The European Union budget is notorious for being highly contested and seeming to be stuck in the past. When the European Commission put forward its initial proposals for the next (2028-34) multi-annual financial framework on 16 July 2025, it argued that, if adopted, it would ‘equip Europe with a long-term investment budget matching its ambitions to be an independent, prosperous, secure, and thriving society and economy over the coming decade’.
This is quite a claim, but does it bear scrutiny, especially as the amount of money to be available for EU programmes is limited? The proposed headline total of 1.26% of EU gross domestic product is a little higher than in the current MFF, but after allowing for the repayment of the Covid-19 Next Generation EU loans, the amount to fund EU spending is barely 1.1% of the Union’s GDP.
Certainly, the next MFF would look different: the proposal is to integrate the various traditional headings of expenditure into four sets of funds. Two of these, ‘global Europe’ and ‘administration’ are essentially the same as in previous MFFs, but with the former allocated a moderately increased budget, mainly for pre-accession support for candidate countries and development assistance.
A third, ‘national and regional partnership plans’ brings together two of the largest components of past MFFs – cohesion policy (aimed at reducing economic, social and territorial disparities) and direct payments (nearly all to farmers) – and several other budget lines. It will reinforce a recent trend, already visible in how they allocated NGEU projects, towards providing member states with greater discretion in how EU funding is used.
Although welcome in some quarters, it has also elicited three main concerns: regions worry about having their interests over-ridden by the national level; there is a risk that ambitions to focus the MFF more on EU level public goods will be undermined if member states concentrate on national priorities; and the European Parliament fears a loss of influence relative to the Commission.
As a response to the challenges set out in the Draghi report, the fourth, entitled the ‘competitiveness fund’, is more novel and has the potential to be transformative. The Commission proposes an allocation of €409bn over the seven years of the MFF and makes clear that the underlying objective is both strategic and designed to bolster the EU’s position in the new industries and technologies in which it lags behind global competitors.
However, the fund has to cover a wide array of policies, from helping to counter climate change to investing in space research and contributing to new defence technologies. Its largest component is the EU’s Horizon research budget, allocated 9.6% of total planned spending (after deducting the NGEU repayments), up from a little under 7.5% in the previous MFF. This would be a sizeable shift of priorities, if the plans are approved.
This is a big ‘if’ because in the negotiation of previous MFFs, similarly ambitious proposals have been salami-sliced as member states dug in their heels to protect other spending. For the 2021-27 MFF, the amounts agreed at a marathon European Council in July 2020 saw cuts to the Horizon budget to lessen cuts in direct payments and cohesion policy. When, at a later stage, the European Parliament had the opportunity to react, some, but not all, of the Horizon budget was restored.
An additional likely source of friction will be the shift towards performance-based budgeting which is prominent in the Commission proposal. The principle behind this approach – ‘financing not linked to costs’ – is that beneficiaries need to demonstrate that they are achieving tangible results from the EU money they spend, not just fulfilling obligations about the probity and efficiency of their disbursements.
It is an appealing concept, but one neither easy to implement in practice nor to explain to recipients of EU funding. Evidence from a study suggests that the use of milestones and targets in the Recovery and Resilience Facility (the biggest part of NGEU) and similar approaches in cohesion policy during the current MFF have fallen short of expectations.
The negotiations are bound to be lengthy and will, to some extent, be steered by the successive holders of the presidency of the Council, currently Denmark, with three smaller member states (Cyprus, Ireland and Lithuania) to follow.
The Danish presidency’s stated priorities include aiming ‘to deliver a first draft negotiating box to guide further negotiations’ – this terminology refers to the process used to highlight the points of contention in each expenditure area. The document reiterates in relation to each of the main areas allocated EU funding that it is ready to start negotiations. Rumblings heard in Brussels suggest some member states consider the Danish presidency to be in too great a hurry.
Two of the larger groups in the European Parliament (the centre-right European People’s Party and the centre-left Socialists and Democrats) have contested the proposed NRPPs and have written formally to Ursula von der Leyen, to demand that the Commission withdraw its proposals. The letter was also signed by two other political groups: the liberal Renew and the Greens.
It was triggered in part by dismay about cuts in support for farmers and for regional development, but also cites a ‘democratic deficit’ arising from a process that sidelines the Parliament. The four groups signing it are usually thought of as the most pro-European. For them to object so early in the process of negotiating the next MFF could lead to an acute inter-institutional crisis in the Union.
Some member states concur, although others, seeing an opportunity for reining in the agriculture budget, are supportive. However, in June 2025, no fewer than 20 ministers of agriculture pre-emptively signed a declaration insisting that EU funding for the Common Agricultural Policy remain a separate budget line, thereby partly allaying the concern that farm subsidies would be curbed in favour of other priorities. Unsurprisingly, Germany, the Nordics and the Netherlands did not sign, although one of the so-called ‘frugal 4’ – Austria – did.
Whether the Parliament has the right (as one half of the EU’s budgetary authority) to reject the budget proposals at this stage is one of many sub-plots around the MFF, but members of European Parliament are clearly sensitive to a potential shift in the balance of power away from the EP in favour of the Commission (as NRPPs mean the Commission works directly with member states).
As negotiations ramp up over the coming year, expect tensions to rise, whether among member states, EU institutions or different sectoral interests. Doubts are also bound to surface about whether the quest for a budget matching the Union’s ambitions can survive the inevitable political horse-trading. It will be a slog.
Iain Begg is a Professorial Research Fellow at the London School of Economics’ European Institute.
This is an updated version of an article originally published by UK in a Changing Europe.
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