European Commission President Ursula von der Leyen is scheduled to propose a substantial overhaul of the European Union's budget structure on Wednesday, introducing a €200 billion competitiveness fund aimed at enhancing the EU's global standing in competition with the United States and China.

This proposal, part of a broader revision of the bloc's financial management, seeks to reshape the current multi-annual financial framework (MFF) of €1.2 trillion, which is traditionally divided among three primary categories: subsidies for farmers, regional support for less wealthy areas, and funds for research and administration.

Von der Leyen has advocated for the creation of a 'European Sovereignty Fund' which she argues is necessary to respond to recent shifts in global investment dynamics, particularly referencing a surge of funding under the Biden administration in the United States and significant investment strategies in China.

Despite prior member state resistance to such a fund, the current economic stagnation and evolving security challenges may present a unique context for her renewed proposal.

Should her proposal succeed, European funds will be streamlined into 'national plans,' consolidating over 500 existing funding sources into just 27 for each of the EU's member states.

Her upcoming presentation to the 26 EU commissioners is expected to formally establish this new structural approach, after which bureaucrats will develop a technical proposition to be submitted to EU countries and Members of the European Parliament in July.

Consequently, extensive negotiations on the budget are anticipated to unfold over the ensuing year.

However, this budget plan has generated significant unease among various stakeholders within the EU. The existing budget allocates €379 billion for the Common Agricultural Policy and €382 billion for regional cohesion funds.

The proposal to merge these funds into a single, centrally managed allocation has prompted concerns from agricultural and regional advocates, fearing the potential dilution of long-standing subsidies.

Protests have already been organized, with farmers planning to bring tractors to Brussels on 20 May in opposition to this consolidation.

Notably, 26 out of 27 agriculture ministers have expressed their disapproval, insisting on maintaining a separate Common Agricultural Policy fund.

Supporters of cohesion funding have echoed these concerns, arguing that the proposed national plans could undermine the principles of EU solidarity and create inconsistencies in policy implementation across different regions.

Prominent officials, including Vasco Cordeiro from Portugal and conservative MEP Siegfried Mureșan, have publicly opposed the plan, citing risks associated with the loss of regional control and the potential for diminished policy coherence.

Opposition has also emerged from the scientific community, as the existing €96 billion research fund, known as Horizon, is expected to be subsumed under the new fund, raising alarms regarding future support for fundamental research initiatives.

Critics within academia have voiced worries that prioritization of short-term industrial needs could overshadow essential long-term scientific inquiry.

Existing multi-billion euro programs related to defense, space, health, and environmental transitions could also be impacted by this shift.

From a political perspective, key member states, including Germany and France, have expressed a willingness to reform the budget structure.

Germany's new administration advocates for modernization to enhance clarity and flexibility, while France is pushing for a transition from a program-based to a policy-based financial framework.

Despite these calls for reform, the EU faces fiscal constraints due to repayment obligations from a €806 billion COVID-19 recovery package.

Simultaneously, a separate issue presents itself as the EU prepares to reintroduce pre-war trade quotas for Ukrainian agricultural imports from 5 June, following a temporary suspension enacted in response to Russia's invasion in 2022. The European Commission's decision involves reverting to tariff rate quotas established under a 2017 trade agreement, which could significantly impact Ukraine's agri-food sector, potentially resulting in estimated losses of €3 to €3.5 billion annually.

This move is particularly sensitive given the upcoming elections in Poland and the farmer unrest triggered by previous Ukrainian import policies.

The reinstatement of quotas has been met with criticism from both Ukrainian officials and EU agricultural organizations, who argue that such measures could disrupt trade flows and harm agricultural relations.

A debate in the European Parliament highlighted concerns surrounding the decision, with members of the European Parliament cautioning against perceived capitulations to local agricultural lobbies.

The Commission maintains that the proposed transitional measures are intended to mitigate disruption while balancing competing interests within the EU.