On 16 July, the European Commission presented a proposal for the future Multiannual Financial Framework (MFF). This marked the start of a debate that will shape EU policy for the next two years. Given the massive financing challenges and major political differences within the EU Parliament and between member states, negotiations are expected to be difficult. Once Parliament has given its approval, the Council will need to obtain the consent of all member states. This also applies to the proposals on new own resources, some of which will also need to be ratified by national parliaments.

 

According to the EU Commission, the ‘ambitious and dynamic’ EU budget will amount to nearly €2 trillion for the period 2028-2034, which represents 1.26% of the EU's gross national income. A ‘fundamental redesign’ is proposed where the number of programmes is reduced from roughly 52 to 16. Overall, the proposed new EU budget can be broken down into the following three headings, with administrative tasks amounting to €117 billion forming a fourth heading.

 

Heading 1: Economic, social and territorial cohesion, agriculture, fisheries and maritime, prosperity and security

 

Almost half of the MFF, or €1 billion, falls into this category and is to be implemented through National and Regional Partnership Plans (NRRP). This builds on the method used for the Recovery and Resilience Facility, where the disbursement of funds is linked to the successful completion of pre-defined milestones. The plans are to be designed and implemented jointly by the Commission, Member States, regions, local authorities and other stakeholders. The aim is for a single plan per member state that integrates all relevant support measures for workers, farmers, cities, rural areas, regions, and the national level. The Commission hopes that this will simplify implementation and increase transparency and control.

 

This will involve merging 14 existing funds, including the significant funds for agriculture (almost €300 billion) and cohesion (€453 billion). 14% of the funds covered by the NRRPs are to be used for a ‘social target’ in order to finance reforms and investments to ‘enhance skills, fight poverty, promote social inclusion, boost rural areas, among others’. In addition to fisheries, the plans will also reflect the areas of migration, border management and security. Funding for migration management, strengthening the EU's external borders and internal security is to be tripled to €74 billion. The repayment of NextGenerationEU (NGEU) also falls under this Heading.

 

Heading 2: Promoting competitiveness, prosperity and security

 

This heading totals just under €590 billion. The new European Competitiveness Fund, worth €409 billion, is central to this and aims to support the implementation of the Competitiveness Compass and strengthen the EU's autonomy in key sectors. The aim is to boost private and public investment in the following four policy areas: firstly, clean transition and industrial decarbonisation; secondly, digital leadership; thirdly, health, biotech, agriculture and the bioeconomy; and fourthly, resilience and security, defence industry and space (seeing a fivefold increase to €131 billion). The Competitiveness Fund is to be implemented in synergy with the equally increased research framework Horizon Europe, for which €175 billion is now earmarked.

 

This heading also includes the Connecting Europe Facility (CEF) that provides funding for the development of trans-European networks in the energy, transport and digital sectors. The budget for military mobility will be increased tenfold. The facility will thus support, among other, investments in cybersecurity, infrastructure and defence development overall, in addition to civilian investments in dual-use infrastructure. A slight increase is planned for the Erasmus+ programme to promote educational mobility, while a strong AgoraEU programme to promote democracy, cultural diversity and the rule of law is proposed.

 

Heading 3: Global Europe

 

This heading deals with building partnerships for a more influential Europe on the global stage. The EU's international activities are to be promoted with the help of the ‘Global Europe’ programme, for which funding will be increased to €200 billion, thereby tripling the previous amount. The aim is to enhance the effectiveness of EU activities in partner countries and to assist candidate countries in their preparation for accession. In addition to the Common Foreign and Security Policy (CFSP), a reserve capacity to address unforeseen crises is also planned. This part totals € 215 billion.

 

In addition, loans totalling €400 billion will be made available to member states through a crisis mechanism in the event of serious crises. For Ukraine, €100 billion will be mobilised outside the MFF from 2028 to 2034, while the European Peace Facility will be available for military support.

 

New own resources to finance the common budget

 

The Commission also wants to provide the EU with a ‘modern and diversified’ revenue stream. The following new own resources are proposed: firstly, the EU Emissions Trading System (ETS) projected to generate €9.6 billion annually in revenue; secondly, the Carbon Border Adjustment Mechanism (CBAM) with €1.4 billion revenue; thirdly, a levy on non-collected e-waste worth €15 billion revenue; fourthly, a tobacco excise duty worth €11.2 billion revenue; and fifthly, a Corporate Resource for Europe (CORE) amounting to an annual lump sum contribution from companies operating and selling in the EU with a net annual turnover of at least EUR 100 million, expected to raise about €6.8 billion annually revenue. Together with other elements, this is intended to create an own resources package estimated to generate revenue of approximately €58.5 billion per year (in 2025 prices).

 

Many unanswered questions, as well as criticism and rejection

 

Two trillion euros might sound like a lot. However, if the repayments due in 2028 for joint borrowing under NGEU are deducted, this represents only a small increase compared to the current MFF. However, with defence spending on the rise and the EU facing significant financial challenges, the EU's budgetary leeway is likely to be very limited. Last but not least, the Multiannual Financial Framework (MFF) faces uncertainty regarding the degree to which specific policy objectives will be advanced, for example in the area of climate policy. The Commission's proposals have often faced criticism and rejection from individual member states and various interest groups. The European Parliament is concerned that its ability to participate in EU decision-making processes could be weakened.

 

There is also considerable scepticism from a trade union perspective. In the lead-up to the presentation of the MFF, there was significant advocacy for the retention and strengthening of the European Social Fund Plus (ESF+).  However, the concern is that when social objectives are merged with other, broader objectives without clear, specific requirements, the social concerns may be overlooked or deprioritised. Positive aspects can be found in the proposal regarding new own resources, in particular the proposal for an EU-wide levy on large companies with an annual turnover of over €100 million.

 

 

Further information:

 

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

EU Commission: A dynamic EU Budget for the priorities of the future - The Multiannual Financial Framework 2028-2034 (Communication)

EU Commission: The 2028-2034 EU budget for a stronger Europe

EU Parliament: The EU long-term budget: All you need to know

EU Parliament: Budget proposal “simply not enough” to meet Europe's challenges, lead MEPs say