An overview of the Commission’s EU budget proposal and the challenges ahead

The Commission lays out the plans  before the budget battle

Serafín Pazos-Vidal analyses the new EU budget proposal for 2028-2034 presented by the Von der Leyen Commission. Although it is billed as a “radical restructuring,” the author warns that it is actually “doing much more with the same,” which foreshadows a tough political battle in Europe. 

As expected, just before the European bubble holidays, when Brussels empties out on the day Belgian national holiday, after marathon days and no small number of internal battles and external mobilizations, on July 16, the European Commission presented (first by Commissioner Serafin in the European Parliament—with farmers demonstrating at the entrance—and almost simultaneously by President von der Leyen, visibly exhausted, in the Berlaymont press room) its proposal for European finances for 2028-2034.

“In Brussels, everything is relative, and the budget in particular.”

We must begin by warning that in Brussels everything is relative, and the EU budget in particular. The budget is annual, just like in the Member States, but given the scale of the EU’s interests and challenges, a Multiannual Financial Framework is agreed upon with maximum limits for a number of years. This process in the multi-level and consensus-building system that is the EU requires at least two years of negotiation , with at least another year to launch the programs, which is why the negotiation is being launched as early as mid-2025.

And yet, most likely, given prior experience, the new funds will not begin to be spent until 2029. Especially if we take into account that almost half of the extraordinary funds mobilized in the wake of COVID-19—the Recovery Plan, NextGenerationEU, and its Recovery and Resilience Facility—which almost doubled the EU’s finances overnight, remain unspent, despite having been raised through debt on financial markets and due to be implemented before the end of 2026 . Not to mention the 2021-2027 ordinary budget, which in the case of Regional or Cohesion Policy (a third of the current budget), only 7% has been fully implemented (with 57% still to be spent).

Furthermore, when calculating the accounts, it can be calculated based on 2018 prices (the year in which the current 2021-2027 budget was presented) at updated prices. Also, since these are multiannual funds, they can be calculated based on commitment appropriations or expenditure appropriations. These details are not minor, because in the coming days, one or the other value will be used, sometimes with interest , in the political fight that has only just begun .

Let’s at least state the obvious. President von der Leyen announced before her second investiture a year ago that she wanted a radical restructuring of the budget , and on paper she has achieved this.

From fifty EU funding instruments and funds at present, the figure will drop to around twelve. The structure of the new budget would pivot towards the European Competitiveness Fund (ECF, a €362 billion macro-fund that integrates all the programs directly managed by the Commission), associated with the FP10, successor to the current European research fund Horizon Europe. The latter remains in place and would increase from 89 billion to 154 billion euros – at least on paper, due to pressure from the scientific and business lobby – while the FP10 remaining separate from the aforementioned ECF (a kind of slush fund, as Parliament openly believes, designed to to reduce the authority of the European Parliament in budgetary matters).

On the other hand, funds shared with Member States (and, where applicable, regional or local governments) are grouped into National and Regional Partnership Plans  ( NRPPs). This means going from 540 regional, rural, social, or agricultural development programmes at present to just 27 NRPPs, one per Member State, plus the INTERREG cross-border cooperation program. However, looking at the structure (still to be detailed in dozens of proposed regulations), the NRRP is the ceiling that can accommodate many of the current funds, which are not disappearing.

Driving prosperity, sustainability and security tailored investments and reforms through national and regional partnership plans

 

 

 

Source: European Commission

In itself, this is not new, as attempts have been made in the past, with varying degrees of success, to have ministries and departments collaborate vertically and horizontally on shared problems, avoiding duplication. This new attempt is even more ambitious, as it seeks to merge the Common Agricultural Policy with the Cohesion Policy (and the vested interests surrounding each of these funds). Faced with strong opposition from the agricultural sector, as well as from EU institutions and governments, the Commission has announced that within this structure, some €300 billion is guaranteed for agricultural subsidies. The other pillar of the current CAP, rural development, is once again being integrated with the Cohesion Policy. The total of the 27 NRRPs, clearly inspired by the Recovery Plan, would, in the best-case scenario, amount to €1 trillion managed by the Member States.

Furthermore, all external action, enlargement, and neighbourhood instruments are being integrated into a single €215 million instrument. The Commission’s administrative expenses would be borne at 6% as they are now.

Commission proposal for the EU Multiannual Financial Framework 2028-2034

Budget distribution by category (millions of euros)

	Category	2028	2029	2030	2031	2032	2033	2034	Total 2028-2034
	Economic, social and territorial cohesion, agriculture, rural and maritime prosperity and security	163,088	160,860	158,053	155,565	152,274	140,140	132,240	1,062,220
	National and Regional Partnership Plans. Of which:	135 571	133 134	130 131	127 411	123879	111 535	103 415	865 076
	Common Agricultural Policy (CAP) and fisheries – income support	42 272	42 268	42 265	42 261	42 257	42 204	42 172	295 699
	Migration and border management	5 847	5 633	5 407	5 170	4 922	3 945	3 291	34 215
	Economic, territorial and social cohesion	75 768	73 334	70,769	68,074	65 240	53,715	46 065	452 965
	Social Climate Fund	10,500	10,300	10 100	9,800	9,400	0	0	50 100
	Interreg	0	1 753	1 782	1 810	1 840	1 524	1 555	10 264
	EU Facility – Union Actions	10 512	8 951	8 690	8 852	8 353	8 853	9 012	63 223
	Agricultural Unit/Reserve Safety Network	900	900	900	900	901	900	900	6 301
	EU Solidarity Fund	2 706	2 760	2 815	2 872	2 929	2 988	3,047	20 117
	Themed Facilities HOME	3 401	3 469	3 539	3 609	3 682	3 755	3 830	25 285
	Others	3 505	1 822	1 436	1 471	841	1 210	1 235	11,520
	EU Facility – Margin	1 172	1 195	1 219	1 243	1 268	1 294	1 319	8 710
	Support for the Turkish Cypriot Community	58	63	61	62	64	64	66	438
	Decentralized agencies	2 677	2 866	3,048	3 261	3 483	3 676	3 877	22,888
	Frontex	1 309	1 421	1 561	1 694	1 827	1963	2 113	11,888
	Europol	320	361	395	430	464	498	531	2 999
	NGEU Refund	24,000	24,000	24,000	24,000	24,000	24,000	24,000	168,000
	Margin	781	797	814	831	846	864	881	5 814
	Competitiveness, prosperity and security	66,875	81,300	83,176	87,312	88,611	90,706	91,614	589,594
	European Competitiveness Fund	42 703	56,663	58,374	70,978	72 286	74 158	75 346	450 508
	European Competitiveness Fund (without Innovation Fund)	42,653	56 613	58 324	61,925	62 343	63,498	63 945	409 301
	Horizon Europe	16 243	25 183	26 265	26,891	26 607	27,048	26,765	175 002
	Clean Transition and Industrial Decarbonization	3 004	3 566	3 636	12,971	13,940	14,737	15,560	67 416
	MFP component	2 954	3 516	3 586	3 919	3 997	4,077	4 159	26 210
	Innovation Fund	50	50	50	9,052	9 943	10,660	11 401	41 206
	Resilience and Security, Defense and Space Industry	14,733	17,534	17,884	19,544	19,935	20 334	20,741	130 704
	Digital Leadership	6 176	7 350	7 497	8 194	8 358	8 525	8,695	54,793
	Health, Biotechnology, Agriculture and Bioeconomy	2 547	3 031	3,092	3 378	3 446	3 515	3 585	22,593
	InvestEU Instrument	1 143	1 643	1 642	1 643	1 643	1 643	1 643	11,000
	Erasmus+	5 261	5 440	5 625	5 819	6 019	6 224	6 439	40 827
	Connecting Europe Facility	10 906	11,290	11 342	11,569	11,982	12,045	12 294	81 428
	MCE – Transportation	7 124	7 354	7 246	7 308	7 550	7 434	7 499	51 515
	Military mobility	2 842	2 899	2 609	2 483	2 533	2 214	2 071	17,651
	MCE – Energy	3 782	3 936	4,096	4 261	4 432	4 610	4 795	29 912
	Union Civil Protection Mechanism +	1 316	1 437	1 477	1 535	1 569	1 644	1 697	10,675
	AgoraEU	1 099	1 139	1 180	1 223	1 268	1 313	1 360	8 582
	Creative Europe – Culture	230	238	247	256	265	275	285	1 796
	Media+	409	424	439	455	472	489	506	3 194
	Democracy, Citizens, Equality, Rights and Values	460	477	494	512	531	550	569	3 593
	Others	5 811	5 227	4 981	4 859	5,091	5 886	5 680	37,532
	Single Market Programme	833	916	860	885	904	915	925	6 238
	Euratom Research and Training Programme	1 599	1 434	1 287	1 143	1 219	1 653	1 459	9 794
	Contribution to ITER	946	848	762	676	721	978	863	5 794
	Nuclear decommissioning (Lithuania)	91	124	87	84	94	94	104	678
	Nuclear safety cooperation and decommissioning	135	103	121	128	144	158	177	966
	Justice	101	105	109	114	118	123	128	798
	Decentralized agencies	1 271	1 319	1 354	1 397	1 441	1 486	1 530	9 798
	Others (Other actions, prerogatives)	699	273	277	302	306	320	316	2 493
	Margin	908	1 104	1 129	1 185	1 203	1 231	1 239	7,999
	Global Europe	24,555	25,127	25,578	30,603	35,761	36,442	37,137	215,203
	Global Europe Instrument	22,787	23 243	23,708	28,448	33,369	34,037	34,717	200 309
	Enlargement, Eastern Neighbourhood and the rest of Europe	4 843	4 940	5,039	6 046	7,093	7 235	7 380	42,576
	Sub-Saharan Africa	6 795	6 931	7 069	8 482	9,950	10 149	10 352	59,728
	Asia and the Pacific	1 900	1 938	1976	2 372	2 782	2 838	2 895	16,701
	Americas and the Caribbean	1,024	1,045	1,065	1 278	1 499	1 529	1 560	9,000
	Middle East, North Africa and the Gulf	4 835	4 932	5,030	6 036	7,080	7 222	7 367	42 502
	Global Affairs	1 706	1 741	1 775	2 131	2 498	2 548	2 599	14,998
	Margin	1 684	1 718	1 752	2 103	2 467	2 517	2 567	14,808
	Common Foreign and Security Policy (CFSP)	443	454	467	483	494	507	521	3 369
	Overseas Countries and Territories (including Greenland)	94	144	147	199	153	156	106	999
	Other (Other actions, prerogatives)	310	344	297	325	404	376	400	2 456
	SFPA and ORGP	192	202	148	164	199	204	222	1 331
	Other actions	12	32	42	52	95	56	60	349
	Prerogatives	106	109	107	109	110	116	118	775
	Margin	920	942	958	1 147	1 340	1 366	1 392	8,065
	Administration	14,945	15,584	16,281	16,870	17,466	18,062	18,669	117,877
	TOTAL	269,463	282,871	283,088	290,350	294,112	285,350	279,660	1,984,894
	% GDP (EU-27)	1.31%	1.33%	1.29%	1.29%	1.27%	1.19%	1.13%	1.26%
	Flexibility Instrument	2 122	2 165	2 208	2 252	2 297	2 343	2 390	15,777
	Ukraine	14 286	14 286	14 286	14 286	14 286	14 286	14 286	100 002
	European Peace Fund	4 357	4 357	4 357	4 357	4 357	4 357	4 357	30,499

The categories listed after the total Come under the headings “Over abd above the ceilings” or “Outside MFF”. 

Table based on chart by Agenda Publica created with Datawrapper.  Source: European Commission

Therefore, we could say that the order of magnitude of the future budget—also seven years, like the current one—has a similar order of magnitude, around one trillion euros if we compare this proposal for 2028-2034 with the ordinary budget for 2021-2027 plus the 800 billion euros of the Recovery Plan.

And that’s without considering a still vaguely detailed series of emergency instruments outside the EU budget, which could potentially mobilize several hundred billion euros in additional funds and with which Von der Leyen openly seeks to avoid the renegotiation of current funds to address the latest of the polycrises that have shaken the EU.

However, it involves doing much more with the same amount (such as, for example, €115 billion, partly for defense, and unspecified amounts for housing ).

Added to this is the need to begin repaying the Recovery Plan loan to the financial markets, amounting to around €24 billion annually starting in 2028 and for two decades.

“It is about doing much more with the same thing.”

Since the Member States (by far the largest contributors to the EU’s ordinary budget) are unwilling to put more funds on the table, the ever-postponed issue of “new own resources” has to be reopened. In other words, European taxes worth around €44 billion (i.e., 18% of the EU’s annual needs): the well-known Emissions Trading System (ETS1), the Carbon Border Adjustment Mechanism (CBAM), uncollected e-waste, a percentage of each Member State’s excise duty on tobacco, and a fixed annual quota of around €6 billion for large multinationals operating in Europe. Many Member States are against it, and if such an agreement is not reached, the final budget will most likely return to the traditional size of the EU’s ordinary budget , which is just over €180 billion annually for the entire EU.

The other front is domestic, as the Commission itself admits that traditional policies such as Cohesion and the CAP will go from accounting for two-thirds of the total, as has been the case for decades, to 43%.

Roughly expressed by order of magnitude, CAP agricultural subsidies, even without accounting for inflation from 2021, amount to €291 billion in the current budget and would apparently fall to only €261 billion at 2025 prices (although the Commission prefers to use current prices, which assume €295 billion). That is, if we take into account that fisheries funds are now also included, this would represent a freeze or a reduction.  Regarding Cohesion or regional policy, also including rural development, which is currently considered part of the CAP, we would go from around €466 billion currently to at most €412 billion in the new budget.

Although, to conclude with a governance perspective, the main challenge is political and (co)governance. The new national plans in the new budget represent a decisive step in centralizing decisions regarding European funds (and, therefore, many Member States discretionary investments) in the ministries, namely the Ministry of Finance which is the one that separately negotiates the MFF.

Likewise, the many ministries that for the first time tasted the benefits of European funds thanks to the Recovery Plan will want to continue doing so, relegating the autonomous regions to executive bodies for initiatives designed from the Central government, even within their own sphere of competence.  We have seen this already in federal states such as Germany with the present CAP Strategic Plans and is particularly concerning for Members States with a weak culture of multilevel governance such as Spain.

While the partnership principle is nominally in place (as has been extended to a variety social actors)  following the calls from the European Community of Practice on Partnership this remains pro-forma as most decisions will remain even more decisively in hands of national ministries than at present.

Similarly, with respect to LEADER, while the various calls among the Local Develoment community have bene successful, it nominally remains under the successor of the present CAP Pillar I (i.e. DG AGRI), the fact is that most of what is now Pillar II, is primarily at the discretion of Member States to programme and earmark funds within their NRPPs for non-farm expenditure. Let’ s recall that according to the Commission at present not 5% but 8% of CAP is spent beyond agriculture. Pending the legislative work of MEPs and Council starting in September there is at present no guarantee of an earmark for rural (or indeed urban development).

Last but not least, the current period saw a minor victory in the first-ever definition of depopulation as demographic decline across Europe and not just as low density to benefit sparsely populated areas in Nordic countries. Unsurprisingly, the hard-fought ERDF definition to target funds to those areas was also erased in the new Regulations, despite the fact that in the 9^th Cohesion Report the Commission came up with a more suitable definition to a problem affecting large swathes of the European territory.

Serafín Pazos-Vidal

An earlier version was published in Spanish in Agenda Publica.