Billion Euro Brussels

What to Expect from the Next Long-Term EU-Budget

When EU Budget Commissioner Piotr Serafin presents the draft for the EU's next Multiannual Financial Framework (MFF) from 2028 on Wednesday, he will talk about a ‘trilemma’. This is how the Commission describes the seemingly impossible mathematical task facing the EU budget: firstly, the Union has too little own resources; secondly, member states are unwilling to increase their contributions; and thirdly, there is growing cost pressure due to geopolitical, climatic and economic crises.

While rising social inequality in Europe is at best a marginal issue, wars and conflicts are omnipresent in Brussels. Conservatives, Social Democrats and Greens agree that vast sums are needed to turn the EU into a defence union. When the MFF is debated in the coming months, we can expect to see reallocations in favour of rearmament.

According to the Commission, defence spending is to be linked to a competitiveness fund. This fund is also intended to benefit other strategic sectors. In view of global overcapacity, high energy prices and weak productivity growth, key sectors such as the automotive and chemical industries and steel and aluminium production are currently under pressure. The trade dispute with the US is making matters worse. On Monday, the European Trade Union Confederation warned that up to 700,000 jobs are at risk.

Grim Backdrop — Slim Budget

This is the grim backdrop against which the EU's new MFF is being discussed. The budget is not lavish: at €289.7 billion per year, the last Framework amounted to just under 60 per cent of the current German federal budget – for the entire Union, mind you. The purse is additionally burdened by the repayment of loans from the Corona Recovery Fund and interest payments. This amounts to up to 30 billion euros from 2027 onwards.

Brussels is responding to the chronic lack of money with reform efforts. For example, so-called own resources are to be increased through revenue from the emissions trading system (ETS). This is expected to generate an additional 19 billion euros per year.

The CO2 border adjustment mechanism (CBAM) is expected to bring an additional 1.5 billion euros per year into the coffers. In addition, a levy on international companies with a turnover of more than 50 million euros is on the table. A new edition of joint debt, such as the Corona Recovery Fund, as demanded by the Social Democrats, is considered out of the question.

Simplification or Nationalisation?

Probably the biggest sticking point is the plan to comprehensively simplify the budget. The Commission wants to merge multi-billion-euro funds such as the Cohesion Fund, the European Regional Development Fund (ERDF) and the European Social Fund (ESF+) into national plans. According to the Commission, this will enable a more efficient response to crises. The funds would then flow directly to the governments of the member states via general funding guidelines.

This has been met with sharp criticism from parliamentarians, who see it as a threat to parliamentary control. On Tuesday, the rapporteur responsible, Siegfried Mureşan (EPP), emphasised at a press conference: ‘We categorically reject any attempt to nationalise the funds,’ said von der Leyen's party colleague, who was unusually harsh in his criticism of the plans. While the plan to modernise the MFF is welcome, ‘the pots must remain separate,’ the conservative politician emphasised.

As a concession, the Commission is now talking not only of ‘national’ but also of ‘regional partnerships’. And before last week's vote of no confidence, the Social Democrats say they negotiated a promise from the Commission President that the Social Fund would be retained in its entirety. ‘The fund is crucial for education and health in the European Union,’ emphasised Parliament rapporteur Carla Tavares (S&D) on Tuesday.

Warnings against Watering Down EU-Priorities

Conservatives are unhappy that the largest item in the EU budget, the Common Agricultural Policy, including fisheries and environmental protection, is to be transferred to national plans. ‘Parliament will not accept the watering down of traditional EU priorities,’ Mureşan emphasised.

However, concerns about cuts in the EPP's key area seem unfounded, especially given the powerful agricultural lobby and last year's farmers' protests. It is more likely that the Commission will relax climate and environmental protection standards in agriculture as part of its omnipresent bureaucracy reduction measures, according to parliamentary circles.

The Greens are also concerned that national governments could cut back on regional funding and replace it with EU funds. ‘Instead of taking money away from the regions and local civil society, we should make it easier for stakeholders to access funds for European objectives,’ said Green MEP Rasmus Andresen in response to my questions. ‘We want to spend more money on combating climate change and inequality,’ he emphasised.

The Left Party in the European Parliament takes a similar view. ‘We need an MFF with more social progress and less rearmament,’ criticised MEP and party rapporteur João Oliveira. Instead, he calls for a significant increase in the European Social Fund and a child guarantee of 20 billion euros to combat child poverty.

But these demands are not up for debate. They would require higher contributions from member states or joint borrowing – neither of which is politically feasible at present. The national plans do not provide any additional funds, so Serafin's trilemma remains unresolved. Experienced MEPs doubt that the reforms will make the allocation of EU funds more efficient. They suspect that the Commission's main aim is to strengthen its power over regions and Parliament.

This article was first published in German in the Newspaper nd.Der Tag (Si apre in una nuova finestra)