Ursula von der Leyen's new €2 trillion EU budget: 6 key takeaways

Euronews

17-07-2025

For Ursula von der Leyen, the sky might not be the limit.
Her proposal for the next seven-year budget of the European Union has taken Brussels by storm with its headline figure: €2 trillion, larger than any number rumoured or leaked in anticipation of the high-stakes announcement.
The next budget "will be the most ambitious ever" in the bloc's history, the president of the European Commission told reporters on Wednesday.
"It is more strategic, more flexible, more transparent," she went on. "We are investing more in our capacity to respond and more in our independence."
But what makes her blueprint so special and distinct from its predecessors?
Here are the six takeaways from von der Leyen's budget, under the caveat that things will dramatically change as the no-holds-barred negotiations get underway.
Crisis mindset
Von der Leyen was perfectly candid about the inspiration behind the €2 trillion budget: her own experience battling back-to-back crises.
Her six-year stay in Brussels has seen the COVID-19 pandemic, Russia's invasion of Ukraine, a spike in energy prices, record-breaking inflation, unfair competition from China, devastating natural disasters, disrupting new technologies, cyberattacks, sabotage against critical infrastructure and, more recently, Donald Trump's tariffs.
The seemingly never-ending string of challenges has put the bloc's common budget under unprecedented strain to the point that von der Leyen had to ask the 27 leaders to approve a financial top-up in the middle of her first mandate.
"Each time, it was extremely difficult to react fast and with the financial firepower that was necessary," she admitted, noting that 90% of the existing funds are already "fixed" and therefore leave a negligible margin for manoeuvre.
"We want greater flexibility. Not everything should be decided once for seven years," she said.
As a result, the 52 programmes in the ongoing budget will be reduced to 16 in the next, with a share of the money left completely unallocated to allow the Commission and member states to respond faster to the changing circumstances on the ground.
At the same time, von der Leyen proposes a special mechanism of up to €400 billion in loans to deploy in case an "unknown crisis hits". The tool will not be immediately created; rather, it will be an in-waiting reserve to be triggered when the need arises.
"It's something we have as a possibility, but not to be used for normal times," she said.
Contentious merger
Brussels is known for blocking controversial mergers in the European market.
This time, von der Leyen is turning a blind eye. The Commission chief has envisioned merging what have until now been the budget's two largest envelopes – the Common Agricultural Policy (CAP) and the cohesion funds – into one single pot of money.
This brand-new pillar, known as the National and Regional Partnerships Plans, will also encompass funds for social policy, fisheries and maritime policy, migration, border management and internal security, for a whooping €865 billion across seven years.
Agriculture and cohesion are "the central pillars of European solidarity and investment in the European model", von der Leyen said.
Although the €865 billion might seem enticing, the devil's in the details.
The next budget will keep €300 billion ring-fenced for the CAP, including the jealously guarded subsidies for farmers. By comparison, the current budget allocates €386.6 billion for the entire CAP, with €270 billion alone for direct payments.
Different agricultural policy experts contacted by Euronews all estimate that, when adjusted for inflation, von der Leyen's proposal will represent a 20% to 30% cut in real terms to the bloc's agricultural spending. It is a remarkable reduction, considering the shockwaves sent by the 2023-2024 farming protests.
The move has been immediately denounced by the agrifood sector and is likely to be contested by the CAP's largest recipients, like France, Italy and Spain. At the same time, it will be welcomed by northern member states, which have consistently advocated for downsizing the CAP's lasting dominance in favour of modern-day priorities.
Strings attached
Another headline-making novelty in von der Leyen's proposal is her strong focus on the rule of law. Her first mandate saw her executive freeze billions in EU funds for Hungary and Poland over their democratic backsliding and continued legal breaches.
The freezing, however, only covered a share of the allocated funds to the wayward countries, fuelling criticism that the Commission was carelessly allowing taxpayers' money to flow despite violations of EU law and fundamental rights.
The disputes left a mark on von der Leyen: she now intends to make all funds, from farming subsidies to social policy, conditional on the respect for the rule of law.
"The rule of law is a must for all funding from the EU budget," she said on Wednesday.
"We will ensure responsible spending and full accountability, with very strong safeguards, and the right incentives. This serves the citizens."
Member states will have to demonstrate compliance with the rule of law before unlocking the National and Regional Partnerships Plans. Violations will lead to the freezing of payments at "any moment" according to the "nature, duration, gravity and scope of the identified breach", the Commission says. The paralysed money will be channeled into other priorities if the wrongdoing is not properly addressed.
While the strings attached will be greeted by most member states, particularly net contributors, it is improbable, to say the least, that Hungarian Prime Minister Viktor Orbán, the chief critic of the rule-of-law conditionality, will endorse the revamped system. Approving the budget requires unanimity, meaning vetoes apply.
Standing strong
Von der Leyen's massive budget is informed and inspired by the geopolitical tumult of the 21st century and, in particular, Russia's brutal war on Ukraine.
Among the unique features in her ambitious blueprint is a €100 billion fund dedicated exclusively to supporting Ukraine's recovery and reconstruction, the costs of which swell with each day that Moscow continues its bombardment.
The idea follows the steps of the €50 billion Ukraine Facility that leaders approved in early 2024 to make aid more reliable and predictable. It combined non-repayable grants with favourable loans to help Kyiv sustain its fragile economy and repair its infrastructure.
The Facility, though, is rapidly running dry.
"We are suggesting €100 billion to fill up again the Ukraine Facility," von der Leyen said.
Moreover, von der Leyen says the new budget, which might take two years to negotiate, should be revised in the future if any of the candidate countries to join the bloc, such as Ukraine, Moldova, North Macedonia, Albania or Montenegro, completes the process.
The ad-hoc review will take into account the size of the new member state, its financial needs and its contribution to the common budget.
"It worked in the past accessions, and it will work now," she said.
Taking up arms
Another evident consequence of Russia's war of aggression is the concentrated push to reinforce defence capabilities across Europe. Leaders have set 2030 as the date by which the bloc must be ready to deter a potential Russian attack.
Fulfilling this mission requires eye-watering amounts of money to reverse decades of complacency, expand industrial production and acquire cutting-edge lethal equipment.
As part of her plan, von der Leyen puts on the table €131 billion to boost the defence and space sectors, which Brussels considers to be intrinsically linked. A "Buy European" clause will apply to ensure a preference for domestic companies.
But there's a catch: under the EU treaties, the common budget is strictly prohibited from financing the direct purchase of weapons and ammunition, which, as it happens, is the most pressing priority for member states today.
Von der Leyen tiptoes around the rules by focusing the money on other aspects of arms production, such as research and innovation, economies of scale, the commercialisation of prototypes, the mobilisation of private investment and the aggregation of demand.
She also wants to channel more EU funds into transport infrastructure for military mobility "so that our armed forces can move faster, better and together."
In other words, everything except the purchase of the weapons themselves.
Quest for cash
Ambition comes with a price.
Von der Leyen's €2 trillion budget for the 2028-2032 period represents a sizable increase compared to the €1.2 trillion budget agreed by leaders in the summer of 2020.
Still, she insists the hike should not be felt in the capitals, as long as the capitals empower the Commission to raise money independently.
Traditionally, Brussels has relied on two resources – customs duties and value-added tax (VAT) – to cover a portion of the common budget. Now, she wants to add five more.
Two of them will be based on the bloc's climate policies: the Emissions Trading System (ETS), the market where companies buy and sell credits to compensate for their greenhouse gas emissions, and the Carbon Adjustment Mechanism (CBAM), which will put an extra price on carbon-intensive imports coming into EU territory.
Moreover, von der Leyen envisages three new taxes on electronic waste (e-waste), tobacco products and companies with an annual turnover above €100 million.
Altogether, the Commission estimates the old and new own resources will bring in €58.5 billion per year. This amount will be enough to cover the €24 billion in annual repayments of the COVID-era debt and contribute to other envelopes.
"The goal is simple: we have to repay our shared recovery borrowing (and) must meet our modern priorities," von der Leyen said.
However, the €58.5 billion is idealistic, as it takes for granted that all five measures, including the new taxes, will be swiftly endorsed by member states. In reality, the taxes will be extremely contentious and risk being shot down in the bitter negotiations.
Tellingly, von der Leyen's previous proposal to revamp the own resources is still on the table, awaiting a resolution.
Gerardo Fortuna and Paula Soler contributed reporting.