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02/07/25

Between Crises and Ambitions: Rethinking the EU budget

Newsletter July-August 2025

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On 16th July, the European Commission is expected to present its proposal for the next Multiannual Financial Framework (MFF), covering the period 2028–2034. Adopted every seven-years, this this framework sets the European Union’s long-term spending and revenue priorities. The current MFF, adopted in 2020 for the 2021–2027 period, was complemented by the Next Generation EU recovery plan and revised in 2024 to include, among other elements, the Ukraine Facility—nearly doubling the initially planned budget.

Rarely in recent history has the EU faced such a succession of overlapping crises: the COVID-19 pandemic in 2020, the war in Ukraine since 2022 and a cascade of systemic shocks _ energy, agricultural, geopolitical. The joint €750 billion loan issued in 2020 allowed the EU to respond with unprecedented speed and scale.

The international context in which this new MFF will be negotiated is fraught with uncertainty. Climate change is accelerating, global economic and technological competition is intensifying, and demographic ageing is reshaping European societies. These major shifts have been extensively analysed in the recent reports of Enrico Letta and Mario Draghi. And yet, the EU’s common budget remains capped at just 1.02% of its GDP— far below what is needed to meet these historic challenges. The equation that must be solved for the next MFF is therefore extraordinarily difficult.

On the revenue side, Member States remain reluctant to increase their national contributions. Few new own resources are expected, and the possibility of a new joint loan remains uncertain. Meanwhile, starting in 2028, the EU will need to begin repaying the COVID-era loan—requiring €25–30 billion annually, or nearly 20% of the today’s budget. This will force intense trade-offs on the expenditure side, with difficult decisions and far-reaching consequences.

What would young Europeans think if the Erasmus+ programme—the Union’s most popular initiative—were scaled back? How would citizens react if climate ambitions were watered down, even as they endure these days the effects of global warming during yet another summer heatwave? What message would be sent to rural and peripheral regions, already wary of the European project, if territorial development funds were reduced? At the same time, how can the EU invest more in security and defence, innovation, and competitiveness without reallocating resources?

In the current financial cycle, over 90% of the €2 trillion allocated under the 2021–2027 MFF and Next Generation EU has been pre-assigned to specific programmes, objectives, or national envelopes. This leaves very limited room for flexibility or for responding to new challenges —a situation unlikely to improve. Moreover, as a large share of these funds is distributed via national envelopes, they will serve as a baseline for future negotiations. With fewer resources available, the risk is a further nationalisation of the EU budget, leaving even less funding for cross-border and European-scale investments.

In this context, who will finance the electricity interconnections essential for the energy transition, the Europeanisation of defence industries, or the expansion of the high-speed rail network? These projects create substantial added value for all Member States—not only by reducing costly fragmentation, which still persists, but also by enhancing the EU’s geopolitical clout. Europeans understand this very well and Eurobarometer after Eurobarometer confirms strong public support for addressing major  challenges at the European level. A lack of ambition would very likely further erode citizens’ trust in their leaders and fuel Euroscepticism.

The Commission’s proposal on 16th July will only mark the the beginning. Member States in the Council and Members of the European Parliament will negotiate for months before a final agreement is reached. Debates will be intense, and the path to consensus narrow. Despite the technical nature of the subject, it is essential that discussions remain transparent and accessible to citizens, to avoid polarisation and disillusionment. Clear priorities must be set – possibly with binding spending targets, as in the current MFF, where 30% of funds were earmarked for the green transition. Proposed projects must be concrete and visibly demonstrate the added value of EU funding.

The stakes are high, echoing the warning often voiced by Jacques Delors: “survival or decline”.

We will have to wait until 16 July. In the meantime, happy holidays to all.

Sylvie Matelly

Director of the Jacques Delors Institute