We just finished our College meeting. We had two big files: One was the MFF revision and the other one was the economic security. I want to comment on both.
First of all, the backdrop against which we discussed that is a world that has changed dramatically. We saw three years of crisis after crisis. As you all know, it culminated in Russia’s war that it unleashed against Ukraine. And we felt the aftershocks very painfully: energy prices rising, higher inflation, higher interest rates. So we are in a completely different world compared to 2020, when the MFF we are discussing today was negotiated.
Of course, this world of multiple crises also shows in our budget. We have been using this budget more than ever to be part of the solution of these crises that we saw. We have used every flexibility, every possibility of redeployment. We have reprioritised our funds, for example two of our largest funds. You will know the fact that we reprioritised NextGenerationEU in favour of REPowerEU – an exact and immediate response to the energy crisis. Or take cohesion money that we reprioritised for the support for Ukrainian refugees – that was the CARE package we designed. And of course, beyond that, we have mobilised every euro we could for Ukraine itself – you know the topics: the solidarity lanes, the humanitarian needs, the macro-financial assistance. If you put that in a figure: We have so far allocated EUR 30 billion for Ukraine directly from the EU budget. And of course, this was initially never foreseen in our MFF. This is why we need to revisit our budget now.
Of course, we are fully aware of the fact that Member States were also hit by the crises. And after years of large public support to their economies, it is now time for consolidating their public finances. We are also aware of this. Taking everything I have just described into account, we come today with a targeted and limited proposal for the absolute must. There are three topics: The first is Ukraine, the second is migration and external challenges, and the third is preserving our competitiveness.
On Ukraine: Here, we propose a financial reserve for the next four years of EUR 50 billion. This includes both loans and grants. The reserve will first of all provide perspective and predictability for our partners in Ukraine. And it should also incentivise other donors to step up, too. This financial reserve will allow us to really calibrate our financial support according to the evolution of the situation on the ground. Because we all know that a war requires utmost flexibility from us.
On migration: The magnitude of migration challenges today requires us to give urgent, fast responses. We are here proposing to equip our Member States with financial support to strengthen the management of our external border. We need to work more intensively with our neighbourhood to foster their economic development, to stabilise those countries. We need to enhance our international partnership. Therefore, we need additional budget for Syrian refugees in Syria, Lebanon, Jordan and Türkiye; for the southern migration route; for the Western Balkans; for the partners across the world; and also to maintain our capacity to react to humanitarian crises and natural disasters. For everything I have just described, we are asking for EUR 15 billion.
Our third priority concerns the resilience and the competitiveness of our economy. It is crucial for Europe to have a technological edge for the world of tomorrow. As you recall, we have already done a lot. Just think of the Net-Zero Industry Act and the Chips Act – all these are reactions on this topic. But we also know that more needs to be done and that time is of the essence. Therefore, we are creating STEP. How does it work? We have identified three sectors of priorities that are critical to preserve our competitive edge. It is deep tech, it is clean tech and it is bio tech. And then we have efficient funds in our European budget for projects in these sectors, but we have limited budgets. You know some of these funds like InvestEU or the Innovation Fund and others. By creating STEP, we want to focus these funds on these priorities and have them work better together. This creates synergies. Here, we are asking for limited reinforcement of EUR 10 billion for some of those funds. Because we also want to leverage the funding capacity of cohesion funds in order to fund these projects even more. This is why we are creating a seal for the projects that are eligible but did not receive funding so far. With this seal, we are creating a pipeline of projects that will be fast-tracked for funding from cohesion. Or if I put it in very short terms: Some funds have the projects but not the money. Cohesion has the money but not the projects. So, the seal makes both ends meet. All in all, we expect, with leveraging and crowding in of private capital – this is crucial –, that this will result in an investment capacity of EUR 160 billion for STEP.
Finally, the new macroeconomics are also reflected in increasing funding costs and fixed costs in our budget itself. These issues are also addressed in our proposal. In addition, we are coming back to the own resources topic. It is important to put our budget on a stable funding trajectory. With this overall revision of the MFF, we are asking our 27 Member States to equip us with EUR 66 billion to deliver on these three priorities I have just described: Ukraine, migration and competitiveness.
Now, to the other topic of economic security: Many of the issues that have led to the revision of the budget have also of course revealed inherent vulnerabilities in our economies. And they have opened our eyes to the increasing – and increasingly complex – risks to national security and economic resilience. Beforehand, I want to make very clear that global integration and open economies are a force for good for Europe. We need them. They are good for businesses, they are good for our competitiveness, and they are good for our economies. That will not change in the future. That is very clear. This is a vast majority, for example, of all the trade we are doing. But we also see that the world has become more contested and geopolitical. And there is a limited set of key technologies that can be used in a different and in an aggressive way. This is why the topic of economic security has become a priority for us and for many of our partners.
We have already done a lot in the last years. You know the trade defence instruments, for example. Or we have taken a critical look at our resilience and dependencies in certain sectors. Think about the chips, the clean tech or the critical raw materials. We have discussed it many times. But given the changing nature of the risks, we now need a strategic vision for how we are going to handle these risks. And today, Europe becomes the first major economy to set out a strategy on economic security. It builds on three policy strands: We want to promote, we want to protect, and we want to partner. A few words on these three strands.
The first is to promote our own competitiveness here in Europe. We are already doing this by investing, for example, in research through Horizon Europe; you know NextGenerationEU, the Green Deal Industry Plan, and the digital transition; but also by upskilling our workforce. This is about promoting the competitiveness of Europe.
The second is strand is to protect ourselves from the risks that we have identified. This also means that we have to be more assertive in using the existing tools. You know them, it is 5G and 6G security, the foreign direct investment instrument, export controls, but also anti-coercion instruments. And it means working on targeted new tools, for example on outbound investment. Outbound investment means that we need to ensure that European companies’ capital, their knowledge, their expertise, their research is not abused by countries of concern for military application. So, we are working on how best to build such an instrument and we will propose an initiative before the end of the year.
My final point: We need to partner on economic security. This means first and foremost bolstering our research cooperation with others. It is also about strengthening our trade relations and supply chains, and diversify these supply chains. This was one of the main topics I have discussed during my trip last week to Latin America, for example here on the free trade agreements that we are pushing forward, but also on common projects under Global Gateway, for example on renewable energy like green hydrogen, or for example Critical Raw Materials Partnerships. With today’s strategy, we are ensuring that we have a clear set of objectives, principles and processes to prevent and mitigate these risks as they emerge.