'Agriculture will be strengthened. What we have safeguarded is the direct payments to farmers, that is one part that is clearly safeguarded and secured,' the centre-right German politician said.
The head of the commission said merging different EU funds into national pots could make it easier to divert money to housing, which was an area that did not fit neatly into any of the existing funding schemes.
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EU commissioner for agriculture Christophe Hansen said the amount of funding set aside for direct payments to farmers would not be cut. 'What the farmers get remains stable and that was our priority,' he said.
About €450 billion would be set aside for 'cohesion' funding for regional development, about half of which would be earmarked for poorer regions.
Some €100 billion of the proposed budget would be put towards support for Ukraine. The budget will contain a clause allowing it to be renegotiated in the event a new country joined the union during the seven-year period.
EU funding in the next budget will come with stricter 'conditional' strings requiring countries to respect the rule of law.