The next period of the EU budget is set to begin in 2028. Negotiations on the 2028-2034 Multiannual Financial Framework are already underway. The European Commission's communication ‘The Road to the next Multiannual Financial Framework, published on 12 February 2025, marked the start of the negotiations. To illustrate the current challenges, we will start with a brief review.

MFF, NGEU and RRF. What is it all about?
The Multiannual Financial Framework (MFF) sets out the EU budget’s long-term spending priorities. These are categorised into seven categories, with by far the largest share earmarked for categories ‘Cohesion, Resilience and Values’ and ‘Natural Resources and Environment’. The smallest shares are currently allocated to ‘Security and Defence’, ‘Migration and Border Management’ and ‘European Public Administration’. The current MFF covers the period from 2021 to 2027 and amounts to just over 2 trillion euro, of which around 800 billion euro is covered by Next Generation EU (NGEU), an economic stimulus package put together in 2021 to mitigate the economic and social impact of the COVID-19 pandemic. The main part of NGEU is the Recovery and Resilience Facility (RRF). To receive funding from it, member states must submit a plan of how they intend to contribute to the digital and green transitions.

While the EU budget is generally financed through customs duties and contributions from member states, NGEU saw the first comprehensive joint borrowing by the EU Member States. To make this possible, they agreed to temporarily increase the own resources ceilings by 0.6 percentage points to provide broader joint financing. In order to support the funding of NGEU, new sources of revenue or new own resources for the EU budget were also proposed in December 2021: shares in the revenues from the Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM), the taxation of corporate profits (proposed BEFIT) and revenues based on Pillar 1 of the OECD/G20 agreement. However, these proposals are still pending. The ECB's interest rate hikes in the wake of inflation are now having a significant impact on financing costs and interest costs, which have been significantly more as originally estimated. The first repayments are due as early as 2028, which will be a major challenge, especially in view of the current upheavals.

The European budget: a shift in priorities
The Commission communication particularly emphasises the high need for investment in the areas of defence and competitiveness. As part of the new emphasis on security and competition policy, a competitiveness fund is to be set up, which is to create investment capacities to support strategic and critical technologies. Here, AK demands that subsidies to companies will be subject to compliance with minimum standards as regards to remuneration, working hours and health. In addition, the new EU budget will include a plan for each country outlining important reforms and investments. The Commission plans to revise the distribution of funds for regional and social programmes under the cohesion policy, which accounts for one third of total EU expenditure, and to improve their implementation in cooperation with local authorities. A more targeted approach is also to be taken regards foreign policy by revising external funding. It is to be welcomed that the budget is to provide additional measures to protect the rule of law. A new steering mechanism that links the EU budget to EU policy priorities is also being considered. Specifically, the linking of the EU budget to the planned Competitiveness Coordination Tool, together with a streamlined EU semester is being considered.

Proposals for financing the next EU budget
In its communication, the Commission is clearly in favour of new own resources: ‘Europe needs to square the circle: there cannot be an EU budget fit for our ambitions and notably ensuring the reimbursement of NextGenerationEU, and, at the same time, stable national financial contributions without introducing new own resources. Choices need to be made.’The Commission also explicitly calls on the Council to resume work on the issue of new own resources as proposed in December 2021 “as a matter of urgency”.

Who carries the investment risk?
The InvestEU programme, which came into force in 2021, is also to be reformed. The aim is to promote public investment in the EU and create jobs by combining a large number of previous instruments. The EU will provide a guarantee for part of the financial risk in order to create a safety net for more risky investments. In the MFF 2021-2027, up to €26 billion is allocated for this purpose. This is now to be increased by €2.5 billion, with the hope of attracting €50  billion in investment. This was proposed by the Commission on February 26 in the Investment Omnibus Package. Contrary to the Commission´s announcement, the proposed changes clearly go beyond the simplification of existing rules.

What is next on the agenda?
It remains to be seen whether Council and Parliament will agree to the EU Commission's comprehensive proposals for the next MFF. Not least the planned steering mechanism is rightly controversial. Meanwhile, the demand for more own resources will meet with resistance from many member states. However, the Commission emphasises: ‘The status quo is not an option’. In addition, the 12-weeks public consultation for the next EU budget is now starting. AK is also taking part and AK EUROPA will continue to report on it.

Further information:
EU Commission: Commission simplifies rules on sustainability and EU investments
EU budget planning for 2021–2027 with significant gaps: EU budget characterised by crises (EU budget in times of crises) (German only)
EU Parliament: Interim report on the proposal for a mid-term revision of the Multiannual Financial Framework 2021-2027
AK EUROPA: The EU budget powering the recovery plan for Europe
Die Implementierung der Goldenen Regel für öffentliche Investitionen in Europa | Chamber of Labour (Implementing the Golden Rule for public investment in Europe) (German only)