COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Mid-term revision of the Multiannual Financial Framework 2021 – 2027
Date: 2023-06-20
Institutions: European Commission, Secretariat-General
Subjects: budgetary procedure, commitment of expenditure, financial management, general budget (EU), multiannual financial framework

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 20.6.2023  COM(2023) 336 final  COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE EUROPEAN COUNCIL, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS  Mid-term revision of the                  Multiannual Financial Framework 2021 – 2027                             {SWD(2023) 336 final}  
 
 
1.  INTRODUCTION 

Since 2020, the Union has faced a series of unprecedented and unexpected challenges. The 
Multiannual Financial Framework 2021-2027 and NextGenerationEU  have provided a 
forceful response to the COVID-19 pandemic and its economic and social fallout. They 
have allowed the Union to recover quickly from the crisis, and  are making Europe greener, 
more  digital,  and  more  resilient,  while  addressing  inequalities  and  promoting  equal 
opportunities for all. However, just barely out of one of the deepest global economic crises in 
more than a century, the EU is facing another major crisis: with Russia’s brutal invasion of 
Ukraine, additional new and unexpected challenges have emerged, such as the energy crisis. 
Within its limits, the EU budget has powered a strong EU response, by drawing from its limited 
built-in flexibilities. Addressing these multiple challenges has pushed the resources of the EU 
budget to the point of exhaustion.  

Russia’s illegal war of aggression against Ukraine has brought war back to European soil 
with a devastating effect. The Union will keep supporting Ukraine for as long as it takes 
and  firmly  help  Ukraine  on  its  European  path.  The  war  has  had  first  and  foremost  a 
devastating effect on Ukraine and its people, but it also had major repercussion for Europe and 
for third countries, from people fleeing Ukraine to the energy and food crises. The war also 
required massive mobilisation of humanitarian assistance, which needs to be maintained, as 
well as support for agri-food production and civil protection in third countries. Ukraine will 
need sustainable support for short-term relief and recovery as well as long-term reconstruction.  

Migration has picked up after the pandemic, putting strains on Member States’ reception 
and  integration  capacities.  Addressing  the  root  causes  of  migration,  improving  border 
management, and maintaining effective migration partnerships with third countries – whether 
countries of origin and transit, or those hosting large numbers of refugees – will need additional 
financial support. In addition, regarding both the internal and external dimensions of migration, 
the General Approach agreed by the Council on 8 June 2023 on key elements of the New Pact 
on Migration and Asylum underlines the need to live up to the new responsibilities that the 
Union and the Member States will be taking on, and the costs these imply.  

Increasing geopolitical instability, crises and natural disasters – beyond the fallout of the 
war in Ukraine, and exacerbated by climate change – are having a dramatic impact on countries 
in  the  EU’s  neighbourhood  and  on  developing  countries  globally,  increasing  the  need  for 
emergency aid and humanitarian support.  

Significant  investment  is  needed  to  foster  long-term  competitiveness.  Accelerating 
Europe’s  twin  transition  provides  the  opportunity  for  the  Union  to  regain  leadership  in  key 
sectors  through  smart  public  and  private  investment  in  strategic  sectors,  while  preserving  a 
level playing field in the single market and thereby cohesion. This is also important against the 
background of current strategic dependencies, the ongoing demographic change and to ensure 
affordable access to energy. 

Since  2022,  the  EU  and  other  major  economies  have  witnessed  a  steep  increase  in 
inflation, the highest in over 40 years, exacerbated by the bottlenecks in the post-pandemic 
recovery phase and Russia’s invasion of Ukraine. As a result, central banks across the world 
have tightened monetary policy. Interest rates on international capital markets have increased 
at an unprecedented pace. The 10-year EU-Bonds interest rate increased from about zero at the 
time of the adoption of the Multiannual Financial Framework to more than 3% in less than a 
year. This volatility directly and very heavily affects the EU budget.  

The numerous additional tasks given to EU institutions since the start of the Multiannual 
Financial  Framework,  coupled  with  high  inflation,  are  putting  the  EU  administration 

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under strain. While making exceptional efforts to reprioritize and reduce administrative costs, 
the EU institutions now have difficulties to fulfil their legal obligations without a corresponding 
increase in staff.  

This Communication proposes a way forward to provide the most essential funding to be 
able to deliver on  the Union’s shared priorities and needs. It  by far  does not  address  or 
suggest correcting the full impact the various crises have had on the EU budget, but focusses 
on the most pressing areas, where an adjustment is unavoidable to ensure that the Union can 
deliver on its common needs and objectives in a completely new global environment.  

2.  THE BUDGET UNDER PRESSURE 

While the multiannual nature of the EU budget provides stability and predictability, it 
has limited capacity to respond to major unexpected events, and its flexibilities are being 
depleted. 90% of the EU budget and NextGenerationEU are already pre-allocated for specific 
purposes, programmes or national programmes. Already 75% of the initial unallocated margins 
for the period 2021 – 2027 (which were only EUR 5.5 billion, or 0.45% of the total expenditure) 
have already been used or earmarked to adapt to new needs and respond to unexpected crises. 
The Flexibility Instrument, which provides some limited additional flexibility over and above 
the ceilings of the Multiannual Financial Framework for approximately EUR 1 billion per year, 
has  been  fully  used.  This  undermines  the  Union’s  ability  to  address  the  most  urgent 
emergencies, to provide support to boost Europe’s long-term competitiveness in critical areas, 
to maintain and strengthen the unique European social model, not to mention the ability to react 
to  new  challenges  which  are  expected  to  arise  in  the  next  four  years  given  the  volatile 
geopolitical and economic context. 

Extensive  use  of  redeployments  and  reprogramming,  on  top  of  existing  budgetary 
flexibilities,  has  been  necessary  to  address  the  unforeseen  challenges.  Cohesion  policy 
funds have been mobilised extensively to support people fleeing the war in Ukraine as well as 
host Member States with the Cohesion's Action for Refugees in Europe and Flexible Assistance 
for Territories (CARE and FAST-CARE) packages. Amendments to 2014 – 2020 and 2021 – 
2027 programmes alleviated the budgetary pressure on Member States and allowed faster and 
more  flexible  use  of  available  funding.  REPowerEU,  which  aims  at  ending  the  EU’s 
dependence on Russian fossil fuels and tackle the climate crisis, is financed by and large from 
redeployment and repurposing of other funds.1 The Secure Connectivity Programme, which 
responds to increasing hybrid and cyber threats as well as natural disasters, received funding 
from  several  EU  programmes  that  share  similar  objectives  with  this  initiative2  as  well  as 
unallocated  budgetary  margins.  The  proposed  Act  in  Support  of  Ammunition  Production 
(ASAP) to facilitate the ramp-up of ammunition production capacity within the EU is financed 
with  redeployments  of  EUR 260 million  from  the  European  Defence  Fund  for  2024  and  of 
EUR 240 million initially foreseen for the European Defence Industry Reinforcement through 
common Procurement Act (EDIRPA) in 2023 – 2024. The Chips Act is financed via the margin 
of  Heading  1  and  redeployments  from  other  programmes  or  their  strands.  In  addition,  the 
Emerging  challenges  and  priorities  cushion  of  the  Neighbourhood,  Development  and 

1 Remaining loans under the Recovery and Resilience Facility for up to EUR 225 billion, additional resources 
from  the  sale  of  EU  Emissions  Trading  System  (ETS)  allowances  (outside  the  EU  budget)  for  up  to 
EUR 20 billion; voluntary transfers from the Brexit Adjustment Reserve. Supporting Affordable Energy (SAFE) 
flexibility was introduced in the 2014 – 2020 Cohesion Policy funds to enable direct support to vulnerable families 
and small and medium-sized businesses (SMEs) facing increased energy costs. 
2  Horizon  Europe,  the  Union  Space  Programme  and  the  Neighbourhood,  Development  and  International 
Cooperation Instrument. 

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International  Cooperation  Instrument has  been  used  extensively  –  EUR 7.4 billion  out  of 
EUR 9.3 billion – to provide support for COVID-19 vaccines globally, Ukraine (including the 
provisioning of MFA loans), Syrian refugees in Türkiye, inter alia. Further redeployment or 
reprioritisation possibilities are thus extremely limited. 

Faced with this situation, the Commission sees no alternative to ensure that the EU can deliver 
on all its objectives, urgent and traditional ones, until the end of 2027, but to propose a targeted 
revision of the Multiannual Financial Framework 2021 – 2027. 

3.  A  TARGETED  AND  BALANCED  ADJUSTMENT  OF  THE  BUDGET  TO 

RESPOND TO NEW CHALLENGES  

Unwavering and long-term support to Ukraine via the new Ukraine Facility 

The EU firmly stands by Ukraine’s side to support its resistance against Russia’s invasion 
and to build Ukraine’s European future together. The Multiannual Financial Framework 
2021 – 2027 was not constructed to address the direct and indirect consequences of a war on 
Europe’s  soil  and  these  dramatic  events  and  needs  could  not  have  been  anticipated. 
Nevertheless, by June 2023, the EU budget had mobilised EUR 30.5 billion to support Ukraine. 
This includes the novel Macro-Financial Assistance Plus instrument which will provide up to 
EUR 18 billion in 2023 guaranteed by the EU budget.  

In addition, several existing programmes have been repurposed to support Ukraine and 
address the fallout of the war. For instance, the Connecting Europe Facility, to which Ukraine 
is now associated, provides for the EU solidarity lanes – which are essential to keep Ukraine’s 
economy linked to the single market and the rest of the world – and military mobility. Regional 
funds were mobilised to help Member States support people fleeing from the war or address 
resulting high energy prices, by a total  amount of EUR 17 billion. EU Home Affairs Funds 
were  granted  more  flexibility  to  facilitate  the  use  of  unspent  2014  –  2020  funds. 
EUR 400 million  was  made  available  for  frontline  Member  States  through  the  Asylum 
Management and Integration Fund and Border Management and Visa Instrument, to assist with 
the  first  reception  and  early  integration  of  Ukrainians  entering  the  EU.  The  Erasmus+ 
programme is also contributing to support the Ukrainian people, including many children and 
young people, with a reinforcement of an additional EUR 100 million in 2023 to pursue these 
objectives.  

Additional  support  is  being  provided  outside  the  EU  budget,  with  EUR 5.6 billion  of 
military assistance under the newly set-up European Peace Facility (EPF). The EPF has been a 
key tool to support Ukraine’s self-defence.  

Taken together, the entire support mobilised by the EU and its Member States to support 
Ukraine and its people amount to EUR 70 billion. 

Since the start of the war, the Union has also imposed unprecedented sanctions against 
Russia,  adding  to  those  imposed  by  the  EU  following  the  illegal  annexation  of  Crimea  in 
March  2014.  Work  is  ongoing  on  the  possible  use  of  frozen  assets  to  support  Ukraine’s 
recovery and reconstruction. 

The European Union is committed to firmly and fully stand with Ukraine and to continue 
to  provide  strong  political,  economic,  military,  financial  and  humanitarian  support  to 
Ukraine and its people for as long as it takes. Financing is required for Ukraine’s immediate 
needs,  recovery  and  for  long-term  reconstruction.  The  Macro-Financial  Assistance  Plus 
instrument only covers 2023 and can only finance the most urgent immediate budgetary needs. 
It can neither cover all the areas that the Union committed to support, nor provide long-term 

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support for fast recovery. The European Union needs to rise to the challenge by confirming 
support to Ukraine on a multiannual basis.  

Support to Ukraine’s  fast  recovery should progress  as the situation evolves.  Sustaining 
economic  activity  and  rebuilding  basic  infrastructure  would  generate  employment  and 
revenues, give refugees a perspective to return home and lower the volume of international 
assistance needed. According to the International Monetary Fund’s estimates3, the financing 
gap of Ukraine amounts to USD 81.6 billion for 2024 – 2027. Moreover, in March 2023, the 
World  Bank  together  with  the  Ukrainian  Government,  the  European  Commission  and  the 
United  Nations  presented  the  updated  assessment  of  damages  covering  a  full  year  of  the 
unprovoked  Russian  aggression  against  Ukraine.  The  assessment  found  that  the  estimated 
overall reconstruction needs of Ukraine over the next 10 years amount to EUR 384 billion, and 
to  EUR 142 billion for the period 2023-2027. The  International  Monetary  Fund programme 
concluded on 31 March will cover USD 10.2 billion of these needs alongside Norway’s 5-year 
support package of EUR  7 billion.  

The Union is  determined to provide a structured engagement with other international 
donors,  notably  through  the  Multi-Agency  Donor  Coordination  Platform,  and  a 
multiannual  partnership  with  Ukraine  helping  the  country  on  its  reform  and  EU 
accession path. This would allow Ukraine to cover its most immediate financing needs and to 
focus on public administration reform, good governance, the rule of law, gradual integration to 
the single market,  and sound financial management (including anti-corruption and anti-fraud 
measures). It can provide Ukraine with a possibility to progress while rebuilding, fostering the 
transition  to  a  resilient,  climate-neutral,  digital  and  inclusive  economy,  strengthening 
fundamental rights and equality in Ukraine.  

A  sustainable  solution  is  needed  to  support  Ukraine  for  the  remainder  of  the  current 
Multiannual Financial Framework. It will need to combine strong Union commitment and 
flexibility to adapt to the evolving situation. Financial support to Ukraine should thus include 
a flexible combination of loans and grants. Loans financed by borrowing and guaranteed by 
the EU budget, as for the Macro-Financial Assistance Plus instrument, will play a key role to 
ensure liquidity to the Ukrainian government. The EU can offer to cover the interest rates on 
these  loans.  At  the  same  time,  an  appropriate  share  of  grants  will  support  Ukraine’s  public 
finances sustainability and finance specific investment measures or technical assistance.  

Continued  EU  support  must  also  provide  confidence  to  the  European  and  Ukrainian 
private  sector  to  invest  in  Ukraine  and  its  reconstruction.  Over  time,  as  conditions  for 
private sector engagement improve, support through guarantees, with additional contributions 
from  International  Financial  Institutions,  should  be  provided,  to  de-risk  private  sector 
investments and increase the leverage of EU funds. It should ensure integration of Ukraine in 
European  supply  chains  and  to  the  single  market,  to  the  mutual  benefit  of  the  EU’s  and 
Ukraine’s citizens and businesses.  

To  cater  for  Ukraine’s  immediate  needs,    recovery  and  modernisation,  the  Commission 
proposes the creation of an integrated and flexible instrument with an overall capacity of up 
to EUR 50 billion for 2024 – 2027. Support will be provided in the form of loans, grants and 
guarantees. This will ensure stable and predictable funding while providing an appropriate 
framework  ensuring  prioritisation  of  reforms  and  investments  underpinned  by  a  Ukraine 
Plan, the sustainability of Ukraine’s finances, as well as the protection of the EU budget. The 
non-repayable support will be financed under a Ukraine Reserve, providing resources to the 
Ukraine  Facility  on  an  annual  basis  over  and  above  the  expenditure  ceilings.  The  loan 

3 Source: https://www.imf.org/-/media/Files/Publications/CR/2023/English/1UKREA2023001.ashx  

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support will be financed by borrowing on financial markets and backed by the headroom 
between the own resources ceilings and EU budget expenditure. This flexible approach is 
needed for catering for the country's evolving needs until 2027. 

Managing migration, strengthening partnerships with key third countries and 
addressing emergencies 

The EU budget is contributing to a comprehensive approach, bringing together policy in 
the areas of migration, asylum, integration, return and border management, recognising 
the link of the internal and external dimensions of migration as well as needs arising from 
the global consequences of Russia’s war of aggression in Ukraine, such as food security 
and hybrid threats. Concerning the external dimension of migration, the European Union will 
further deepen cooperation as part of comprehensive, balanced and tailor-made partnerships 
with key countries of origin and transit. While funding challenges are seen across the board, 
the situation is particularly challenging in the Southern Neighbourhood countries and Türkiye. 
The needs regarding Syrian refugees in Türkiye and in the broader region are not decreasing 
and  might  increase  even  further  considering  the  additional  challenges  following  the  recent 
earthquakes. For 2024 – 2027, the needs across the region are largely uncovered. Additional 
needs will also arise following the closure of the Trust Fund for Africa, as there is a growing 
expectation on preserving at least the same levels of funding for the Southern Mediterranean 
route (EUR 208 million per year), to which the Commission had also committed. This is a point 
of further attention following the European Council of 9 February 2023, which put an accent 
on the need to increase returns by intensifying cooperation with countries of origin and transit 
covering  all  migratory  routes,  ‘also  with  adequate  resources’,  including  under  the 
Neighbourhood, Development and International Cooperation Instrument.  

Concerning  the  internal  dimension  of  managing  migration  as  well  as  border 
management,  helping  Member  States  facing  the  increasing  migratory  pressure  and 
implementing the New Pact on Migration and Asylum will require additional financing. 
This is in particular the case for the screening and border procedure, reception capacity, 
relocations and returns. As regards the Pact, good progress is being made, with the European 
Parliament and the Council aiming to adopt the legislative proposals by February 20244 and a 
number of files already agreed. The changes proposed in the legislative process have increased 
the needs compared to original estimations. This is in particular the case for the establishment 
and  maintenance    of  reception  infrastructure,  increased  returns  and  relocations.  Today,  the 
amounts  available  for  existing  priorities  and  to  host  an  increasing  number  of  refugees  are 
already  earmarked.  In  that  regard,  30%  of  the  funds  in  the  policy  area  of  Migration5    is 
implemented  under  the  Thematic  Facilities,  which  in  principle  provides  some  flexibility. 
However, the Thematic Facilities are being used at a high pace to address emergencies. and 
support Member States facing exceptional pressure,  such as the crisis in  Afghanistan or the 
crisis  orchestrated  by  the  Belarus  regime,  and  most  recently  hosting  the  millions  of  people 
fleeing  the  Russian  war  in  Ukraine.  These  funds  can  therefore  not  be  earmarked  for  the 
implementation of the Pact. 

Heightened global economic and political instability is increasing global needs, but the 
EU budget as it stands can no longer fully provide the necessary Union response to crises 

4  Joint  Roadmap  of  the  European  Parliament  and  Rotating  Presidencies  of  the  Council  on  the  organisation, 
coordination, and implementation of the timeline for the negotiations between the co-legislators on the CEAS and 
the New European Pact on Migration and Asylum. 
5 Asylum, Migration and Integration Fund (AMIF) and Border Management and Visa Instrument (BMVI). 

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in  third  countries.  Beyond  its  impact  on  Ukraine,  Russia’s  war  of  aggression  also  affects 
neighbouring countries such as Moldova, an EU candidate country that will require additional 
support.6 Moreover, major crises in Yemen, Sudan and Afghanistan, and the ensuing global 
food crisis and rising instability in Subsaharan Africa and other parts of the world have made 
the  need  for  EU  assistance  and  humanitarian  aid  even  more  acute  than  could  have  been 
foreseen.  

The Humanitarian Aid programme had to rely on significant budgetary reinforcements 
from the Solidarity and Emergency Aid Reserve, after redeployments and recourse to the 
margins were fully exploited. In a number of crises in the Middle East and Africa in particular, 
humanitarian organisations are already applying cuts to rations and scaling down programmes. 
The remaining unallocated margin in Heading 6 (Neighbourhood and the world) is on average 
EUR 83 million  per  year  in  2024  –  2027.  Limited  remaining  availabilities  in  the  Common 
Provisioning Fund to provision for additional Macro-Financial Assistance loans – in particular 
the recent announcement of a EUR 900 million Macro-Financial Assistance loan to Tunisia – 
imply that  there will be  very little room for  further measures  of this type under  the current 
Multiannual  Financial  Framework,  should  the  need  arise.  In  addition,  around  80%  of  the 
availability  for  2021  –  2027  of  the  Emerging  challenges  and  priorities  cushion  of  the 
Neighbourhood,  Development  and  International  Cooperation  Instrument  has  already  been 
either used or allocated to provide support in response to a wide range of needs. This negates 
the  rationale  of  the  cushion  which  was  meant  to  provide  a  flexible  reserve  to  respond  to 
unexpected needs.  

In parallel, and in the light of the changed geopolitical landscape it is even more crucial to step 
up support to our Western Balkans partners, to accelerate convergence with EU Member States 
and aiming to  support stable, prosperous and well-functioning democratic societies on their 
path towards EU membership. 

The Solidarity and Emergency Aid Reserve is helping to tackle major natural disasters 
or public health crises both inside and outside the EU, but was by far not sufficient to 
meet  all  the  requests  since  the  beginning  of  the  Multiannual  Financial  Framework.  In 
2021 and 2022 the allocation was completely exhausted to address major unforeseen events, 
including  natural  disasters  (e.g.,  floods,  forest  fires,  earthquakes)  and  the  requests  received 
were far above the budget availability of EUR 1.2 billion (in 2018 prices) per year. As a result, 
not all needs could be met. Halfway into 2023, the Solidarity and Emergency Aid Reserve is 
already expected to be fully used this year due to the earthquakes in Türkiye and Syria, leaving 
no more room for additional mobilisations until the end of the year.  

In  order  to  provide  for  sufficient  funding  to  support  Member  States  in  managing  urgent 
challenges related to migration and borders as well as  for the implementation of the New 
Pact  on  Migration  and  Asylum  once  adopted,  the  Commission  proposes  to  increase  the 
ceiling of heading 4 by EUR 2 billion. 

In order to allow the Union to provide the absolute necessities in a context of extraordinary 
geopolitical  tension,  the  Commission  proposes  to  increase  the  ceiling  of  Heading  6  by 
EUR 10.5 billion. 

The Union’s capacity to address crises and emergency situations needs to be reinforced. The 
Solidarity and Emergency Aid Reserve should be increased by EUR 2.5 billion. 

6 The  setting up of the Ukraine Facility  will allow  to redeploy resources  from NDICI  to other neighbourhood 
countries including Moldova.  

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Promoting long-term competitiveness on critical technologies via a  Strategic 
Technologies for Europe Platform  

Strengthening the competitiveness and reducing strategic dependencies of the European 
economy through the green and digital transformations has been the EU compass over 
the last years. With NextGenerationEU, the EU’s flagship economic recovery programme, the 
EU has closed the gap with pre-pandemic output levels already in the summer of 2021. The 
funds  directed  to  the  twin  green  and  digital  transformation  render  the  economy  more 
competitive  whilst  leaving  nobody  behind.  The  unprecedented  efforts  by  the  EU  Member 
States to implement crucial reforms are making the EU more resilient. Efforts in this direction 
should continue, to enable the EU to remain at the forefront to tackle existing and emerging 
challenges,  including  strategic  dependencies  in  key  sectors.  Moreover,  green  and  digital 
technologies  have  been  at  the  heart  of  the  Multiannual  Financial  Framework:  30%  of  the 
EUR 2 trillion  2021  –  2027  Multiannual  Financial  Framework  and  the  NextGenerationEU 
recovery programme are being spent on climate policies and more than 20% of the Recovery 
and  Resilience  Facility  is  dedicated  to  digital  policies.  Cohesion  policy  contributes  with 
EUR 110 billion to the climate transition and EUR 37 billion to the digital transition. Besides, 
the Digital Europe Programme supports bringing digital technology to businesses, citizens and 
public administrations. The EU budget is also the ultimate EU tool to underpin common action 
at  EU  level,  preserving  the  integrity  of  the  Single  Market,  securing  economies  of  scale, 
effectiveness, convergence, solidarity and passing a clear political message that the EU stands 
together in the face of challenges. 

The  EU  industry  has  also  proven  its  inbuilt  resilience  but  is  being  challenged  by  high 
inflation, labour shortages, supply chain disruptions, rising interest rates, and spikes in 
energy costs and input prices. This is paired with strong, but not always fair, competition on 
the fragmented global market. Whereas EU funding is often focussed on the deployment of 
clean-tech, biotech and digital and deep technologies, our global partners have more and more 
focussed on supporting the manufacturing of these technologies, such as in the US with the 
recent Inflation Reduction Act and since much longer in China. 

The  uptake  and  scaling  up  of  the  development  and  manufacturing  of  strategic 
technologies  in  the  Union  will  be  essential  to  seize  the  opportunities  and  meet  the 
objectives  of  the  green  and  digital  transitions,  therefore  strengthening  European 
sovereignty  and  economic  security.  Immediate  action  is  thus  required  to  support  the 
development and manufacturing of strategic technologies in the Union, in particular of critical 
clean-tech,  biotech  and  digital  and  deep  technologies.  Safeguarding,  strengthening  and 
developing new value chains and thereby reducing the Union’s strategic dependencies should 
enjoy greater support. As shown by the COVID-19 pandemic, complex global value chains for 
production  and  distribution  of  products  such  as  pharmaceuticals  can  result  in  shortages  of 
essential goods. The Union also needs to address labour and skills shortages in those strategic 
sectors, attracting additional workers through quality jobs, trainings and apprenticeships.  

The EU has already put forward several initiatives to support its industry. The Green Deal 
Industrial Plan seeks to enhance the competitiveness of Europe's net-zero industry, support the 
fast  transition  to  climate  neutrality  and  create  quality  jobs.  It  provides  a  more  supportive 
environment for the scaling up of the EU’s manufacturing capacity in clean-tech. The plan is 
based on four pillars: a predictable and simplified regulatory environment, speeding up access 
to  finance,  enhancing  skills,  and  open  trade  for  resilient  supply  chains.  With  the  European 
Innovation Agenda, the EU has sought to position Europe at the forefront of the new wave of 
deep tech innovation and start-ups. At the same time, the EU Member States are also currently 

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amending their national recovery and resilience plans to include REPowerEU Chapters, which 
is  a  crucial  opportunity  to  provide  immediate  support  to  companies  and  boost  their 
competitiveness, while reducing dependencies.  

While these bridging solutions provide fast and targeted support, the EU needs a more 
structural answer to the investment needs of its industries to preserve a European edge on 
critical  and  emerging  technologies  relevant  to  the  green  and  digital  transitions,  from 
connectivity  and  computing-related  technologies,  including  microelectronics,  quantum 
computing,  6G,  and  artificial  intelligence;  to  biotechnology and biomanufacturing, and net-
zero technologies. The uptake of these investments in the EU will have a significant positive 
impact  on  the  EU’s  open  strategic  autonomy,  by  reducing  its  strategic  dependencies,  while 
supporting the clean and digital transition. 

As a next step, a new Strategic Technologies for Europe Platform (STEP) will reinforce 
and leverage existing EU instruments for a quick deployment of financial support. The 
EU has several funds and programmes on- and off-budget to provide support to clean-tech, bio-
tech  and  digitalisation.  These  instruments  include,  in  particular,  the  Innovation  Fund, 
InvestEU, Horizon Europe, the European Defence Fund, the Recovery and Resilience Facility 
and  cohesion  policy  funds.  The  European  Council  of  23  March  asked  to  ‘ensure  a  full 
mobilisation of available funding and existing financial instruments and deploy them in a more 
flexible manner, to provide timely and targeted support in strategic sectors without affecting 
cohesion policy objectives.’ Leveraging on existing instruments and governance frameworks 
will speed up the implementation and allow to mobilise higher amounts of financial support.  

The STEP will help to direct existing funding towards sovereignty projects and speed up 
implementation  on  a  subset  of  areas  which  will  be  identified  as  crucial  for  Europe’s 
leadership,  while  safeguarding  cohesion  and  preserving  the  level  playing  field  in  the 
Single Market. This entails increasing the ceiling from 4% to 10% for using resources from 
the Recovery and Resilience Facility under InvestEU, which will have a new window dedicated 
to sovereignty investments. Concerning the cohesion policy funds, which represent the largest 
single  EU  policy  financed  through  the  EU  budget,  the  Commission  proposes  a  new  STEP 
priority in across all major funds – the European Regional Development Fund, Cohesion Fund 
and  the  Just  Transition  Fund.  In  line  with  cohesion  objectives  and  contributing  to  regions’ 
competitiveness in the Single Market, the Commission proposes to support STEP investments 
in enterprises other than SMEs, which can make a significant contribution to the development 
of less developed and transition regions, as well as in more developed regions of Member States 
with a GDP per capita below the EU average. Under those funds, the Commission also proposes 
a 30% pre-financing in 2024 to incentivise uptake as well as an increase of the EU co-financing 
to  100%  for  European  STEP  projects.  At  the  same  time,  managing  authorities  can  take  the 
opportunity to address labour shortages and promote attractive and accessible quality jobs. 

The  STEP  should also be supported by reinforcements of selected programmes.  In  the 
case of InvestEU, this will enable the creation of a new policy area (‘fifth window’) aimed at 
supporting sovereignty investments.  The resources will  provide guarantees  to implementing 
partners to enable investments in the sovereignty sectors through debt (including guarantees) 
and  equity  financial  products  for  companies,  including  SMEs,  and  projects  in  the  sectors 
supported by the STEP. InvestEU will leverage additional investment, particularly from the 
private  sector,  by  addressing  market  failures  and  sub-optimal  investment  situations 
experienced in  the sectors targeted by the  STEP.  Member States  are  encouraged to  provide 
resources to InvestEU Member State compartments to support financial products in line with 
the STEP objectives.  

8 

 
 
The  Innovation  Fund  is  one  of  the  key  instruments  at  EU  level  that  targets  the 
demonstration  of  innovative  low  carbon  technologies  and  the  scaling  up  of  clean  tech 
manufacturing. It is  therefore Europe’s key instrument to gear up its green industrial 
strategy while preserving cohesion objectives. Increasing its fire power and creating synergies 
with other funding streams through the Seal of Sovereignty will be an essential part of the EU 
answer  in  the  face  of  the  global  race  for  clean  tech  manufacturing  and  the  climate  neutral 
transition for industries. To accelerate the deployment of net-zero and innovative technologies 
throughout the Union, the Innovation Fund will be equipped with additional resources that will 
be earmarked for Member States whose GDP per capita is below the average of the European 
Union for the period 2015 – 2017.  

A  top-up  for  the  European  Innovation  Council  under  Horizon  Europe  will  support  game-
changing innovation, from the early-stage research to start-up and scale-up. 

The  European  Innovation  Council  (EIC)  Accelerator  will  provide  equity-only  support 
between EUR 15 and 50 million to non-bankable high-risk SMEs, including start-ups, and 
non-bankable  high-risk  small  mid-caps,  scaling  up  breakthrough  innovation  in  the  critical 
technologies supported by the STEP. Such investments, through a new STEP compartment of 
the EIC Fund will leverage private investments and may be supplemented with complementary 
financing provided by the EIB Group and/or Member States, using the ample possibilities to 
support  risk  finance  under  State  aid  rules.  Complementarity  between  the  EIC  Fund  and 
InvestEU will be ensured as the EIC Fund will only invest in companies with an investment 
risk profile complementary to InvestEU support. EIC Fund investments aim to leverage around 
five times in additional co-investments from other equity investors and be complemented by 
additional  financing  from  the  EIB  Group.  Furthermore,  the  Commission  invites  the  EIB  to 
continue to provide investment advice to the EIC Fund to ensure high quality deals and attract 
additional co-investment; and the Commission will consider expanding the current scope of 
this advice.  

The global landscape has changed. Russia’s unprovoked aggression shows that it poses and 
will continue to  pose in  the coming  years a threat  to  the security of Europe. Therefore,  the 
STEP will reinforce the European Defence Fund, which will boost the innovation capacity of 
the European defence technological and industrial base, thus contributing to the Union open 
strategic autonomy. The top-up of the European Defence Fund will be used for actions focused 
on  deep  and  digitial  technologies  that  can  significantly  boost  the  performance  of  future 
capabilities throughout the Union, aiming to maximise innovation and introduce new defence 
products and technologies. 

The  STEP  will  also  promote  synergies  amongst  existing  instruments.  The  additional 
flexibilities  proposed  under  the  STEP  will  enable  Member  States  to  finance  projects  from 
cohesion policy funds, either on a tand-alone basis or in combination with other EU funds, for 
instance  by  using  the  benefits  of  the  proposed  ‘Sovereignty  Seal’.  In  that  respect,  Member 
States will be able to directly grant support from the European Regional Development Fund 
and the European Social Fund+ to projects having been awarded a Sovereignty Seal.  

The Commission is also working to maximise synergies between the rules of the Innovation 
Fund and the State aid rules to ensure a more streamlined process. The Commission will further 
align criteria and streamline processes to ensure that the decision on State aid is taken at the 
same time as the funding decision for the Innovation Fund, provided a complete notification 
by  the  Member  State  occurs  in  due  time.  Such  synergies  are  also  being  assessed  for  other 
selected EU instruments, including the EIC Fund. The Commission will also consult Member 
States on a proposal to enable higher rates of aid via a bonus for projects within the scope of 
STEP  in  assisted  regions  to  spur  further  economic  development,  while  preserving  cohesion 

9 

 
 
objectives. A new ‘One-Stop-Shop’ will be created to steer the new priorities at three levels: 
(i) within the Commission, it will prepare relevant guidance to provide strategic direction and 
coordinate the fulfilment of the  STEP prioritisation in the Commission’s work programmes 
and investment decisions of the various instruments; (ii) as an entry point for project promoters 
seeking  EU  funds  for  investments,  thereby  centralising  information  on  the  funding 
opportunities and implementation of all relevant financial instruments at EU and national level; 
(iii)  finally,  it  will  assist  the  Member  States  by  providing  advice  on  regulatory  issues  and 
uphold  two-way communication with  the designated national  authorities, ensuring  adequate 
coordination and promotion of critical investments in EU countries. 

While the STEP relies on the reprogramming and reinforcement of existing programmes for 
supporting strategic investments, it is also an important testing ground for further steps towards 
a European Sovereignty Fund.  

The Commission proposes the creation of a new instrument (STEP Platform), leveraging on 
existing  programmes  such  as  InvestEU,  Innovation  Fund,  Horizon  Europe,  European 
Defence Fund, Recovery and Resilience Facility, and cohesion policy funds.   

To boost the investment capacity dedicated specifically to promoting STEP investments, the 
Commission further proposes to allocate EUR 10 billion to targeted programmes:  

  EUR 3 billion  for  InvestEU,  resulting  in  EUR 75 billion  of  investments  given  the 

40% provisioning rate and an average multiplier of 10;  

  EUR 0.5 billion  to  Horizon  Europe,  complemented  with  EUR 2.1 billion  of 
redeployment  and  use  of  decommited  amounts,  resulting  in  EUR 13 billion  of 
investments with an average multiplier of 5; 

  EUR 5 billion  to  the  Innovation  Fund,  which  implementation  so  far  shows  could 

result in some EUR 20 billion of investments; 

  EUR 1.5 billion to the European Defence Fund, which could result in up to EUR 2 

billion of investments. 

On the basis of these funds alone, STEP could result in an estimated EUR 110 billion 
of new investments.  

In addition, this Platform will allow to direct existing funding towards  STEP sovereignty 
projects and speed up implementation on a subset of areas which will be identified as critical 
for Europe’s leadership. By providing financial incentives in cohesion policy funds in the 
form of higher pre-financing and co-financing, Member States are encouraged to reprioritise 
their  programmes.  Every  5%  of  reprogramming  towards  STEP  priorities  leads  to 
EUR 18.9  billion of resources made available, in addition to EUR 6 billion to be paid out 
from the Just Transition Fund.  

Across  programmes,  the  Commission  proposes  a  ‘Sovereignty  Seal’  to  be  awarded  to 
projects contributing to the objectives of the STEP Platform, provided that the project has 
been selected under Horizon Europe, the Digital Europe programme, the European Defence 
Fund, the EU4Health programme, or the Innovation Fund. The Seal will be used as a quality 
label to help attract investments and will also enable a project not receiving funding under 
one programme due to lack of funding to have better access to funding in other instruments. 
The increase of the ceiling under the RRF to  use resources for  InvestEU products  via its 
national  compartments  represents  an  additional  flexibility  for  Member  States  of 
EUR 30 billion potentially available for such sovereignty investments. 

10 

 
 
Altogether, the total estimated amount of new investments through STEP could reach up to 
EUR 160 billion. 

To implement these changes, the Commission proposes to increase the ceiling of Heading 1 
by EUR 3.5 billion, Heading 3 by EUR 5 billion and Heading 5 by EUR 1.5 billion. 

Technical adjustments to the new economic realities  

(i) 

A sustainable solution for NextGenerationEU funding costs 

The  Commission  set  up  a  solid  borrowing  and  lending  programme  underpinned  by  a 
reliable payments, settlement, and accounting infrastructure in a short period of time. 
This infrastructure provides the capacity for managing the borrowing related to several current 
and  any  relevant  future  EU  policy  programmes  in  line  with  international  best  practices. 
Financing EU programmes through joint EU issuances required a significant upgrade of the 
Commission’s debt management architecture. The appropriateness of EU’s funding method in 
meeting  the  NextGenerationEU  needs  was  confirmed  by  ECA’s  special  report  on 
NextGenerationEU debt management7 which noted that the Commission’s debt management 
procedures enabled borrowing of the required funds on time, in compliance with regulatory 
limits and at costs corresponding to its market position. Under NextGenerationEU alone the 
Commission will borrow up to around EUR 800 billion by end of 2026, with further issuances 
after that date due to refinancing needs. Out of this amount, up to EUR 420 billion will be used 
for the provision of non-repayable support for which the budget will cover the debt servicing 
costs.  The  Commission  continues  to  develop  further  its  debt  management  capacity,  with  a 
particular focus on strengthening demand by developing the secondary market liquidity and 
infrastructure to ensure the best possible price for the benefit of the budget and all EU Member 
States. 

The  success  of  the  EU  funding  programme  to  date  is  reflected  in  a  strong  investor 
confidence in the credit strength of the EU as an issuer and in investor interest in EU 
bonds, including green bonds. As of end May 2023, the EU has EUR 394 billion of bonds 
outstanding, with the majority of bond proceeds allocated to NextGenerationEU. 

Since  2022,  financial  markets  experienced  a  sharp  rise  in  interest  rates  as  a  result  of 
tighter monetary policies to curb inflation. Funding costs substantially increased for all 
bonds issuers, including for the EU. The 10-year EU bonds interest rate increased from about 
zero at the time of the first bond issuance for NextGenerationEU in 2021 to more than 3%. As 
a  result,  the  full  2021  –  2027  envelope  of  EUR 14.9 billion  to  cover  the  financing  costs  is 
expected to be used by the summer of 2023. The volatility of interest rates is much higher than 
what  could  have  been  expected  at  the  time  of  adoption  of  the  Multiannual  Financial 
Framework,  which  makes  fixed  multiannual  ceilings  ill-suited  for  expenditure  related  to 
borrowing costs.  

In such a context of high volatility in financial markets, the EU budget should have the 
necessary  flexibility  to  cater  for  increasing  borrowing  costs.  While  the  existing  legal 
framework provides for the necessary mechanisms to ensure that the Union will always cover 
its obligations towards bondholders in all circumstances, the EU budget should be equipped 
with the means and tools to pay its debt in the most efficient manner. 

7  European  Court  of  Auditors,  ‘Special  report  16/2023:  NGEU  debt  management  at  the  Commission  –  An 
encouraging  start,  but  further  alignment  with  best  practice  needed’,  published  12  June  2023,  available  at  
https://www.eca.europa.eu/en/publications/SR-2023-16 (accessed 15 June 2023) 

11 

 
 
 
                                                           
A new special instrument is thus proposed for the sole purpose of covering the additional 
costs  related  to  NextGenerationEU  borrowing.  NextGenerationEU  financing  will  remain 
covered  under  the  Multiannual  Financial  Framework  ceilings.  The  budgetary  technique  to 
address the interest volatility would be a new special instrument, over and above the ceilings, 
to cover exclusively the cost overruns in relation to the planned amounts for NextGenerationEU 
borrowing. Its mobilisation would be activated during the budgetary procedure based on a best-
effort forecast.  

The  Commission  proposes  a  new  special  instrument,  over  and  above  the  ceilings  of  the 
Multiannual Financial Framework, to cover the additional NextGenerationEU funding costs. 
The new special instrument will be limited to the NextGenerationEU funding costs in excess 
of the amounts initially programmed for 2021 – 2027. This will allow for a timely provision 
of additional budgetary appropriations in case of increases for covering the cost of interest 
expenditure. 

(ii)  Maintaining a functioning administration to deliver on the EU’s 

political priorities 

The resources of the European administration (heading 7) are under severe pressure due 
to additional tasks given to the Union, rising energy prices and high inflation.  

The numerous new initiatives introduced over the last two years have given substantial 
additional tasks to the Union since the start of this Multiannual Financial Framework 
without a corresponding increase in staff. The new geopolitical reality is adding to that. In 
addition  to  the  coordination  of  financial,  humanitarian  and  military  support  to  Ukraine, 
examples  include  the  Inter-operability,  Cybersecurity,  Secure  Connectivity,  Schengen 
evaluation  and  monitoring  mechanism,  European  Peace  Facility,  Digital  Markets  Act  und 
Digital Services Act, the Health Emergency Preparedness and Response Authority, Fit-for-55 
package  (including  the  Carbon  Border  Adjustment  Mechanism),  REPowerEU,  or  the  EU 
Energy  Platform.  These  new  initiatives  would  translate,  for  the  Commission,  into  600 
additional  establishment  posts  until  2027,  as  shown  in  the  Legislative  Financial  Statements 
accompanying  the  legal  proposals.  When  considering  also  the  other  institutions  and  cyber-
security related needs, this would amount to 885 additional posts. This has pushed the resources 
of  European  administration  to  the  limit.  The  European  administration  will  not  be  able  to 
continue delivering on an ever-increasing number of tasks with the current level of resources. 

The Commission has made exceptional efforts to reduce administrative costs and intends 
to continue applying structural changes. The Commission redeployed more than 900 posts 
internally since 2019, including through a major effort to modernize existing services, making 
them leaner and more efficient, but possibilities for savings have been exhausted. New working 
methods have been introduced and a new building policy, covering the 2022 – 2030 period, has 
been  developed  around  a  smarter  use  of  spaces,  replacing  the  office  standard  settings  to 
optimise surface used.  

Even  though  the  significant  volatility  of  the  macroeconomic  data  poses  an  objective 
difficulty in the appropriate predictions and effectively hampers any long-term planning 
for  Heading  7,  virtually  all  currently  available  forecasts  indicate  that  the  level  of 
appropriations as agreed in December 2020, which was based on 2% annual deflator, are 
insufficient and require reinforcement. 

12 

 
 
 
 
To meet the Institutions’ legal duties and to handle the additional responsibilities assigned 
by the co-legislators to the Commission, it is necessary to raise the ceiling of Heading 7 by 
EUR 1.9 billion. 

(iii) 

Equipping the EU budget with flexibility for unforeseen needs 

Three fourths of the 2021 – 2027 margins have been used. For the years 2024 – 2027, only 
about EUR 1.4 billion remain in total, including past margins in the Single Margin Instrument, 
and the situation in several headings is precarious. At this stage of the programming period and 
in a most volatile environment, the low level of margins is unprecedented which risks putting 
more  pressure  on  the  Flexibility  Instrument  than  what  was  originally  planned  for.  The 
Flexibility Instrument is in fact the only possibility to support any type of additional needs or 
crises irrespective of their nature. Fulfilling this objective, it will be fully used in 2021 – 2024 
by  EUR 4 billion,  leaving  no  amounts  to  carry  over  to  following  years.  Given  the  high 
pressures in the different headings, the Flexibility Instrument will play a crucial role to ensure 
that the EU budget can deliver. 

The Union’s budget needs to be equipped to respond to unforeseen needs that may arise. 
Since  budgetary  margins  are  very  limited  for  the  rest  of  the  Multiannual  Financial 
Framework, the Flexibility Instrument should be increased by EUR 3 billion.  

(iv) 

Sustainability of the payments ceiling 

Multiannual  Financial  Framework  payments  are  expected  to  peak  in  2026  and  2027  as  in 
previous programming periods – albeit compounded by the delays given the late adoption of 
the relevant legal acts. In order to ensure that the proposed increases can be fully matched by 
payments  availabilities,  the  relevant  Multiannual  Financial  Framework  ceiling  should  be 
increased.  

The Union’s budget needs to be able to honour its commitments with a sufficient level of 
payments. Hence, the payments ceiling for 2026 should be increased by EUR  7.7billion in 
2018 prices and for 2027 by EUR 2.8billion in 2018 prices, equal to 50% of the proposal to 
increase the ceiling for commitments in 2018 prices. 

4.  CONCLUSIONS AND NEXT STEPS 

The current availabilities in the EU budget are no longer sufficient to address the most urgent 
challenges that the EU is facing, let alone possible future needs in the coming years. Against 
this background, this Communication proposes a limited, targeted and balanced revision 
of  the  2021  –  2027  Multiannual  Financial  Framework  to  ensure  that  the  EU  budget  can 
deliver in the coming years. 

This Communication is accompanied by the following documents:  

-  A  Commission  Staff  Working  Document  providing  a  detailed  analysis  of  the 
implementation  of  the  Multiannual  Financial  Framework  2021  –  2027 
(SWD(2023)336); 

13 

 
 
 
 
 
-  A  proposal  amending  Council  Regulation  2020/2093  laying  down  the  Multiannual 
Financial Framework for the years 2021 to 2027, as amended by Council Regulation 
2022/2496 of 15 December 20228 (COM(2023)337); 

-  A proposal for a Regulation of the European Parliament and of the Council establishing 

the Ukraine Facility (COM(2023)338); 

-  A proposal for a Regulation of the European Parliament and of the Council establishing 

the Strategic Technologies for Europe Platform (STEP) (COM(2023)335). 

Given  the  urgent  budgetary  constraints,  which  will  already  materialise  in  2024,  the 
Commission calls on the European Parliament and Council to ensure that this package is 
in force on 1 January 2024, in line with the procedures set in the Treaties. The Commission 
will do everything in its power to make a swift agreement possible.9  

8 OJ L 433I, 22.12.2020, p. 11–22 and OJ L 325, 20.12.2022, p. 11–12.  
9 Finally, the decision of the legislator as regards the Social Climate Fund as adopted on 10 May 2023, and  the 
fact that the opportunity of setting up a mechanism for an early repayment of the principal of NextGenerationEU 
borrowing  has  waned  in  the  light  of  the  sharp  rise  of  interest  rates,  make  the  proposals  contained  in 
COM(2021)569 obsolete. The Commission will thus withdraw its 2021 proposal in 2024. 

14 

 
 
 
 
                                                           
 
Annex 1 – Overview table  

 Political Priorities 
Ukraine Facility (loans and grants) 
Loans 
Grants 
Migration and external challenges 
Migration 
Syrian refugees (Syria, Jordan, Lebanon) 
Southern migration route (Neighbourhood South line) 
NDICI Cushion 
Syrian refugees (Turkey) 
Western Balkans 
Solidarity and Emergency Aid Reserve  
Strategic Technologies for Europe Platform 
Innovation Fund 
InvestEU 
European Innovation Council under Horizon Europe (**) 
European Defence Fund (EDF) 
Technical Adjustments 
Total Administration 
EURI Instrument 
Flexibility Instrument 

50.0 
33.0 
17.0 
15.0 
2.0 
1.7 
0.3 
3.0 
3.5 
2.0 
2.5 
10.0 
5.0 
3.0 
0.5 
1.5 

1.9 
18.9 (***) 
3.0 

(*) In addition, EUR 0.6 billion of redeployments withing NDICI Eastern Neighborhood will contribute to increase support to Moldova and 
provision for MFAs 
(**) In addition, EUR 2.1 billion of redeployments will increase the contribution within European Innovation Council: EUR 0.8 billion from 
transfer from pillar 2 to pillar 3 of EIC; EUR 1.2 billion of recycling and EUR 0.1 billion from use of reflows 

15 

 
 
  
  
 
 
(***) Indicative amount based on  market forecasts of 16 June 2023. Based on the different assumptions for the evolution of the interest rates 
used by the largest European Debt Management Offices this amount could range from EUR 17 billion to EUR 27 billion. 

16 

 
 
 
Annex 2 – Financing Ukraine Facility- overview 

17 

 
 
 
 
Annex 3 – Strategic Technologies for Europe Platform (STEP) 

18