Fabian Bohnenberger

On 16 July, the European Commission unveiled its detailed proposals for the next long-term EU budget. This post summarises key elements of the proposal.

The negotiations on the Multiannual Financial Framework (MFF) 2028–2034 are pivotal: they will determine what the EU funds, who benefits and under what conditions – shaping EU policy priorities for the next decade.

What is the MFF?

The MFF sets the annual spending ceilings for the EU and establishes some of the procedures for agreeing the detailed annual budgets between EU institutions. For the 2028–2034 period, the Commission proposes a budget of €1.76 trillion (in 2025 prices), equal to 1.26% of the EU’s gross national income (GNI).

While this figure appears significantly higher than the current MFF (€1.2 trillion), the proposed increase is modest when adjusted for inflation and new EU debt repayments (which total €149 billion) over the coming decade. In real terms, the budget would increase only slightly — to 1.15% of EU GNI, up by just 0.02 percentage points.

Key Changes in the New MFF Proposal

1. Streamlined Budget, More Flexibility

The Commission proposes to cut the number of programmes from 52 to 16, grouped under three main spending categories (“headings”). This streamlining is paired with increased flexibility, allowing the EU to better respond to crises and changing priorities.

Key innovations include:

• Faster redeployment of funds,
• Larger “cushions” of unprogrammed funding,
• New special instruments beyond agreed ceilings to manage emergencies.

2. Strategic Investment via the European Competitiveness Fund

At the heart of the proposal is a new European Competitiveness Fund (ECF), worth €362 billion, plus an estimated €35 billion in Emissions Trading System revenue. The ECF will consolidate at least 11 existing programmes and target investments in four priority sectors:

1. Clean transition and industrial decarbonisation
2. Health, biotech, and the bioeconomy
3. Digital leadership
4. Resilience, defence industry, and space

The Horizon Europe programme will be closely linked with the ECF and receives a substantially top-up to €155 billion. The InvestEU guarantee will also be rolled into the ECF.

The ECF will use a standardised funding toolkit (grants, loans, equity, procurement, etc.) and be governed by a dedicated ECF Regulation.

3. Simplification

The Commission aims to reduce administrative complexity and improve access to funding by:

• Consolidating information on funding opportunities through a single EU funding portal
• Streamlining eligibility criteria
• Accelerating adoption of “Financing Not Linked to Costs” (FNLC), which allows reimbursements based on results rather than receipts

Horizon Europe and the ECF will operate under integrated rules and work programmes, ensuring smoother support from early R&D through to deployment.

4. National and Regional Partnership Plans and Conditionality

A major shift is the creation of “National and Regional Partnership Plans”. Inspired by the Recovery and Resilience Facility, these consolidate funding instruments at Member State level and make disbursements conditional on performance against agreed targets.

While these plans aim to align funding more closely with EU priorities, they also risk centralising control in national governments, possibly diminishing regional influence. Fourteen existing programmes (including those for agriculture, cohesion and border management) will be folded into these plans. However, their combined budget is cut by 10–15% compared to the current MFF.

The Commission also proposes a stronger link between EU funds and the rule of law, allowing for a broader scope of payments to be withheld in the event of violations.

5. New Revenue Streams (“Own Resources”)

To finance the budget – including NGEU repayments beginning in 2028 – the Commission proposes five new “own resources,” expected to raise up to €58 billion annually:

1. Revenue from the EU Emissions Trading System (ETS)
2. Revenue from the Carbon Border Adjustment Mechanism (CBAM)
3. A national contribution based on non-collected e-waste
4. A tobacco excise duty
5. The Corporate Resource for Europe (CORE): an annual lump-sum contribution by large EU-based and foreign companies with EU establishments and turnover above €100 million. Contributions would start at €100,000 and be capped at €750,000 annually.

What Happens Next?

• September 2025: The Commission will publish a second batch of proposals with more details on specific programmes.
• Late 2027/early 2028: The final MFF will be agreed, following negotiations among Member States. The Danish Council Presidency has pledged to pursue an “ambitious and financially responsible course” over the coming months.
• The European Parliament must give its consent before the MFF can be adopted. The final deal requires unanimity from Member States.
• In parallel, individual programmes are established via the ordinary legislative procedure (with qualified majority vote and involvement of Parliament).
• The own resources decision must be adopted unanimously by Member States. The Parliament is consulted but has no veto. However, any agreement usually needs to be ratified by national parliaments.
• The Commission, the Parliament and the Council also need to agree a revised Inter-Institutional Agreement governing procedures to administer the next MFF, including a new governance mechanism to manage the increased budget flexibility.

Final Thoughts

The Commission’s proposal is a step toward a more strategic, flexible and modern EU budget – but the scale remains limited. Despite a €1.76 trillion headline figure, the actual increase is modest and does little to close the EU’s estimated €800 billion annual investment gap (roughly 4.5% of GNI). Not that this can be done by public investment alone.

Still, there is progress. Funds are reallocated from traditional areas like agriculture and cohesion to strategic priorities such as defence, digital leadership and competitiveness. The new European Competitiveness Fund, integrated with Horizon Europe, signals stronger support for key technologies and private capital mobilisation. However, its impact depends on political buy-in and implementation: the Regulatory Scrutiny Board already criticised the lack of analytical groundwork for the ECF, and the European Parliament opposes the ECF because it fears being sidelined in its implementation.

Looking at where Member States are at, the political road ahead is tough:

• Germany, Sweden and the Netherlands publicly opposed any budget increase.
• France backs the strategic shift but faces pressure from farmers over cuts to agricultural funds (CAP).
• Increased spending for defence and  military mobility may find consensus given governments’ recent NATO commitments, but new EU debt tools like Catalyst Europe are unlikely to survive in their current form.
• The centralisation of agriculture and cohesion funds has already triggered pushback from 14 Member States (Bulgaria, Czechia, Greece, Spain, Hungary, Italy, Latvia, Lithuania, Poland, Portugal, Romania, Slovenia and Slovakia).
• And with unanimity required, Hungary’s threat to veto the MFF unless frozen funds are released adds further complexity.

In short, the Commission is trying to modernise the EU budget in substance and structure, but it’s a tough fight both internally and externally. Whether the plan survives negotiations is now up to the Member States and the Parliament.