The EU budget for Europe’s strategic autonomy and a stronger geopolitical role

The European Union’s budget has always been a key instrument to support Europe in delivering on its policy agenda and investing in projects that no member state could implement as efficiently and effectively on its own. Europe’s Galileo global satellite navigation, the student mobility programme Erasmus and the numerous Nobel Prize winners that have received EU research grants are just a few small – yet telling – examples of the impact of the EU budget.

Since the outbreak of the coronavirus pandemic, the EU budget has served as one of Europe’s key crisis response tools. Thanks to EU funding, the European Commission organised joint procurement of vaccines, due to which over 80% of the EU population is now vaccinated, and provided liquidity for member states to support hospitals in the first days of the pandemic. The EU budget has also been instrumental for putting in place the NextGenerationEU recovery instrument, financed through capital market funding and supporting Europe’s green and digital transition.

Following the success of these joint projects, the European Commission also came forward with further initiatives to strengthen Europe’s resilience and secure its long-term strategic autonomy. These include the European Chips Act, which seeks to ensure that Europe has a 20% share of the global semiconductor market by 2030, and the space initiative to further boost the competitiveness of the EU space ecosystem. The source of funding? The EU budget.

Russia’s unprovoked and unjustified military aggression against Ukraine was a wake-up call that, while the EU was right to invest in its strategic autonomy and independence, more was needed. Defence, energy, humanitarian aid and food security are all areas in which the EU has been asked to act – quickly and imminently.

The EU has responded decisively, within the limited remit of the EU budget. As of mid-October, Team Europe has secured over €19bn for Ukraine, of which over €12bn were enabled by the EU budget. This amount has been topped up by €3.2bn for military assistance. Once again, and following the example of the coronavirus pandemic, the Commission has allowed EU countries to use cohesion and agricultural funding flexibly to cover any expenses linked to the unprecedented inflow of refugees and their needs. Furthermore, the Commission put forward a short-term EU instrument to reinforce defence industrial capabilities through joint procurement, €500mn worth of funding from the EU budget over two years. The proposed REPowerEU seeks to enhance energy independence by mobilising EU funds that incentivise EU countries to accelerate investments in this domain.

The EU budget is therefore once again playing a key role in building Europe’s strategic autonomy and strengthen its geopolitical role. In parallel, it has continued to deliver for all internal stakeholders that rely on it, from farmers and students, to innovators and municipalities. It continues to serve the EU’s green and digital agendas, and to secure funds for the post-coronavirus recovery and transformation.

However, the EU budget has its limitations. More than 90% of the over €2bn under the 2021-2027 long-term EU budget and the NextGenerationEU recovery instrument are pre-allocated for specific purposes, programmes and beneficiaries. This makes it challenging to mobilise funds to finance new projects or address unexpected emergencies. The Commission has so far succeeded in mobilising funds in response to new challenges, but these developments leave little room for manoeuvre in the future.

As Commission President Ursula von der Leyen said at this year’s Annual EU Budget Conference, “our budget has not been designed to deal with multiple challenges at this scale.” This calls for a re-assessment of the EU budget.

Today’s challenges call for a common response and the European Union must reflect on the future of its budget in this context. Commissioner Johannes Hahn, responsible for Budget and Administration, announced that the European Commission will present a review of the functioning of the current long-term budget by summer 2023.

How much does it cost to increase common action in key areas and do the benefits justify the need for greater investment? Is the current size of the EU budget sufficient to pay for this ambition through reallocation and reprioritisation? If not, are EU member states ready to allocate the necessary resources for a greater common action, avoiding costlier expenditure at the national level?

The questions are many, and it is for all of us to discover the answers.

The views expressed in this #CriticalThinking article reflect those of the author(s) and not of Friends of Europe.