Ukraine war forces EU to revise its budget

The European Union needs more money. 

This marks the beginning of a political battle to increase the EU budget – a fight that has only just begun.

First, the EU wants more funds for the Ukraine Facility, which would support the country with 50 billion euros from 2024 to 2027.

The funds will be divided into grants and loans, along the lines of the historic Marshall Plan.

The European Parliament has approved the European Commission’s proposal to revise the budget.

“We will be in a position to support the (Ukrainian) government as it sets up a plan for its reconstruction and pre-accession to the EU,” says Michael Gahler, Member of the European Parliament for the European People’s Party (EPP) and co-rapporteur for the Ukraine Facility.

“We will also promote private investment and ensure the continuity of our expertise for those who are active in the reform program,” he added.

The Ukraine Facility represents half of the almost 100 billion euros that the European Commission is asking for to reinforce its current budget for 2021-2027.

The other half would be split across six topics: migration, a sovereign fund for the industrial plan, interests on the pandemic recovery debt, staff costs and a contingency reserve.

The European Parliament’s Budget Committee wants an increase of another 10 billion euros.

A combination of government contributions and new sources of revenue, such as taxes on global companies and on financial transactions, is planned.

But the parliament is opposed to cuts in current programs.

“We have to protect the cohesion and common agriculture policies and their funding. These are policies that have been part of the European Union Treaties since the beginning of its constitution and are fundamental resources that cannot be cut at any time”, says Margarida Marques of the Socialists and Democrats (S&D), co-rapporteur for the mid-term EU budget revision.

This ambition is likely to meet resistance from the European Council, as several member states are unwilling to pay more into Brussels’ coffers or incur new joint debt.

However, analysts believe that the EU will have to adapt to a new global reality.

“These 7-year budget cycles with very long negotiations, very protected and complex things, they don’t really work in a world where there are very immediate challenges and where there has to be a much faster response”, says Heather Grabbe, analyst at Brussels-based think tank Bruegel.

“At the moment the EU budget is also pretty small – it is only a maximum of 1% of the EU’s GDP. It is very likely that more fiscal needs are foreseen.”

At the start of the European election campaign and against the backdrop of the inflation crisis, the budget increase is a test of the EU’s solidarity and enlargement ambitions.