Ursula von der Leyen delivered her annual State of the European Union speech in Strasbourg, where she, for the first time, proposed sanctions on Israeli officials, acknowledged the backlash over the EU-US trade deal, and underlined the importance of competitiveness for Europe.
But can these promises restore trust in her leadership, or will they deepen the divisions inside the EU?
Von der Leyen opened her speech with security. Just hours before, more than ten Russian drones violated Polish airspace. She said the European Union stands in full solidarity with Poland and confirmed that the Commission is preparing the bloc’s nineteenth sanctions package against Russia. This package will target the so-called “shadow fleet” transporting Russian oil, third countries helping Moscow bypass sanctions, and accelerate Europe’s complete phase-out of Russian fossil fuels.
On Ukraine, von der Leyen announced a new financial tool: a “reparation loan,” backed by profits from frozen Russian assets. Not the assets themselves, but the interest they generate. Ukraine would only repay the loan once Russia pays reparations. She stressed that European taxpayers should not bear the cost of rebuilding Ukraine.
Then came Gaza. Von der Leyen described the humanitarian situation there as catastrophic. For the first time, and in unusually harsh language, she proposed sanctions on extremist Israeli ministers and violent settlers. She also called for a partial suspension of the EU-Israel Association Agreement, which regulates trade. In addition, she announced that the Commission itself will suspend certain payments to Israel while continuing to fund Israeli civil society groups. Finally, she said the EU will push for the creation of an international donor group to finance Gaza’s reconstruction.
Von der Leyen then shifted to the economy and competitiveness. She warned that Europe faces strong headwinds and growing dependencies. She announced a Single Market Roadmap to 2028, a new “Scale-Up Europe Fund” to attract private investment into critical technologies, and a “Made in Europe” clause in public procurement. She also highlighted a €1.8 billion “Battery Booster” package, aimed at scaling up European battery production.
On energy, she repeated the EU’s goal of phasing out Russian fossil fuels completely by 2027. She said Europe must expand its renewables, keep nuclear in the mix, and build what she called “Energy Highways” to remove eight major cross-border bottlenecks in European infrastructure.
Housing was another major theme. Von der Leyen noted that house prices have risen more than 20% since 2015, while building permits have dropped by more than 20% in the last five years. She announced that the European Affordable Housing Plan, originally scheduled for 2026, will now be presented this year. It will revise state-aid rules, support construction of homes and student residences, and introduce a proposal on regulating short-term rentals.
Agriculture also featured in the speech. She promised to simplify the Common Agricultural Policy, protect farmers’ incomes in the next EU budget, and fund a new “Buy European” campaign to promote local products.
Finally, von der Leyen repeated that access to EU funds will remain tied to respecting the rule of law and fundamental rights.
This speech outlined the EU’s priorities in a moment of political tension. On Russia and Ukraine, the message was strength and financial responsibility. On Gaza, a clear shift: for the first time, the Commission proposed sanctions on Israeli officials. And on housing, energy, and farming, von der Leyen addressed issues that affect Europeans’ daily lives, from energy bills to rent prices.
What’s next?
The Parliament and the Council will now debate these proposals. Agreement on another Russia sanctions package is likely. But the measures on Israel are expected to divide member states sharply. The housing plan and competitiveness agenda will face pressure from industry and governments concerned about costs. Politically, von der Leyen must also survive upcoming motions of censure in Parliament.