Brussels - The European Union needs to step up funding to ensure security while also plugging a funding gap expected after Britain's exit from the bloc, the European Commission said on Wednesday as it unveiled its budget proposal for the 2021-2027 period.

The proposal is kick-starting a long and historically acrimonious process of setting the bloc's next long-term budget.

Same budget despite Brexit

Most of the deliberations will take place among member states based on the commission's proposal. The final decision also needs approval from EU lawmakers.

"We have chosen a Europe that is stable, more prosperous, more social and stronger in the world," European Commission President Jean-Claude Juncker told EU lawmakers as he presented the proposal.

"Every euro spent will deliver a result superior to that of just spending it nationally."

The commission wants to keep the size of the post-2020 budget "broadly similar" to the current, 2014-2020 budget despite Brexit, which is expected to leave an annual funding gap of over 12 billion euros (14.4 billion dollars).

The commission's proposal called for 1.135 trillion euros in commitments over the seven-year period, equalling 1.11 per cent of the bloc's gross national income (GNI), without taking inflation into account.

Those commitments are expected to translate into 1.105 trillion euros (or 1.08 per cent of the EU's GNI) in payments during the budget term, because some of the commitments are expected to be paid out after the seven-year period ends.

Income through new sources of funding

Increased funding should be allocated to areas such as migration and border management, youth and security, the commission said.

To create some saving, the commission wants to cut funds allocated for agriculture and cohesion policy, which is meant to assist lower-income countries to participate in the single market, by around 5 per cent.

To make up for lost funding due to Brexit, the EU should generate income through new sources of funding including revenues from the emissions trading system, new corporate taxes and new contributions from EU countries based on the amount of non-recycled plastic packaging.

These could contribute up to 22 billion euros annually to the budget.

The EU's executive arm also proposed a mechanism that would allow freezing EU funds to countries where "generalised deficiencies regarding the rule of law" could lead to financial risks. This could particularly target Hungary and Poland.

"It does not in principle target any particular member states," Juncker noted.

European Budget Commissioner Guenther Oettinger said that linking the rule of law to the EU budget was necessary to ensure judicial independence in case issues linked to EU funding needed to be decided in court.

"It is about the fact that we have to be certain when there is a dispute over European budget programmes," Oettinger said.