On 16 July, the European Commission presented its draft for the future Multiannual Financial Framework (MFF) 2028–2034. This proposal marked the start of intensive negotiations, which are scheduled to be concluded by the end of 2026. Unfortunately, it is already becoming apparent that the draft is proving disappointing for European workers. The next budget may also undermine Cohesion Policy.

 

Major changes proposed for Cohesion Policy

 

EU Cohesion Policy serves to achieve the objectives set out in Article 174 of the Treaty on the Functioning of the European Union (TFEU): firstly, the convergence objective, aimed at reducing disparities in development between regions and nations, and secondly, the cohesion objective, which aims to promote economic, social and territorial cohesion within the EU. The four Structural Funds currently constitute the central instruments of EU Cohesion Policy: the European Social Fund (ESF+), the European Regional Development Fund (ERDF), the Cohesion Fund and the Just Transition Fund (JTF). Over the past decades, these Structural Funds have not only had a significant impact on growth and employment but have also strengthened confidence in the EU institutions, thereby promoting social cohesion and a common European identity. In the next EU budget, these four funds are to be integrated into ‘National and Regional Partnership Plans’ (NRPP), together with the funds for the Common Agricultural Policy (CAP), fisheries, security and migration. This integration, however, entails a risk of diluting regional and social targeting.

 

What is the future of ESF+?

 

The ESF+ is currently a key instrument for implementing the European Pillar of Social Rights and is regarded as a lever for promoting employment, education and social inclusion. The new EU budget proposes abolishing it as a separate fund. Instead, the Commission proposes to allocate 14 per cent of the NRPP to social investment. However, this would not only mean a nominal reduction compared to ESF+ funding in the current financial period. Furthermore, as has been the case up to now, there are no binding guidelines for the distribution of social expenditure by Member States, such as earmarked funds for social inclusion or reducing poverty. The ultimate concern is that the 14% target will give Member States significant flexibility in social spending compared to the current system.

 

This raises the risk that Member States will increasingly align EU funds with national priorities or use them to cover budget shortfalls, while regional and social objectives are neglected. Moreover, it should be noted that social and employment policy objectives will be split between the NRPPs and the new European Competitiveness Fund, the latter being intended to target the development of quality jobs in strategic sectors by supporting lifelong learning, education, training projects and apprenticeships.

 

What is the future of the Just Transition Fund?

 

Abolishing the Just Transition Fund would equally be a major setback. This Structural Fund, which was only launched in 2021, was presented as an important social component of the European Green Deal. To date, the JTF has supported regions that are particularly affected by the transition to climate neutrality. Its integration into the NRPPs could cause it to lose its impact. Until now, JTF funds could only be used in selected regions. However, from 2028 onwards, decision-making authority for the allocation of funds under the NRPPs could be transferred to the Member States. Furthermore, plans exist to integrate the Climate Social Fund, which is intended to provide social cushioning for the introduction of the extended emissions trading scheme (ETS2) into the NRPPs.

 

Criticism Mounts Over Proposed Cohesion Policy Reform

 

The restructuring of cohesion policy has faced significant criticism.  Andrés Rodriguez-Pose, European Union High-Level Group on the Future of Cohesion Policy, sees the new NRPPs as a worrying change of course. While the European Commission describes the draft as ‘tighter, more flexible and more effective’,  he warns against combining up to 14 funding programmes into a single ‘mega-fund’. Without fixed funding allocations (ring-fencing) for areas such as rural development or employment policy, there is a risk that regions and local authorities will have to compete with farmers for funding, or that different policy areas will be played off against each other. Secondly, any blanket allocation of funds through national plans would centralise and nationalise EU investment programmes. Such an approach would potentially undermine the fundamental principles of cohesion policy, namely its democratic legitimacy, its place-based approach and its partnerships with regional and local actors. Similar developments have already been observed in the context of the NextGenerationEU coronavirus recovery fund, whose structure could now serve as a model for the regular budget.

 

Criticism has also been levelled at the plan to link the disbursement of EU funds to the achievement of milestones based on the country-specific recommendations of the European Semester.  According to this ‘cash-for-reforms’ model,  which is also based on NextGenerationEU, NRPP payments are released only after investment targets and reforms are met. To facilitate these objectives and reforms, a draft regulation establishes output and result indicators applicable to all EU funds and programmes. The Commission and the Member States would be obliged to conduct interim evaluations. The German Trade Union Confederation also criticises this interlinking of EU Cohesion Policy and the European Semester. ‘A closer link between the European Semester and the Structural Funds would pressure Member States into implementing irrelevant and, from an economic policy perspective, counterproductive reform requirements.’

 

European Parliament issues strong criticism and warns of a possible blockade

 

In particular, The Commission's proposal to merge agricultural and regional funds in the NRPPs faced widespread cross-party opposition in the European Parliament. Regional and agricultural representatives expressed concern regarding potential reductions in subsidies and increased oversight by national governments. Parliament threatened to block negotiations on the forthcoming EU budget. Commission President Ursula von der Leyen was able to avert this by offering a number of minor concessions. These points focused on making the Common Agricultural Policy more autonomous, giving regional governments greater authority to establish NRPPs, and allocating more targeted funding to rural areas. The EPP agreed, but the S&D considers these only ‘cosmetic changes’ and still urges significant reforms to the EU budget structure and continued support for cohesion policy.

But concerns about cohesion policy remain across party lines, with many MEPs referring to an “alarming” change of course during a public hearing held by the Committee on Regional Development on Tuesday. Among other things, it was argued that the Commission is losing sight of the regions and thereby disregarding the European treaties. The possibility of bringing an action before the European Court of Justice was also raised, should the Commission fail to continue pursuing the objectives of cohesion policy in earnest.

 

Further information:

 

EU Commission: An ambitious budget for a stronger Europe: 2028-2034

AK EUROPA: New EU budget from 2028. A difficult agreement process lies ahead

A&W-Blog: Paradigmenwechsel beim EU-Budget auf Kosten der Sozial- und Beschäftigungspolitik? Paradigm shift in the EU budget at the expense of social and employment policy?) (German only)

European Trade Union Confederation: The Commission’s 2028-2034 MFF proposal

European Trade Union Confederation: Guarantees still needed over social funds