Mario Draghi, a former Italian prime minister, enjoyed his retirement when the phone rang. It was September 2023 and the office of Orsula von der Layen wanted to know if he could do a last “job for Brussels”: to find a way to make Europe competitive again, Politico notes in a statement.

“I had to think about a few days … Before I really say yes,” Draghi later recalled, publishing his final report on the revitalization of the European Union economy. “The project seemed so scary, so difficult,” he said.

On Wednesday, Draghi’s ideas for competitiveness will be at the center again, as von der Laien will present her plan for the next seven -year EU budget, at a decisive moment of her term as chairman of the European Commission.

The multiannual budgetary framework (MSc), as the long -term expenditure plan is known, will apply from 2028 to 2034. The fact that two years have been provided for negotiations on what the budget will contain is a sign that – as usual – von der Layen awaits a huge battle.

European Commission officials spent the weekend locked in marathon meetings to finalize the proposal and continue to work until late Monday night.

The stakes

The stakes could not be higher. The MFF proposal will have to fund the EU to face unprecedented challenges, such as a Donald Trump trade war, a real war with Russia’s Russia, the increasing competition with China, the conflicts in the Middle East, the climate.

In the words of Draghi, the “wise” of the European economy: “We have reached the point where, without action, we must either endanger our well -being, our environment or our freedom.”

Today’s basic EU budget is about 1.2 trillion euros, a number that is not small at all.

But this represents only about 1% of EU total GDP. Experienced observers – including Draghi – argue that EU public investment are sadly inadequate to meet the challenges facing the continent.

The question is, how bigger should the Brussels budget be? The answer varies strongly, depending on who gives it.

Some countries want zero increase, while others want to double the EU budget, said Jan Stáský, a senior OECD economist.

“This is the range, from zero to twice, and my estimation would be that by increasing it less than half, you could already achieve many of what makes sense to be done at the EU level,” Stráský told Politico. “Maybe let’s say 20 or 30%” – which would raise the total budget to about 1.3% of GDP – “if spent correctly, it could be a huge improvement”.

Rearrangement of funds

In addition to the overall increase in the funds, the OECD recommended, in a report this month, the rearrangement of existing EU funds to focus on defense and a more comprehensive electricity market, which will reduce costs and help stimulate growth.

The share of public spending should be increased, the thought tank proposed to coordinate more effective cross -border infrastructure projects, such as electricity interconnections and defense supplies.

Other analysts argue that Brussels must be even more ambitious. According to Zsolt Darvas, one of the authors of a new study of the Bruegel thought tank, the MSc’s spending funds must be doubled, more or less, to take into account the need to finance climate transition and repayment of debt from the Covid-19 pandemic era.

“The European Union is facing increasing pressure to implement priorities that are increasingly European,” the Bruegel study concludes. “Challenges such as climate and digital transition, competitiveness, economic durability, defense, migration management and foreign policy go beyond national borders and require coordinated answers. But the EU’s main financial instrument, its budget – or the multiannual fiscal framework (MSc) – remains stuck in the past, ”he says.

Darvas suggested an increase in budget to about 2% of GDP. Such an increase would have put the EU budget on track to cover the share of the additional 800 billion euros a year that, according to Draghi, will be required by the private and public sectors to revitalize Europe’s economic competitiveness.

Some countries, including France, agree that the EU budget must be increased.

Others, such as Germany, Sweden and the Netherlands, do not want the budget to increase.

“Sweden has in mind not to embrace the narrative that we now need a larger budget because we have new problems to handle,” Swedish Minister of European Affairs Jessica Rosencrantz told Politico. “We need to set priorities within the budget,” he said.

Sweden in particular wishes the MSc to deal with defense and security, although some analysts claim that the EU legislation prevents the bloc from carrying out immediate military spending through its long -term budget. “How exactly this should be formulated or depicted in the budget, we should come back to it,” Rosencrantz said. “But I think that defense, security, support and Ukraine, as well as competitiveness – these will be the issues that a new budget should handle.”

Single

Draghi also proposed the radical simplification of the budget, an idea that von der Layen adopted with her proposal to unite the common agricultural policy and the cohesion fund – the highest EU costs – in a single mega fund.

A second pillar of the MSc, according to the outlines already announced by the Commission, will create a new European competitiveness fund, which will provide investment capacity for basic sectors and support for research. The third pillar of the budget would be a new external action fund, which would combine growth assistance and diplomacy, according to von der Layen’s original plan.

Already, some EU countries and politicians have risen for these reforms, especially in terms of aid for European farmers and economic problematic regions.

The hardest place – potentially, at least – is to decide where the money should come from.

There is already a strong debate on whether new forms of these “own resources” should be approved, as the EU’s revenue is called, as part of the new budget, possibly by expanding the share of revenue that Brussels can receive from existing taxes or financial regulations.

Countries that are purely contributors – such as Germany, the Netherlands and Sweden – pay more than they receive back. This often makes it politically more difficult for these governments to justify an audience within them because the overall EU budget must be increased.

The EU Commissioner for the Budget Seraphen budget promised “an ambitious set of same resources”, which “will enhance the financial capacity of what we have here at European level, but will also be politically and socially accepted for Member States and Europe’s citizens.”

He will need luck with his side. “We don’t see the need for European taxes,” Sweden Rosenkrad said.

Rule of law

One way to save resources is not to give “a single euro” to any country that grossly violates the democratic “rule of law” of the EU, Rosencrantz added. This is a view that agrees with the objectives of the Commission for the next MFS.

The von Der Lien team is working on a new “sectarian” regime, which will boost economic sanctions for countries such as Hungary (and, in the past, Poland), which Brussels have found to fail to maintain democratic freedoms that, as they say, constitute the EU.

But when every EU country must fully agree on the budgetary package – including Victor Orban’s Hungary – there is no guarantee that any rules of evidence will move on to the final plan of the budget, whatever the von der Laeen want.

In fact, the question of the punishment of countries that do not respond to the “rule of law” returns to the same key issue that governs the entire budget: why is the EU in fact? How many, at this time of multiple world challenges, should the 27 countries of the bloc together, through actions coordinated in tall glass and steel offices in Brussels, and how much should they decide inside?

In the end, the scale and range of the EU final budget will express the block of the block to this question.

“If we look at the history of the agreements for the next MP, we have seen very limited changes from one frame to another,” said Darvas, one of the authors of the Bruegel report. In his view, the greatest risk to the EU to meet the challenges it is now facing is that the demand for unanimous agreement between the 27 countries will “significantly” limit any margin for reforms.

“There is a huge stiffness,” he said. “I am a little skeptical that there will be big changes this time,” he said.