EU chief seeks funding boost to help bloc compete By Reuters

By Jan Strupczewski

BRUSSELS (Reuters) – The European Commission wants to set up a fund to support strategic sectors, a document showed on Tuesday, as the bloc seeks to compete more effectively in new technologies, particularly against China and the United States.

The competitiveness fund proposal was put forward in a letter to Commissioner-designate for Budget Piotr Serafin from Commission chief Ursula von der Leyen, who on Tuesday appointed her new team to lead policy-making over the next five years.

The European Union is concerned that it needs to invest heavily in technology to avoid being overtaken by global competitors and prevent economic decline.

Previous ideas to finance strategic spending through joint EU borrowing, building on the experience of the 800 billion euro ($890 billion) post-Covid recovery fund, have met with resistance from richer countries in the bloc’s north, including Germany and the Netherlands.

Von der Leyen said the EU’s long-term net budget for 2028-2034 should make better use of the money it has available through leverage or attracting private funds to boost the impact of national spending.

The letter does not specify where the money will come from or the amount.

“I want you to develop a new approach for a modern and strengthened EU budget, moving to a policy-based budget from a program-based budget,” von der Leyen wrote.

The EU’s long-term budget is around 1% of EU GDP. About a third of this supports EU farmers, a third tries to equalize living standards across the 27-nation bloc, and the rest is spent on other policies.

This split has been criticized by some member states as not giving the EU enough resources to spend on policies to adapt to the changing environment – climate change, security and defense or industrial policy – and instead focusing on support programmes.

EU enlargement, which could start between 2028 and 2034, will be a new challenge, especially if the structure of the budget remains unchanged, EU officials said.

Von der Leyen said there could be a closer link between the money EU regions get from the EU budget and reforms and investment, an idea officials could draw criticism from some EU members.

The EU budget receives money from customs duties, a share of the value added tax collected by EU countries, unused plastic packaging waste and national contributions based on GDP.

The letter said it would have to find new sources of EU revenue, called “own resources” in EU jargon.

Expected new sources of revenue include a share of revenue from the CO2 emissions trading system, a tax on goods imported from outside the EU from countries that do not comply with the same environmental regulations and a reduction in company profits tax, but officials have said that no it will be enough.

(1 USD = 0.8991 euros)