An Increasingly Geopolitical Budget

Last July, the European Commission began one of its most sensitive negotiations: the Multiannual Financial Framework (MFF) for 2028-2034. The MFF translates the EU's political priorities into numbers, allocating resources across the various spending chapters. In practice, for each EU program, the MFF sets the spending ceiling for a seven-year period, as well as the resources that will be held as reserves. Given the Union's growing level of debt, these reserves are now crucial to ensuring the solvency of common debt. The unanimity requirement grants each member state veto power, which, in practice, has often hindered decisive reforms, contributing to a high level of conflict between countries over the European budget.

A Budget Called Upon to Respond to New Strategic Priorities

Due to the constantly evolving context, the European Commission's July proposal already appears partially obsolete. Geopolitical tensions, war in Ukraine and the Middle East and the redefinition of global and NATO equilibria are further accelerating the transformation of the EU budget. Faced with these challenges and the limited fiscal space available to Member States, the European budget is now called upon to respond not only to redistributive needs, but also to strategic objectives such as security, competitiveness, and the green and digital transitions. From this perspective, the Draghi report highlighted the structural criticalities of the budget as it has been conceived to date, including the fragmentation of programs, duplication and the complexity of access rules, underscoring the need for a more targeted and efficient use of resources.

The National Recovery Plan as a Method for Disbursing Funds

The Commission's proposal replicates the model tested during the pandemic with the National Recovery and Resilience Plan (NRRP). Specifically, the new MFF provides that cohesion funds and agricultural policy funds — the largest portion of budget resources — will be disbursed based on the achievement of objectives and targets defined in National and Regional Partnership Plans, negotiated between Member States and the Commission. This approach marks a shift from a cost-reimbursement approach to governance focused on the progress of plans and the implementation of reforms. Furthermore, Member States that deem it necessary will be able to use a portion of cohesion funds to strengthen investments in defense.

Common Debt and External Action at the Heart of the New Framework

At the same time, the use of common debt has been expanded and made more structural through new instruments, Catalyst Europe and the Crisis Response Mechanism, which would allow the EU to raise resources on the markets and redistribute them in the form of loans to requesting states. This context also includes the new Global Europe instrument, which consolidates a series of funds dedicated to the Union's external action. It is intended to play a central role in the international dimension of the budget and is endowed with more significant resources than in the past, reflecting the EU’s growing geopolitical ambition.

More Flexibility, But Also New Balance and Control Issues

The implications of these innovations are multiple. On the one hand, the EU model based on national plans would strengthen the role of the Commission and national governments in defining and implementing — hopefully — more integrated spending strategies. However, such a framework could reduce the weight of local and regional authorities, traditionally central to the multilevel governance of European funds. On the other hand, the greater flexibility could allow for a more rapid reallocation of resources to sectors requiring rapid intervention, including defense and energy. At the same time, this new framework, which is independent of actual costs incurred (since the disbursement of resources is contingent on the achievement of objectives distinct from the expenditure itself), raises new questions in terms of transparency and control, requiring an adaptation of the supervisory tools of the European Court of Auditors and the European Parliament.

The negotiations are still ongoing, and their outcome is uncertain. What is clear, however, is the policymakers' intent to make the EU budget a strategic lever for addressing crises and the race for global competition. The challenge will be to strike a balance between new geopolitical priorities, spending efficiency and safeguarding the solidarity dimension that has historically characterized the European project.