Last Wednesday, the European Commission proposed a budget for the European Union that is at once realistic and ambitious.

It is realistic because it reflects our common desire to keep a tight rein on spending in these times of austerity. Under our proposal, payments over the seven-year period of the budget – from 2014 to 2020 – would come to exactly one per cent of the EU’s Gross National Income. Our budget will not cost the taxpayer more. But it will give more in return.

The EU budget does not seek to do what can and should be done at national level. It invests in things that are important, but which national governments cannot fund with their own budgets – either because resources are insufficient or because the projects require coordination between different member states, making the EU budget a more effective mechanism. That is how it has a real impact on the lives of Europeans.

That is also why it is ambitious. And there is no better example of this than the new ‘Connecting Europe’ facility, which will step in to fund major infrastructure projects that shorten the distances across Europe by improving our transport infrastructure and making the best use of our energy resources by interconnecting Europe’s electricity and gas grids.

Malta will stand to benefit in particular as projects have been earmarked that would connect the island to the European electrical grid and to a gas pipeline that would allow access to gas fields as far apart as Norway, Russia or North Africa. Funding will also be available for projects in ICT, an area which Malta is keen to develop further.

The leitmotiv of this budget is smart, sustainable and inclusive growth. It will help us to safeguard our prosperity in a world where competition is only going to grow more intense. This is why the new financial instruments for growth will be aimed at improving the competitiveness of European SMEs, for market access and for the promotion of entrepreneurship.

These new funds take into account the specific interests and circumstances of SMEs. This is of particular interest to Maltese business, which are the key drivers of the economy.

The Commission is proposing to boost its allocation to the common strategic framework for research and innovation to €80 billion for the 2014 to 2020 period, providing a fillip to European science and boosting competitiveness in cutting-edge sectors. Investing in innovation will put member states such as Malta at the centre of the EU’s ‘Europe 2020’ growth agenda.

The budget will help to modernise our farming sector and make it more environmentally friendly. Thirty per cent of direct payments will be made conditional on using green farming practices. And there will be a fairer distribution of support, with a cap on payments to larger agricultural holdings.

It will help us make better use of the resources we devote to tackling climate change. This spending will be made more effective through our proposal to integrate climate considerations into all of our key policies – from energy to transport and research.

Another area in which spending will be streamlined is home affairs, with the creation of a new Migration and Asylum Fund and an Internal Security Fund. These choices work in favour of those countries which, due to their geographical location, are facing disproportionate pressures, and will help the EU strengthen its external borders, so that migration flows can be effectively managed, as well as enabling us to step up our joint action on terrorism and organised crime.

And finally, it will allow us to refocus our external relations policies. We are giving ourselves the tools to respond to and support the momentous changes taking place in our southern neighbourhood. And we are making sure we maintain and strengthen the EU’s essential commitment to the Millennium Development Goals.

These are just a few of the reasons why we believe our proposal addresses the right issues at the right time.

Budgetary discussions in the EU are seldom easy, and in the current economic climate, they will be particularly challenging.

The Commission has launched this round of discussions with a proposal that is both balanced and forward-looking. We fervently hope that we will be able to say the same of the debate that will now ensue.

Mr Barroso is President of the European Commission. Mr Dalli is European Commissioner for Health and Consumer Policy.