The EU’s Next Budget: A Shift Towards a Recovery Fund Model
As negotiations begin on the 2028–2034 Multiannual Financial Framework, Brussels proposes to replicate the performance-based architecture of the pandemic recovery plan. A commentary by Rosalba Famà
From July onwards, the European Commission has launched one of the most delicate negotiations of the next two years: the Multiannual Financial Framework (MFF) for 2028–2034.
The MFF is, in essence, a political programme expressed in numbers. It determines how the EU’s common budget is distributed across spending programmes and how much each member state receives.
Legally, it takes the form of a regulation adopted every seven years by the Council of the European Union acting unanimously, with the consent of the European Parliament.
Unanimity grants each member state veto power. Budgetary decisions have therefore often been used as leverage in negotiations on entirely unrelated political issues.
Despite repeated attempts at reform, it has proved almost impossible to introduce substantial structural changes compared with previous frameworks. The result has been a budget frequently described — borrowing from the title of the film — as “lost in stagnation”.
The common budget has recently come under renewed scrutiny, not least in the Draghi report on European competitiveness.
It criticised the proliferation of programmes, overlapping spending lines and excessive complexity in access rules. In response, the Commission’s current proposal seeks to simplify the architecture and could trigger significant public debate.
One of the most consequential changes concerns agricultural and cohesion policy.
Under the proposed MFF, these funds would be brought under a single umbrella and allocated on the basis of National Regional Partnership Plans, which member states would commit to implementing.
This represents a substantial reform. Its architecture mirrors the model of the Recovery and Resilience Facility introduced during the pandemic.
If adopted, a large share of EU resources would no longer be disbursed on the basis of eligible costs incurred, but upon the achievement of agreed objectives and milestones, which may include structural reforms set out in the plans.
In addition to grants, the Commission has proposed a new instrument — “Catalyst Europe” — which would enable the Union to issue bonds on capital markets and provide concessional loans to member states, again within the framework of these plans.
Several implications follow.
First, the introduction of national plans would create a privileged relationship between member states and the European Commission, the two actors responsible for negotiating and approving them.
Although official documents emphasise the continued role of territorial authorities and the partnership principle, decision-making related to EU funds is likely to become more centralised within national executives.
The impact may vary across member states, particularly those with federal systems or strong regional competences.
At the same time, increased flexibility in allocating resources could allow governments to channel funds towards more urgent priorities and potentially improve absorption rates.
Notably, member states would have the voluntary option to allocate part of these resources to defence investments.
Second, a performance-based disbursement system — independent of actual expenditure — could have significant implications for sound financial management and transparency of final beneficiaries.
The European Court of Auditors, responsible for overseeing EU finances, may need to rethink and modernise its auditing methodologies should this become the dominant spending model.
Finally, the Commission’s proposal, insofar as it includes additional lending instruments, suggests that recourse to common debt is becoming a more structural component of the EU’s financial architecture.
What was once framed as an exceptional response to the pandemic may gradually evolve into a permanent feature of the Union’s fiscal toolkit.
It is too early to predict the outcome of the negotiations. Yet a central question remains: do the proposed reforms genuinely address the need for greater simplicity and efficiency in the EU budget — or do they merely repackage existing complexities within a new institutional framework?
A previous version of this article was published by the Italian daily Il Sole 24 Ore
IEP@BU does not express opinions of its own. The opinions expressed in this publication are those of the authors. Any errors or omissions are the responsibility of the authors.
