How should the bloc finance its next budget? How big should it be? And what should be its spending areas? A policy discussion organised today by the influential Brussels-based think tank Bruegel offered some ideas.
Ahead of negotiations on the next EU budget in 2025, the EU has an opportunity to create a more flexible, faster, more effective and more policy-driven budget, the EU executive’s director-general for the budget said in Brussels today (4 September).
“The EU budget has been essential in our answer to the crises we went through, and this is new,” Stéphanie Riso claimed, adding that the bloc’s budget should further focus on its policy priorities, rather than being programme-based.
At present, the €1.2 trillion budget represents 1% of the bloc’s GDP (excluding post-pandemic recovery funds), with most of the money going to the common agricultural policy and cohesion policies.
“The [next] EU budget should focus on where we have added value, where we bring positive externalities, where when we invest in one part of the EU, it serves the entire EU,” the director-general told an event organised by influential Brussels-based think tank Bruegel.
Riso’s view is that the EU budget has become too complex and that much more can and must be done to make it simpler, quicker and more efficient, so that it can also meet future challenges.
Negotiations on the next budget are set to begin in summer 2025, but several think tanks, such as Bruegel, are already making suggestions, including reforms to the two biggest EU spending areas: agriculture and cohesion.
“Some elements of the two largest EU budget spending items are not in line with the evolving goals of the EU,” it said in a memorandum published today, while noting that some of the bloc’s current priorities are under-represented — notably single market measures, security and defence or border control management.
What the think tank’s analysts propose is to reform the areas that take up the bulk of the budget first, and then try to increase the size of the budget itself — ideally doubling it from 1% to 2% of the bloc’s GDP, which they regard as necessary if politically realistic.
The Bruegel analysts also recommend making the adoption of the budget subject to a qualified majority rather than unanimity.
Temporary resources for exceptional circumstances
“Borrowing seems to be an ideal source of financing for an emergency instrument, similarly to the Next Generation Fund (NGEU), within the legal limit,” say the analysts, who also recommend an exceptional and temporary debt-financed EU instrument to boost defence capabilities to fill the bloc’s investment gaps after years of underinvestment in defence industry and high demand due to the war in Ukraine.
But many countries, such as Germany or the Netherlands, still oppose the idea of joint borrowing, and unanimity is required to get there, so finding new own resources acceptable to member states will be crucial during the next mandate.
The think tank lists a few: taxing carbon emissions or EU-level corporate taxation.
Bruegel’s non-resident fellow Pascal Saint-Amans made a last suggestion to the audience: “You have a lot of money in a few hands. Why not think of a global EU tax on the richest of the rich?”
