Von der Leyen’s plan to revamp EU’s €2 trillion budget is unraveling

BRUSSELS — European Commission President Ursula von der Leyen’s plan to shake up how the EU spends its almost €2 trillion budget is rapidly being diluted.

Von der Leyen’s big idea is to steer hundreds of billions in funds away from farmer subsidies and regional payouts — traditionally the bread and butter of the EU budget — toward defense spending and industrial competitiveness.

But those modernizing changes — demanded by richer Northern European countries that pay more into the budget than they receive back from it — are difficult to push through in the face of stern opposition from Southern and Central European countries, which get generous payments for farmers and their poorer regions.

A coalition of EU governments, lawmakers and farmers is now joining forces to undo key elements of the new-look budget running from 2028 to 2034, less than six months after the European Commission proposed to focus on those new priorities.

Von der Leyen’s offer last week to allow countries to spend up to an extra €45 billion on farmer subsidies is her latest concession to powerful forces that want to keep the budget as close as possible to the status quo.

Northern European countries are growing increasingly frustrated by moves by other national capitals and stakeholders to turn back the clock on the EU budget, according to three European diplomats.

They were particularly irritated by a successful Franco-Italian push last week to exact more concessions for farmers as part of diplomatic maneuvers to get the long-delayed Mercosur trade deal with Latin America over the line.

“Some delegations showed up with speaking points that they have taken out of the drawer from 2004,” said an EU diplomat who, like others quoted in this story, was granted anonymity to speak freely.

The EU’s Common Agricultural Policy was worth 46 percent of the bloc’s total budget in 2004. The Commission’s proposal for 2028-2034 has reserved a minimum of roughly 25 percent of the total cash pot for farmers, although governments can spend significantly more than that.

The Commission had no immediate comment when asked whether the anti-reform camp was successfully chipping away at von der Leyen’s proposal.

The anti-reform alliance

The Commission’s July proposal to modernize the budget triggered shockwaves in Brussels and beyond. The transition away from sacred cows consolidated a ramshackle coalition of angry farmers, regional leaders and lawmakers who feared they would lose money and influence in the years to come.

“This was the most radical budget [ever proposed] and there was resistance from many interested parties,” said Zsolt Darvas, a senior fellow at the Bruegel think tank.

A protest by disgruntled farmers in Brussels during a summit of EU leaders on Dec. 18 was only the latest flashpoint of discontent. | Bastien Ohier/Hans Lucas/AFP via Getty Images

The scale of the Commission’s task became apparent weeks before the proposal was even published, as outspoken MEPs, ministers and farmers’ unions threatened to dismantle the budget in the following years of negotiations.

That’s exactly what is happening now.

“The Commission’s proposal was quite radical so no one thought it could go ahead this way,” said a second EU diplomat.  

“We knew that this would be controversial,” echoed a Commission official working on the file.

A protest by disgruntled farmers in Brussels during a summit of EU leaders on Dec. 18 was only the latest flashpoint of discontent.

The terrible optics of the EU’s signing off on Mercosur as farmers took to the streets on tractors was not lost on national leaders and EU officials.

Commission experts spent their Christmas break crafting a clever workaround that allows countries to raise agricultural subsidies by a further €45 billion without increasing the overall size of the budget.

The extra money for farmers isn’t new — it’s been brought forward from an existing rainy-day fund that was designed to make the EU budget better suited to handling unexpected crises.

By handing farmers a significant share of that financial buffer, however, the Commission is undermining its capacity to mobilize funding for emergencies or other policy areas.

“You are curtailing the logic of having a more flexible budget for crises in the future,” said Eulalia Rubio, a senior fellow at the Jacques Delors Institute think tank.

At the time, reactions to the budget compromise from frugal countries such as Germany and Netherlands were muted because it were seen as a bargaining chip to win Italy’s backing for the Mercosur deal championed by Berlin. The trouble was instead postponed, as it reduces budget flexibility.

Darvas also argued that the Commission has not had to backtrack “too much” on the fundamentals of its proposal as countries retained the option of whether to spend the extra cash on agriculture.

In a further concession, the Commission proposed additional guarantees to reduce the risk of national governments cutting payments to more developed regions. | Nicolas Tucat/AFP via Getty Images

Another month, another concession

This wasn’t the first time von der Leyen has tinkered with the budget proposal to extract herself from a political quagmire.

The Commission president had already suggested changes to the budget in November to stem a budding revolt by her own European People’s Party (EPP), which was feeling the heat from farmers’ unions and regional leaders.

At the time, the EU executive promised more money for farmers by introducing a “rural spending” target worth 10 percent of a country’s total EU funds.

In a further concession, the Commission proposed additional guarantees to reduce the risk of national governments cutting payments to more developed regions — a sensitive issue for decentralized countries like Germany and Spain.

“The general pattern that we don’t like is that the Commission is continuing to offer tiny tweaks here and there” to appease different constituencies, an EU official said.

The Commission official retorted that national capitals would eventually have made those changes themselves as the “trend of the negotiations [in the Council] was going in that direction.”

However, budget veterans who are used to painstaking negotiations were surprised by the speed at which Commission offered concessions so early in the process.

“Everyone is scared of the [2027] French elections [fearing a victory by the far-right National Rally] and wants to get a deal by the end of the year, so the Commission is keen to expedite,” said the second EU diplomat.

Nicholas Vinocur contributed to this report.