Von der Leyen unveils €2 trillion EU budget plan for 2028-2034

European Commission President Ursula von der Leyen has presented a record-breaking long-term budget plan, announcing that the 2028-2034 budget will be €2 trillion.

As announced by von der Leyen in Brussels yesterday, the EU budget for 2028-2034 (the Multiannual Financial Framework) will reach approximately €2 trillion. This figure represents 1.26% of the EU’s gross domestic product (GDP), significantly more than the 1.1% of GDP allocated by Brussels for 2021-2027.

“This budget is more strategic, more flexible, and more transparent. We are investing more in our capacity to react and in our independence,” the European Commission President stated on Wednesday afternoon.

Von der Leyen’s plan reshapes the budget’s structure around three main pillars: €865 billion for agriculture, fisheries, cohesion, and social policy; €410 billion for competitiveness, including research and innovation; and €200 billion for external actions, of which €100 billion is allocated to Ukraine.

Although direct contributions from member states will cover most of the budget, von der Leyen also envisions introducing new EU-wide taxes on electronic waste, tobacco, and the revenues of large corporations so that Brussels can generate additional income on its own.

The main plan is to consolidate the EU’s central spending into three main budget lines. This will allow the Commission to respond more quickly to crises and conflicts, but also to control member states more than before under headings such as the “rule of law.”

The Commission also plans to establish a “Global Europe Fund” for an ambitious global policy.

The plans to radically change the structure of the EU budget are explained by the European Commission’s desire to act more “flexibly and effectively” in the future, while also allocating more funds for foreign policy activities and the improvement of member states’ defense capabilities.

Agriculture and cohesion funds are being merged

According to the Commission’s statement, approximately 90% of expenditures are typically fixed in the multiannual financial framework. The multiannual financial framework determines the EU’s seven-year spending; this long period was chosen to avoid having to enter into lengthy budget negotiations every year.

According to Brussels, this framework should be designed in the future so that the Commission can draw on more comprehensive resources in the event of a crisis or war, and for this purpose, the current budget structure will need to be changed.

This structure allocated about one-third of spending to farmers and another third to regions. The official purpose of the share allocated to regions was to bring the standard of living in the EU’s poor regions up to the level of more prosperous regions. There were also numerous small EU programs for different purposes.

Now, the Common Agricultural Policy (CAP), which covers subsidies to farmers, and the cohesion funds are being merged and will cease to be separate entities, both being grouped under the first pillar, National and Regional Partnerships, worth a total of €865 billion.

The two budget items appear to be significantly downsized compared to the current budget, where CAP and cohesion funds account for more than 60% of allocations.

A new approach is now planned. According to this approach, funds for farmers and regions will be combined in a previously non-existent budget item called “European social model and quality of life.”

Tensions will rise between the ‘poor’ south and the ‘rich’ north

On Wednesday, various figures regarding the exact volume of this budget circulated after clearly contradictory information was leaked from the Commission meeting, which lasted much longer than planned, into the afternoon.

According to the latest information, €865 billion—almost half of the total budget that Ursula von der Leyen wants to increase to €2 trillion—has been allocated to this budget item.

Unlike in the past, this money will be transferred directly to the member states, which will sign “national and regional partnership agreements” with the Commission. In these agreements, member states will set targets for their spending and commit to making “reforms.”

The deep cut will be the scene of a fierce debate between the southern countries, which are anxiously watching for any reaction from the agricultural sector, and the eastern countries, which are dependent on cohesion policy to close the gap with wealthier member states.

At the same time, this reduction will be welcomed by the western and northern countries, which have consistently argued for a greater focus on today’s priorities, such as climate action, defense, security, research, innovation, and advanced technologies.

According to the announcement, these reforms may particularly relate to the protection of the “rule of law.” Under this rhetoric, the EU has been “disciplining” governments with which it has fallen into contradiction for years, such as Viktor Orbán’s in Hungary.

Brussels’ control is increasing

In addition to the massive fund for farmers and regions, the European Commission is planning a new budget item: the European Competitiveness Fund (ECF).

This fund will bring together more than a dozen previously independent programs. The Commission officially states that it wants to reduce “complexity” and “bureaucracy.”

At least initially, the supervision of the ECF was planned to be delegated to the Commission. This would have given the Commission more flexibility to use the funds at its discretion and to distribute them more effectively, for example, in the event of new crises and conflicts.

On Wednesday, a figure of €410 billion was circulating, slightly less than initially planned. However, the ECF has faced serious criticism, especially from the European Parliament (EP), from those who feel deprived of their say and thus their authority, as with the agricultural and regional budgets.

The ‘Global Europe Fund’ will tie non-EU countries to the EU

In addition to these two budget items, the European Commission’s budget plan includes a third item, currently called the “Global Europe Fund.”

This fund was created to bring together programs affecting countries outside the EU. This will allow the Commission to use funds for the EU’s global influence policy in a more targeted way than before.

The programs of the Global Europe Fund will be strictly separated by region, and according to preliminary statements, this will make it much easier to “use development cooperation as a tool of EU foreign policy.”

The size of the Global Europe Fund was announced yesterday as approximately €200 billion. In addition to the official budget, a Ukraine fund is also planned, which von der Leyen wants to equip with about €100 billion.

Tax protests from the German business community

The restructuring of EU spending is accompanied by a restructuring of revenues. This figure is also higher than before, as debt repayments of between €25 billion and €30 billion will be made each year from 2028.

Von der Leyen has already shelved the plan to use revenue from a possible new digital tax on US digital giants to consider the fundamental interests of the Trump administration. Instead, she wants to tax unused electronic waste and take a share of national tobacco taxes.

In addition, a tax is planned for EU-based companies with an annual revenue of over €100 million. This is already causing strong protests from the German business community, particularly because a large proportion of the affected companies (up to 40% according to some estimates) are based in Germany.

Observers predict that the draft budget will cause serious disagreements in the EU for at least two years and will further exacerbate existing differences.