EU Proposes Draft Budget Close to €2 Trillion for 2028-2034

The European Commission's Berlaymont building in Brussels. Photo by Simon Wohlfahrt /Bloomberg

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(Bloomberg) — The European Union has proposed a budget of close to €2 trillion ($2.3 trillion) for its next seven year budget, as it seeks to fend off a range of challenges from rising global economic competition to increased defense demands. 

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The plan, which will kick in from 2028, was agreed after intense negotiations that stretched late into Tuesday night and resumed on Wednesday morning, according to people familiar with the matter who spoke on the condition of anonymity.

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The figure of €1.98 trillion represents a substantial jump from the €1.2 trillion — equivalent to 1% of EU’s output — that was allocated to the budget during the last budgetary cycle, between 2021 and 2027. The bumper budget figure is likely to get pushback from some EU member states already struggling with budgetary issues and who will be responsible for funding most of the package through national contributions. 

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Included in the draft plan is a €589.6 billion competitiveness, prosperity and security fund, of which €450.5 billion is earmarked for an EU competitiveness fund, according to people familiar with the discussions. 

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Farming, which has long been one of the cornerstones of the EU budget, once again will get a big chunk of funding with €293.7 billion proposed for the bloc’s common agricultural policy, according to the people.

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Wednesday’s proposal kicks off a laborious process which will see the European Parliament and the European Council, representing member states, weigh in on the process. EU leaders need to give their unanimous backing. The budget, which is known as the multi-annual financial framework, must be agreed by the end of 2027. 

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EU Commissioner Michael McGrath told Bloomberg Radio on Wednesday morning that the budget is being framed “in challenging circumstances,” including the requirement to start repaying the EU’s pandemic-era Covid debt in 2028, which could reach €25 billion a year.

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“Two years of tough negotiations ahead,” he said. “Today is a significant day though.”

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Debates about the EU’s budget have long been contentious, as the EU grapples with competing demands from agriculture to regional funding for poorer member states. 

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This year’s proposal, which will govern the bloc’s spending priorities between 2028 and 2034, is even more sensitive given the EU’s aim to bolster its defense capabilities and improve its competitiveness as it faces economic threats from the US and increasing competition from China. A report by former European Central Bank President Mario Draghi last year warned that the EU is facing a €800 billion a year investment gap.

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The current long-term budget supports around 50 EU funds from research to energy projects. It is financed primarily by contributions from member states, with richer economies being net contributors to the common pot. 

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—With assistance from Stephen Carroll, Saim Saeed and Michal Kubala.

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