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 The road to the next multiannual financial framework
Date: 2025-02-11
Institutions: European Commission, Secretariat-General
Subjects: EU financial instrument, budgetary procedure, budgetary reserve (EU), commitment of expenditure, financial management, general budget (EU), multiannual financial framework

EN 

  EN 

   EUROPEAN COMMISSION  Strasbourg, 11.2.2025  COM(2025) 46 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  The road to the next multiannual financial framework        
 
 
1.  INTRODUCTION:  THE  EU  BUDGET  AT  THE  CORE  OF  EU  POLICY 

PRIORITIES  

The EU budget is at the centre of the Union policy action. Over decades, it has contributed 
to improving the quality of life and the livelihoods of citizens, farmers,  researchers, businesses 
and  regions  across  Europe  and  beyond.  It  has  shown  its  true  worth  in  helping  overcome  a 
pandemic and energy crisis, saving millions of jobs during lockdowns, and investing in our 
clean and digital future. Looking back, when faced with one of the most significant crises of 
the  past  years,  the  COVID-19  pandemic  and  its  fallout,  the  EU  responded  with 
NextGenerationEU and the 2021-27 multiannual financial framework. This paved the way for 
quick economic recovery, all while making Europe greener, more digital, and future-proof. As 
Russia’s war of aggression on the European borders called for quick action, to support Ukraine 
and address rising energy costs, the EU budget further proved its effectiveness. 

The scale of the challenges faced in recent years required a commensurate and common 
EU  response.  Emerging  political  priorities  were  supported  by  sizeable  spending,  with 
expenditure dedicated to research, migration, defence and external action reaching the highest 
levels compared to previous multiannual budgets. For the first time, financing was provided at 
scale for reforms alongside investments – further increasing the impact of NextGenerationEU. 
Similarly, rule of law was brought to the forefront, through the general regime of conditionality 
protecting EU funds from breaches of the principles of the rule of law in the Member States.  

However, the rise of new needs and emergencies and the increased calls for action at EU 
level, stretched the EU budget to its limits, requiring a mid-term revision in 2024. Strong 
and  predictable  support  for  Ukraine,  reinforcement  of  migration  and  border  management 
programmes,  support  for  EU  neighbouring  partners  and  enlargement  countries  were 
geopolitical necessities; critical technologies required increased support. Volatile interest rates 
and rising financing costs required ad hoc solutions and increased flexibilities. The first-ever 
revision of the multiannual financial framework’s expenditure ceilings came with substantial 
redeployments and the creation of new special instruments.  

Increasing  expectations  for  EU  action  reflect  the  need  to  rethink  the  EU  budget.  The 
objective of a free, democratic, strong, secure, prosperous and competitive Europe outlined in 
the political guidelines of the new Commission and in the Strategic Agenda of the European 
Council for 2024-2029 need to be achieved in a very challenging geopolitical context. This will 
repayment  of 
require  a 
NextGenerationEU borrowing, which played a crucial role for the unified fiscal response to the 
crisis, will start in 2028. Such repayment will add to the financial needs of the next financial 
framework.  

reinforced  EU  budget.  Furthermore, 

reformed  and 

the 

Europe needs to square the circle: there cannot be an EU budget fit for our ambitions and 
notably ensuring the reimbursement of NextGenerationEU, and, at the same time, stable 
national financial contributions without introducing new own resources.  Choices need to 
be made. 

This Communication outlines some of the key policy and budgetary challenges for the next 
financial framework, to launch a broad dialogue to help prepare the proposal for the next 
multiannual financial framework. 

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2.   POLICY CHALLENGES FOR THE NEXT MULTIANNUAL FINANCIAL 

FRAMEWORK 

The future EU budget should focus on common challenges where spending at European 
level brings the highest added value. A broad agreement on ‘what’ to finance – that is, on the 
investment needs for the coming years – is a fundamental prerequisite to agree on ‘how’ to 
finance  it  –  by  mobilising  private  investments,  through  national  budgets  or  through  our 
common EU budget, and which tools to use in the latter.  

European competitiveness is hindered by remaining barriers within the single market, 
unfair  international  competition,  high  energy  prices,  skills  and  labour  shortage  and 
difficulties for businesses in accessing the capital they need. The European economy has 
important strengths – an open economy, high market competition, a strong welfare model with 
low levels of inequality and high standards of governance, health, education and environmental 
protection, and a unique cultural richness. Some weaknesses are, however, becoming apparent. 
Public spending on research and innovation in Europe lacks scale – as only one tenth of it takes 
place at European level, and it is spread across many fields – and is insufficiently focused on 
breakthrough innovation1. In 2023, expenditure for research and development in the EU stood 
at  EUR  381  billion,  or  2.22%  of  EU  GDP,  falling  short  of  the  3%  target2.  Likewise,  EU 
companies  spent  around  EUR  270  billion  less  in  research  and  development  than  their  US 
counterparts  in  20213.  The  industrial  structure  is  static:  no  EU  company  with  a  market 
capitalisation over EUR 100 billion has  been set  up in  the last fifty  years, while all six  US 
companies  with  a  valuation  above  EUR  1  trillion  have  been  created  in  this  period.  The 
persistent gap in private financing for late-stage growth investment4  hinders the ability of EU 
companies to scale up. Europe is also suffering from skills gaps across the economy, reinforced 
by  a  declining  labour  force5.  Overall,  Europe’s  future  competitiveness  will  depend  on  our 
ability to start a new age of invention and ingenuity, putting research and innovation, science 
and technology, at the centre of our economy.  

The EU is facing rising security threats amid growing geopolitical tensions. The European 
Defence Technological and Industrial Base suffers from decades of underinvestment: between 
1999 and 2021, EU combined defence spending has increased by 22%, against 66% in the US, 
289% in Russia and 579% in China6. Member States that are NATO members have committed 
to spending at least 2% of their GDP on defence, but not all have reached that target, while 
there are reflections on a higher target. Collaboration is also limited: Member States are still 
far from  achieving the benchmark they set  for themselves over 15 years  ago to  invest 35% 
together  on  European  collaborative  projects.7  Fragmentation  along  national  borders,  with 
limited  cooperation  and  the  associated  duplications,  harms  competitive  European  defence 
companies and creates strategic dependencies. Stronger defence readiness, including through 
space assets, and military mobility is necessary both as a deterrent against future aggression 
and to support Ukraine towards peace. All this requires increasing and optimising financing for 
defence across the EU. As part of a true European Defence Union, Europe will need to spend 

1 Draghi, M. (2024), The future of European competitiveness. Part A – A competitiveness strategy for Europe. 
2 Source: Eurostat. As a comparison, it is respectively 3.4% and 4.8% of GDP in Japan and South Korea. 
3 Draghi, M. (2024), ibid. 
4 European Investment Bank (2024). The scale-up gap: Financial market constraints holding back innovative firms 
in the European Union. 
5  Letta,  E.  (2023),  Much  more  than  a  market  –  Speed,  security,  solidarity.  Empowering  the  Single  Market  to 
deliver a sustainable future and prosperity for all EU Citizens. 
6 Total military expenditure, constant prices. Source: SIPRI Military Expenditure Database. 
7 Niinistö, S. (2024) Safer Together: Strengthening Europe’s Civilian and Military Preparedness and Readiness. 

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more, spend better, and spend together. The Commission is going to present the White Paper 
on the Future of European Defence in March. 

War, insecurity, poverty and a lack of opportunities contribute to displacement within, 
and irregular migration from, the EU’s Southern Neighbourhood to Europe.8 Europe has 
made a lot of progress in establishing a united approach to migration, asylum and borders, but 
migration will continue to be a challenge and delivering on it remains a priority for Europeans. 
Smuggling  of  migrants  and  trafficking  of  human  beings  yield  criminal  profits.  The 
weaponisation  of  migration  at  the  EU  borders  has  illustrated  new,  hybrid  forms  of  threats 
sowing discord and mistrust in European societies. The next long-term budget should therefore 
help address challenges related to migration, including effective protection of the EU external 
borders  and  comprehensive  partnerships  with  countries  of  origin  and  transit.  It  should  also 
support Member States to ensure they have the  expertise, operational and financial capacity 
they need for the implementation of the new Pact on Migration and Asylum. 

The success of the single market also hinges on its ability to benefit all European citizens 
and  businesses.  While  regional  and  territorial  disparities  have  been  substantially  reduced, 
including by EU cohesion policies, 29% of EU citizens still live in regions with a GDP per 
capita below 75% of the EU average and about 135 million people live in places which, in the 
last  two  decades,  have  slowly  fallen  behind9.  Small  and  medium-sized  enterprises  employ 
almost two thirds of the EU workforce and account for a bit more than half of its value-added, 
but many of them face barriers in accessing the Single Market, including complex bureaucratic 
procedures,  high  administrative  burdens,  and  a  lack  of  information  and  support  services10. 
Unlocking  investment  is  necessary  to  ensure  economic  development  across  Europe,  but 
reforms are also needed to remove obstacles to regional development, e.g. investment barriers, 
regulatory obstacles and weaknesses in the labour market and the business environment.11 We 
must reunite our society through education and investing in people.These challenges need to 
be  addressed  through  a  strengthened,  modernised  cohesion  and  growth  policy,  working  in 
partnership with national, regional and local authorities.   

Food security and nature protection sustain Europe’s quality of life but are facing specific 
difficulties.  Farmers,  fishers  and  rural  areas  are  increasingly  affected  by  unfair  global 
competition,  higher  energy  prices,  a  lack  of  younger  farmers  and  fishers  and  difficulties  in 
accessing capital. Despite the substantial support from the Common Agricultural Policy, the 
agricultural income per worker remains volatile and significantly below the average wage in 
the EU economy (60% in 2023). For small-scale coastal fisheries, the average wage in 2021 
was about half of the economy average wage. With only 6.5% of farmers under the age of 35 
in 2020, EU agriculture is ageing12.  Around EUR 62 billion would be required to close the 
investment  gap  in  the  agricultural  sector  and  deliver  on  its  digital,  green  and  energy 
transitions13.  Moreover,  climate  change  is  increasing  the  food  system’s  exposure  to  risks. 
Building on the recommendations from the Strategic Dialogue on the Future of Agriculture and 
the forthcoming Vision for Agriculture and Food, a Common Agricultural Policy that is fit for 
purpose  must  provide  targeted  support  to  farmers  who  need  it  most,  promote  positive 
environmental and social outcomes through rewards and incentives for ecosystem services and 
support the right enabling conditions for thriving rural areas. It must become simpler, targeted 

8 Niinistö, S. (2024), ibid. 
9 Letta, E. (2023), ibid. 
10 Letta, E. (2023), ibid. 
11 9th Cohesion Report, Highlights and policy takeaways, p. ix. 
12 European Commission (2024) Strategic Dialogue on the future of EU Agriculture. 
13 European Commission and European Investment Bank, 2023. Factsheet: Financing gap in the agriculture and 
the agri-food sectors in the EU. 

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and  find  the  right  balance  between  incentives,  investment  and  regulation,  and  ensure  that 
farmers have a fair and sufficient income. 

More  frequent  and  dramatic  climate-related  disasters  come  with  a  heavy  social  and 
economic toll.14 The average cost of natural disasters doubled from EUR 8 billion annually in 
the 1980s to EUR 16 billion in the last decade.  In 2021 and 2022, the costs exceeded EUR 50 
billion  each  year  and  they  reached  EUR  40  billion  in  2023,  the  hottest  year  on  record 
worldwide.  According  to  the  2024  European  Climate  Risk  Assessment  Report,  cumulated 
economic  losses  could  reach  EUR  175  billion  (i.e.  about  1.4%  of  EU  GDP)  under  a  3°C 
warming  scenario.  Also,  in  light  of  these  risks,  the  European  Court  of  Auditors  has 
recommended future-proofing EU funding for climate adaptation15. This will require stepping 
up  work  on  climate  and  water  resilience  and  preparedness:  while  pursuing  our  Green  Deal 
objectives as part of our economic growth strategy, preparing for growing climate risks will 
need to be an overarching objective for EU action, both internally and externally. 

The  global  political  and  economic  landscape  poses  challenges  of  unprecedented 
magnitude. Russia’s war of aggression against Ukraine has brought war back to the European 
continent. Europe’s financial, political and military support for Ukraine must be sustained for 
as long as it takes and is an investment in European security. The situation in the Middle East 
is  leading  to  instability  across  the  region  and  further  humanitarian  needs.  Growing  unfair 
competition and more aggressive economic and geopolitical stance have undermined the global 
multilateral system reflecting a shift from cooperation to competition and rising conflicts. Less 
than  20%  of  the  Sustainable  Development  Goals  targets16  are  on  track,  with  a  persistent 
investment gap in developing countries. Humanitarian needs continue to rise: in 2024, EUR 45 
billion are needed globally for humanitarian assistance, more than double compared to 2019. 
A European foreign policy with more targeted and impactful financing for  our partners and 
better  alignment  with  the  EU’s  strategic  interests  is  required  for  mutually  beneficial 
partnerships. 

Enlargement is a political and geostrategic imperative. Accession to the EU will always be 
a  merit-based  process  –  and  each  candidate  will  be  assessed  on  its  own  progress  towards 
meeting all criteria. The EU will need to step up support to prepare candidate countries, through 
investment  and  reforms,  to  their  perspective  membership.  GDP  per  capita  of  the  Western 
Balkans, Ukraine, Moldova and Georgia remains around or below 50% of that of the EU, and 
the pace of achieving convergence is slow. Ukraine will need the support of the EU and its 
allies  to  withstand  Russia’s  brutal  aggression  and  weather  its  economic  fallout17. There  are 
significant socio-economic, political and security advantages of a bigger and stronger Union. 

The  scale  of  the  challenges  ahead  thus  calls  for  an  ambitious  budget,  both  in  size  and 
design. 

14 Economic losses from weather- and climate-related extremes in Europe. EEA, Oct 2024.  
15 European Court of Auditors, Climate  adaptation in the EU  – Action not keeping up with ambition, Special 
Report 2024/15. 
16 United Nations (2024) The Sustainable Development Goals Report. 
17 Ukraine’s economy has continued to show resilience but risks remain exceptionally high given uncertainty on 
the intensity and duration of the war, including from the continued attacks on energy infrastructure.; IMF, Press 
Release No. PR24/425. 

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3.  ‘EUROPE’S CHOICE’ FOR A SIMPLER, MORE FOCUSED AND MORE 

IMPACTFUL BUDGET  

A more focused EU budget  

The ongoing implementation of the current financial framework provides some lessons 
on  how  to  increase  the  EU  budget’s  agility  and  better  align  it  with  our  priorities  and 
objectives.  Flexibility  is  key  in  guaranteeing  the  budget’s  ability  to  respond  to  a  changing 
reality.  However,  this  is  not  possible  if  EU  funds  are  nearly  all  pre-programmed  from  the 
startmore than 90% of the 2021-2027 multiannual financial framework and NextGenerationEU 
are  pre-allocated  for  specific  purposes,  programmes  or  national  envelopes18.  As  a  result, 
evolving  needs  and  crises  since  2021  have  been  addressed  by  repurposing  and  reallocating 
existing  funds,  in  sometimes  lengthy  procedures,  as  well  as  creating  new  ad  hoc  funds, 
programmes, or measures, further compounding the issue of scattering of EU funding. Greater 
focus and simplification are needed from the start to maximise the impact of EU funding, at a 
time of reflection on the future financial framework. 

The EU’s response to the economic fallout of Russia’s war of aggression against Ukraine 
provides an example of how a framework aligning our policy objectives with our spending 
priorities strengthens the impact of common EU action. When Russia’s war of aggression 
against Ukraine led to a sharp increase in energy prices, the need to further reduce reliance on 
fossil fuels and accelerate deployment of renewable energy heightened. Through the European 
Semester framework, a dedicated recommendation was addressed to all Member States, which 
they  were  then  able  to  implement  through  new  REPowerEU  chapters  in  the  Recovery  and 
Resilience Plans, including with additional EU funds. Our joint action allowed to reduce gas 
consumption by 18% between August 2022 and March 2024, overcome our dependency on 
Russian fossil fuels, ensured access to affordable energy and increased the production of energy 
from renewable sources19.   

Further  efforts  are  needed  to  achieve  a  true  policy-based  budget  to  ensure  synergies 
between  our  policies  and  the  financial  action  of  the  Union.  The  EU  budget  remains  too 
much driven by  the structures  of spending  programmes  rather than by policies. As a  result, 
financing of the current EU policy priorities is often scattered across sometimes overlapping 
programmes. There is room to reinforce the link between overall policy coordination and the 
EU  budget,  through  a  new  steering  mechanism  linking  EU  priorities  with  the  EU  budget. 
Concerning  competitiveness,  the  Competitiveness  Coordination  Tool,  together  with  a 
streamlined European Semester focused on reforms and investments at national level, will form 
part of a coherent and lean steering mechanism to inform decisions on investments and reforms 
at EU and national level. More broadly, the way EU policies inform and support the budgetary 
priorities could be improved, to ensure that the EU budget supports European public goods, 
notably cross-border projects. 

Greater coherence in the financing of internal and external policies is crucial to better 
promote the Union’s strategic interests. The complementarity with Member States’ external 
action requires coordination to maximise the effectiveness and visibility of European global 
investment  and  cooperation.  For  this  reason,  when  the  COVID-19  pandemic  hit,  ‘Team 
Europe’ was put in place to ensure a co-ordinated and comprehensive global response by the 
EU,  its  Member  States  and  European  public  financial  institutions.  Since  then,  the  ‘Team 
Europe’ approach has become the backbone of EU financing for international cooperation. The 

18 European Commission (2023) Annual management and performance report for the EU budget, Financial year 
2022. Volume 1, COM(2023) 401 final. 
19 https://energy.ec.europa.eu/publications/repowereu-2-years_en  

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Global Gateway initiative follows this approach, joining forces to identify common interests 
and lead a new wave of infrastructural investment around the world. At the same time, external 
action financing also covers a wide range of areas with significant internal and external policy 
interlinkages - from overall trade policy to materials, energy, climate, migration. Reviewing 
and scaling up best practices and the most efficient tools will help deliver on EU strategic and 
economic  security  interests  and  strengthen  mutually  beneficial  partnerships,  in  Europe’s 
neighbourhood and beyond.  

A simpler EU budget  

Access  to  EU  funding  is  hampered  by  the  existing  complexity.  While  the  number  of 
spending programmes has to some extent already been reduced at the beginning of the current 
period,  there  are  still  over  50  spending  programmes  in  the  budget  and  other  programmes 
outside  of  it20  While  this  illustrates  the  large  scope  of  EU  funding,  it  increases  the  risk  of 
overlaps and reduces the impact and transparency while possibly leaving gaps due to the lack 
of  comprehensive  and  coordinated  funding  approaches  for  cross-cutting  priorities  such  as 
competitiveness.  In  the  EU,  ‘weaknesses  along  the  “innovation  lifecycle”  (…)  prevent  new 
sectors  and  challengers  from  emerging,  [and]  begin  with  obstacles  in  the  pipeline  from 
innovation to commercialisation’21. This includes gaps in the support from the EU budget, as 
it does not provide seamless financing from research to innovation through development and 
deployment.  This  fragmentation,  coupled  with  complexity  and  rigidities,  weighs  on  the 
effectiveness of EU funding.  

Beneficiaries have difficulties in navigating the multiplicity of rules and criteria, despite 
the  simplification  measures  introduced  in  the  current  financial  framework22.  Different 
eligibility rules, application processes, co-financing rates, as well as multiple entry points for 
potential  applicants  put  at  risk  the  speed  and  quality  of  implementation  and  stakeholder 
involvement.  They  may  also  undermine  the  achievement  of  EU  objectives,  if  they  are 
inconsistent.  Responding  to  a  call  for  proposals  to  access  EU  funds  can  be  complex,  and 
particularly burdensome for Small and Medium Enterprises23. There are today more than 30 
tools  providing  technical  assistance  and  support  options,  with  scope  for  simplification  and 
eliminating overlaps. Moreover, the more complex the rules are, the higher the risk of spending 
errors. A true single point of entry for beneficiaries to all EU funding and advisory services in 
the next financial framework could facilitate access for beneficiaries. 

The fragmentation of the financial landscape also translates into too many programming 
documents,  which  are  resource-intensive  for  all  administrations  involved  and  cause 
delays. The current financial framework includes over 10 pre-allocated funds24 that require a 
separate  planning  and  programming  efforts. This  creates  a  heavy  administrative  burden  for 

20 European Court of Auditors (2023). The EU’s financial landscape A patchwork construction requiring further 
simplification and accountability. ECA Special Report 05. 
21 Draghi, M. (2024: 4). The Future of European Competitiveness, Part A: A competitiveness strategy for Europe. 
22 For instance, several simplification measures have been introduced in cohesion policy funds, mainly via the 
Common  Provision  Regulation:  sharp  reduction  of  management  verifications,  “single  audit  principle”, 
proportionate arrangements for audits, extended possibility to use simplified cost options and financing not linked 
to costs schemes. 
23  To  that  effect,  the  STEP  portal  provides  a  first  albeit  limited  overview  of  calls  for  proposals,  focusing  on 
innovative technologies, both at Member State/regional level and for programmes directly managed at EU level.  
24  The  following  programmes  are  nationally  pre-allocated:  Cohesion  Fund,  European  Regional  Development 
Fund,  European  Social  Fund+,  the  Just  Transition  Fund,  the  Recovery  and  Resilience  Facility,  European 
Agricultural Guarantee Fund, European Agricultural Fund for Rural Development, European Maritime, Fisheries 
and  Aquaculture  Fund,  Brexit  Adjustment  Reserve  and,  outside  the  EU  budget  or  the  multiannual  financial 
framework, the Social Climate Fund (from 2026) and the Modernisation Fund. 

6 

 
 
managing authorities and project promoters at the start of each financial period and leads to a 
substantial lag between the preparation of the financial framework and implementation on the 
ground.  This  has been the case  also  in  the 2021-2027 programming  period, where  the late 
adoption of the sectoral legislation and the lengthy process to adopt programming documents 
led to delays in implementation. For instance, the operational programmes of Cohesion policy 
funds were only adopted by mid-202225.  

Due to the late adoption of operational programmes and the  coexistence of several funds like 
the  Just Transition  Fund  and  the  Recovery  and  Resilience  Facility,  with  the  latter  having  a 
tighter  timeframe,  and  the  fact  that  national  authorities  focused  first  on  completing  the 
implementation of the funds under the 2014-2020 multiannual framework under the ‘n+3’ rule, 
less than 7% of the 2021-27 allocation had been paid out26, of which more than half is pre-
financing.  

Programming under external action financing, in particular for NDICI - Global Europe, also 
lasted up to three years.  

The  slow  implementation  of  some  programmes  on  the  ground  results  in  higher  outstanding 
commitments or “Reste à liquider” (Figure 1)27 and higher risk of decommitments, and may 
result in inefficiencies, as the policy priorities have shifted when there is a significant lag of 
several years between the priority setting, the programming and the actual implementation of 
the investments.  

Figure 1. Outstanding commitments of the EU budget  

Note: EUR, current prices, rounded to the nearest billion. Years 2024-2027 correspond to the long-term payments forecast.  

An EU budget with greater impact 

The EU budget leverages the overall financial capacity of the Union. The broader financial 
architecture of EU spending programmes includes loans, guarantees and financial instruments 
backed by the EU budget, and mobilises co-financing from Member States and beneficiaries. 
Through InvestEU and the European Innovation Council, the EU budget de-risks innovative 
projects and crowds in private sector investments. 95% of project promoters reported that their 

25 Sectoral acts were adopted in June 2021 and Member States’ operational programmes in the  second half of 
2022.  Despite  Member  States’  ambitious  roadmaps  envisaging  submission  of  their  programmes  to  the 
Commission for adoption by end-2020. 
26 https://cohesiondata.ec.europa.eu/cohesion_overview/21-27.  
27 See also COM(2024) 276 final. 26.6.2024. 

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projects would have either not proceeded at all or not as planned without InvestEU financing. 
Moreover, 58% of project promoters felt that the InvestEU guaranteed financing had impacted 
other financiers or investors’ decisions to commit to the project.  

However, unlocking private investments is still proving challenging in the current long-
term  budget.  There  is  room  to  optimise  the  risk-absorbing  capacity  of  the  EU  budget  to 
maximise  the  impact  of  public  resources.  For  instance,  higher  provisioning  is  necessary  to 
support sectors that face more difficulties in accessing market financing, e.g. high-risk sectors, 
or niche ones like biodiversity or social products. This could be counterbalanced by other lower 
provisioning products. The capacity of the EU budget to mobilise private investment through 
risk-sharing  instruments  is  hampered  by  limited  appetite  for  risk  as  implementing  partners 
remain mostly focused on relatively low-risk investment28. It has proven challenging to support 
defence-related projects with InvestEU in the current multiannual budget due to the internal 
rules of the implementing partners. Moreover, the InvestEU budget had a substantial top-up 
from  NextGenerationEU.  Due  to  the  NextGenerationEU  tighter  deadlines,  approvals  were 
heavily frontloaded, exhausting the availabilities for many financial products. As a result, new 
approvals for some financial products notably in high-risk areas will cease after 202529. The 
use of funding sources different from bank financing is still below potential: for instance, EU 
venture capital is underdeveloped, with funds raising just 5% of global venture capital versus 
52%  in  the  US.  Completing  the  Capital  Markets  Union  will  be  crucial  to  attract  private 
investments.  At  the  same  time,  the  EU  budget  can  complement  and  mobilise  private 
investments  thus  making  it  easier  for  commercial  banks,  investors  and  venture  capital  to 
finance  fast-growing  companies  and  address  barriers  that  restrict  the  amount  of  European 
capital available to finance innovation. The EU needs to make better use of its budget to de-
risk and leverage further national, private and institutional financing. 

Financing  the  green,  digital  and  social  transition  will  require  maximising  public 
investment  and  leveraging  private  capital.  Investing  to  achieve  the  EU’s  decarbonisation 
goals and removing barriers to our Energy Union offers the opportunity for Europe to lower 
energy prices, increase its energy security and take the lead in clean technologies. Reaching 
this goal will require streamlining EU financing for clean technologies, concentrating on the 
technologies where the EU has an advantage and strong potential for growth. In addition, EU 
financial  support  currently  excludes  operating  costs,  where  cost  gaps  are  greatest30. 
Fragmentation of the Single Market and of financing opportunities hinders the possibility for 
innovative companies to scale up, and this is especially the case for young, innovative tech 
companies. The failure to capitalise on the digital revolution is one of the factors hampering 
our competitiveness and will require substantial investments to keep pace with Europe’s main 
competitors: achieving sufficient scale in the support strategic projects will thus be crucial to 
fill  Europe’s  innovation  gap.  In  this  respect,  the  European  Investment  Fund  can  step  in  to 
further finance high-potential and fast-growing European companies. Overall, there is further 
scope for increasing the additionality of EU spending to ensure that the EU budget focuses on 
investments which would not have materialised otherwise. 

A  stronger  focus  on  performance  has  helped  aligning  EU  policy  objectives  and  EU 
spending. Some programmes have moved from payments based on the reimbursement of costs 
to delivery models that are more focused on objectives and results to be achieved. This is not 
only  the  case  for  the  Recovery  and  Resilience  Facility  –  a  large-scale  programme  where 
payments depend on the satisfactory fulfilment of pre-defined objectives – but also for other 

28 Draghi, M. (2024), The future of European competitiveness. Part A – A competitiveness strategy for Europe. 
29 SWD(2024) 229 final.  
30 Draghi, M. (2024), The future of European competitiveness. Part A – A competitiveness strategy for Europe. 

8 

 
 
programmes  such  as  the  Ukraine  Facility  and  the  Western  Balkans  Growth  Facility.  Other 
mechanisms have been used to improve the performance of EU spending, such as financing 
not linked to costs31,  and strategic planning. For example, a stronger performance orientation 
in  the  Common Agricultural  Policy  was  achieved  through  national  Strategic  Plans  shaped 
around  national  needs  and  capabilities,  which  also  link  all  interventions  with  indicators 
allowing to assess the progress of Member States in reaching their objectives. However, this 
has  not  yet  removed  excessive  complexity  at  the  level  of  individual  farmers.  Concerning 
cohesion,  the Council underlined the  need  to  reflect  on how to  make cohesion  policy more 
performance-based with a view to enhancing its efficiency, building on its own experiences as 
well as lessons learned from other EU instruments, and on its strengths – shared management, 
multi-level governance, place-based approach and partnership principle32. The Fit-for-Future 
Platform opinions on the evaluation of the cohesion funds resulting from a consultation of the 
Committee  of  the  Regions  network  of  regional  hubs  have  also  called  for  more  focus  on 
performance33.  

A  stronger  focus  on  performance  needs  to  come  together  with  simplification  and 
accountability.  Performance-based  approaches  have  important  positive  features  related  to 
efficiency and speed of implementation. At the same time, they have created entry costs for 
Member  State  administrations,  with  room  for  further  administrative  simplification34. 
Moreover, important factors of accountability and traceability of the EU funds must be equally 
taken into consideration. In this regard, the European Court of Auditors has identified areas 
with scope for improvement35,36.  

While the EU budget has contributed to promoting horizontal priorities such as climate 
action,  biodiversity,  and  gender  equality,  and  to  developing  a  stronger  performance 
framework, there is room for improvement. Despite the progress made to support horizontal 
priorities,  there  is  scope  to  improve  the  consistency  of  how  programmes  integrate  those 
priorities  in  their  design.  Moreover,  the  revised  Financial  Regulation  requires  that  EU 
programmes take into account, wherever relevant and possible, the Do No Significant Harm 
Principle,  working  and  employment  conditions,  and  the  principle  of  gender  equality.  Our 
performance  framework  is  robust  and  ensures  that  programmes  have  meaningful  indicators 
allowing to monitor EU spending and its results. However, the monitoring and reporting rules 
remain  complex,  with  different  methodologies  and  sets  of  indicators  depending  on  the 
programmes.  

A more flexible EU budget   

The EU budget needs to balance predictability for long-term investments and flexibility 
to  respond  to  crises.  The  EU  budget  is  different  from  national  budgets  insofar  as  it  is 
predominantly  an  investment  budget  subject  to  multiannual  planning.  At  the  same  time,  it 
requires  flexibility  to  respond  to  unforeseen  needs  (e.g.  large  economic  crises  or  natural 
disasters) or to finance new priorities in line with the rapidly evolving global landscape.  

31 Amounts are calculated as an ex-ante approximation of the actual costs. This is a possibility for the cohesion 
policy  funds  and  as  a  rule  under  the  Recovery  and  Resilience  Facility,  the  Social  Climate  Fund,  the  Ukraine 
Facility or the Western Balkans Growth Facility. 
32 Council conclusions on the Communication on the 9th Cohesion Report, 5 June 2024. 
33 Fit-for Future Platform opinions on the evaluation of the European Regional Development Fund, the Cohesion 
Fund and the Just Transition Fund and on the evaluation of the European Social Fund plus.  
34 COM(2024) 82 final. 
35 Special report 07/2023: Design of the Commission’s control system for the RRF. 
36  Special  report  26/2023:  The  Recovery  and  Resilience  Facility’s  performance  monitoring  framework  – 
Measuring implementation progress but not sufficient to capture performance. 

9 

 
 
The inherent rigidities of the multiannual financial framework need to be smoothened. It 
has historically revolved above 1% of EU GNI, and currently, together with NextGenerationEU 
–  1.7%  of  EU  GNI  (Figure  2).  Expenditure  is  locked  for  a  period  of  7  years  in  the  current 
financial framework, which means a longtime lag between the moment of policy design and its 
implementation. Furthermore, expenditures are bound within annual overall limits as well as 
limits per main area of activity (headings and sub-headings) which are set at the beginning of 
the period and constrain the transfer of resources37. With seven headings and two sub-headings, 
the current multiannual financial framework has the highest number of headings compared to 
the past. 
Figure 2. The EU budget as a percentage of GNI38 

The current budget also has some in-built financial flexibilities, but these are limited in 
size  and  are  often  rigid  in  their  use.  Special  instruments  over  and  above  the  expenditure 
ceilings can help cater for unexpected needs.  A few programmes have in-built flexibilities or 
cushions39. Altogether, available flexibilities amounted to 3.65% of the overall ceilings at time 
of adoption of the multiannual financial framework40. By the time of the mid-term revision of 
the financial framework, flexibilities in the EU budget were already depleted due to the size of 
the shocks they had to address, first and foremost the fallout of Russia’s war against Ukraine, 
but  also  natural  disasters  in  the  EU  and  beyond:  the  annual  allocation  of  the  Flexibility 
Instrument and the Solidarity and Emergency Aid Reserve had been fully mobilised in 2021-
2022;  79%  of  the  emerging  challenges  and  priorities  cushion  and  75%  of  the  unallocated 
margins for the whole period had been allocated. As a result, the Flexibility Instrument and the 
Solidarity  and  Emergency Aid  Reserve  had  to  be  reinforced,  and  two  new  instruments,  the 
EURI Instrument and the Ukraine Reserve, have been created to respond to unforeseen needs. 

At the same time, the EU budget has been increasingly called to respond to unexpected 
needs, as the crises Europe faced have become larger, more complex and more frequent. 
Through its built-in flexibilities and re-programming, the EU has been able to provide liquidity 
to  Member  States  in  major  recent  crises,  but  it  required  ad  hoc  solutions.  Cohesion  policy, 

37 Limits apply to total annual expenditure but also to individual headings.  
38  Integrated financial and accountability reporting. Overview : financial year 2023. Available at: 
https://op.europa.eu/publication-detail/-/publication/0f519222-47ed-11ef-aea6-01aa75ed71a1  
39  These  are:  the  ‘emergency  and  priorities  cushion’  (EUR  9  billion  for  2021-27)  within  the  Neighbourhood, 
Development and International Cooperation Instrument,  the  agricultural reserve in the CAP (slightly less than 
EUR 500 million per year in 2021-2022 and at least EUR 450 million per year as of 2023); thematic facilities 
under the Asylum, Migration and Integration Fund, the Border Management and Visa Instrument and the Internal 
Security Fund. 
40 Unallocated margins and thematic and non-thematic special instruments, as well as the emerging challenges 
and priorities cushion and the thematic facilities. 

10 

 
 
 
 
given  its  ability  to  deploy  substantial  means  at  regional  and  local  level,  was  an  important 
vehicle of EU’s response to the COVID-19 pandemic41. It was then called again to respond to 
the  fallout  from  Russia’s  war  of  aggression  in  Ukraine  (with  the  Cohesion’s  Action  for 
Refugees in Europe – CARE42 and FAST-CARE43, as well as SAFE44 to support SMEs and 
vulnerable households facing high energy costs). When floods swept across Europe, increasing 
in intensity and size, current instruments and the current cohesion set-up was insufficient to 
address  these  urgent  needs.  The  Commission  therefore  proposed  to  further  amend  existing 
cohesion  policy  rules  with  RESTORE,  to  allow  for  a  more  wide-ranging  support  for 
reconstruction  efforts  following  natural  disasters.  While  these  ad  hoc  solutions  have 
contributed  to  a  strong  European  response,  they  were  time-demanding,  and  provided  a 
piecemeal  response  to  repeated,  large  and  symmetric  shocks,  while  weighing  on  other 
objectives under cohesion policy. 

A budget that delivers on EU priorities 

Strong mechanisms are needed to guarantee that the funds deliver on EU policy priorities. 
All  investments  supported  by  the  EU  budget,  whether  implemented  by  the  Commission  or 
together with Member States and their regions, should contribute to these commonly agreed 
priorities.  

Delivering on EU priorities must be done together – with Member States and their regions 
shaping many of the EU investments on the ground, and the EU budget supporting and 
incentivising  their  action.  A  greater  focus  on  performance  supports  tangible  results,  by 
disbursing funds when the agreed objectives are demonstrably achieved. This, together with a 
common framework (e.g. do no significant harm principle, conditionality) helps strengthen our 
joint delivery on EU priorities. 

Moreover, not a single euro should be spent for activities where the principles of the rule 
of  law  are  not  safeguarded  or  the  protection  of  the  financial  interests  of  the  EU  not 
guaranteed. Rule of law and good governance are prerequisites to ensuring that funds are only 
used for their intended purpose. With the Conditionality Regulation, the Union has equipped 
itself with an effective instrument to protect the EU budget against breaches of the principles 
of the rule of law. The Recovery and Resilience Facility, together with the horizontal enabling 
condition  under  Cohesion  Policy,  has  also  demonstrated  how  the  EU  budget  can  promote 
reforms that strengthen the rule of law in the Member States. The Commission reporting on the 
rule of law45 has shown how Member States have made progress in recent years, but the nature 
and degree of challenges still vary across Member States. Remaining challenges include the 

41 Through the Coronavirus Response Investment Initiative and the Coronavirus Response Investment Initiative 
Plus, as well as REACT-EU. 
42 Regulation (EU) 2022/562 of the European Parliament and of the Council of 6 April 2022 amending Regulations 
(EU) No 1303/2013 and (EU) No 223/2014 as regards Cohesion’s Action for Refugees in Europe (CARE), OJ L 
109, 8.4.2022, p. 1–5. 
43  Regulation  (EU)  2022/2039  of  the  European  Parliament  and  of  the  Council  of  19  October  2022  amending 
Regulations (EU) No 1303/2013 and (EU) 2021/1060 as regards additional flexibility to address the consequences 
of the military aggression of the Russian Federation FAST (Flexible Assistance for Territories) – CARE, OJ L 
275, 25.10.2022, p. 23–29. 
44  Supporting  Affordable  Energy  measures  under  Cohesion  policy,  as  part  of  REPowerEU.  Regulation  (EU) 
2023/435  of  the  European  Parliament  and  of  the  Council  of  27  February  2023  amending  Regulation  (EU) 
2021/241 as regards REPowerEU chapters in recovery and resilience plans and amending Regulations (EU) No 
1303/2013, (EU) 2021/1060 and (EU) 2021/1755, and Directive 2003/87/EC, OJ L 63, 28.2.2023, p. 1–2. 
45 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social Committee and the Committee of the Regions, 2024 Rule of Law Report - The rule of law situation in the 
European Union. COM(2024) 800 final. 

11 

 
 
 
perception of judicial independence, the efficiency of justice systems, access to justice, and the 
fight against conflicts of interest and corruption. 

Respect for the rule of law cannot be taken for granted and should remain a must for EU 
funds.  The  next  multiannual  financial  framework  should  include  strong  safeguards  in  that 
respect. While the general regime of conditionality applies to all of EU funding, there is still 
margin to strengthen the link between the recommendations in the Rule of Law Report and 
financial support under the EU budget, including for enlargement countries.   

4.  THE FINANCING OF THE EU BUDGET  

Modernising  the  revenue  side  of  the  EU  Budget  is  necessary  to  address  the  following 
dilemma:  repayment  of  NextGenerationEU  –  which  the  EU  will  always  honour  – 
alongside  an  EU  budget  fit  for  our  ambitions  cannot  be  squared  with  stable  national 
financial contributions and the absence of new own resources.  

With NextGenerationEU, the EU is now the fifth largest issuer in the European capital 
market, with high credit rating. During the 2021-2027 period, the Union budget is paying 
the associated interest costs. From the next financial framework, the budget will start to repay 
the principal (used for non-repayable support, up to EUR 357 billion). The principal will be 
fully repaid by 2058 in line with the Own Resources Decision. Assuming full disbursement of 
NextGenerationEU  non-repayable  support,  linear  repayments  and  based  on  current  interest 
rates forecasts, to reimburse the principal and interest of NextGenerationEU debt, about EUR 
25-30 billion per year may be needed over the next multiannual financial framework. This 
is almost 20% of the current annual budget. This is twice the annual budget for Horizon 
Europe, and twice the total amount of the budget for security and defence under the current 
multiannual budget for the whole 7 years. While funds are still being raised and the interest 
rate  environment  is  changing,  in  all  scenarios  NextGenerationEU  repayments  will  require 
significant funding in the future.  
That  is  why  in  the  Interinstitutional Agreement  of  16  December  202046,  the  European 
Parliament,  the  Council  and  the  Commission  agreed  on  a  roadmap  towards  the 
introduction  of  new  own  resources.  The  Commission  has  fulfilled  its  commitments:  a 
comprehensive package on the next generation of own resources was presented in 2021 and 
adjusted in 2023, ahead of schedule. This includes revised proposals on the Emissions Trading 
System and Carbon Border Adjustment Mechanism and an own resource linked to company 
profits in the corporate sector. The Commission has also proposed an own resource based on 
Pillar 1 of the OECD/G20 agreement on the reform of the international tax framework.   

The Commission calls on the Council to resume work on the issue of new own resources as a 
matter of urgency, in line with the Interinstitutional Agreement from 2020 and the Budapest 
Declaration on the New European Competitiveness Deal47.  

5.  THE STATUS QUO IS NOT AN OPTION  

Europe is in an era of profound change – for our society and our security, our economy 
and our planet. The speed of change creates challenges which can only be solved through 

46  Interinstitutional  Agreement  on  budgetary  discipline,  on  cooperation  in  budgetary  matters  and  on  sound 
financial management, as well as on new own resources, including a roadmap towards the introduction of new 
own resources, OJ L 433I, 22.12.2020, p. 28–46. 
47 https://consilium.europa.eu/en/press/press-releases/2024/11/08/the-budapest-declaration/  

12 

 
 
 
 
joint action in a united Europe. It is imperative that the next EU budget plays a central role 
in promoting the EU’s sustainable prosperity, strengthens defence and security, bolsters EU 
competitiveness,  as  well  as  social  and  territorial  cohesion,  supporting  the  EU  on  the  way 
towards  becoming  the  first  climate-neutral  continent  in  the  world.  The  EU  budget  should 
continue  improving  the  quality  of  life  and  the  livelihoods  of  citizens,  farmers,  researchers, 
businesses  and  regions  across  Europe  and  beyond.  Ensuring  the  EU’s  prosperity, 
competitiveness,  sovereignty,  security,  resilience,  preparedness,  and  global  influence,  while 
upholding the highest standards on rule of law and democratic values. The EU budget supports 
all these priorities and will require a team effort by all institutions and stakeholders. 

In light of the policy and budgetary challenges discussed in this Communication, for the 
EU budget to achieve these objectives, the status quo is not an option48. The next long-term 
budget  will  have  to  address  the  complexities,  weaknesses  and  rigidities  that  are  currently 
present  and  maximise  the  impact  of  every  euro  it  spends,  focusing  on  EU  priorities  and 
objectives where the EU action is mostly needed. A new approach for a modern EU budget 
should present at its core:  

•  A plan for each country with key reforms and investments, and focusing on our joint 
priorities, 
territorial  cohesion.  A 
strengthened cohesion and growth policy with regions at its centre must be designed 
and implemented in partnership with national, regional and local authorities.  

including  promoting  economic,  social  and 

•  A European Competitiveness Fund establishing an investment capacity that will support 
strategic sectors and technologies critical to the EU competitiveness, including research 
and  innovation,  and  Important  Projects  of  Common  European  Interest.  The  Fund’s 
comprehensive  architecture  will  allow  it  to  accompany  European  projects  along  the 
entire investment journey, from research, through scale-up, industrial deployment, to 
manufacturing. It will also help to leverage and de-risk private investment. 

•  A revamped external action financing to make it more impactful and targeted for our 
partners, and more aligned with our strategic interests. This should contribute to a new 
foreign policy.  

•  Strong safeguards on the protection of the rule of law.  

•  Strengthened  and  modernised  revenues,  notably  via  new  own  resources,  to  ensure 

sufficient and sustainable financing for our common priorities. 

6.  NEXT STEPS  

Shaping  the  next  long-term  EU  budget  requires  a  shared  analysis  on  the  underlying 
challenges and close cooperation, in view of the preparation of the Commission proposal. 
A strong and effective EU Budget is a common interest. Therefore, the proposal for the next 
financial framework will build on a broad consultation, with input at political, institutional and 
stakeholder level, alongside with active citizens’ involvement.  

Continued  and  structured  dialogue  with  Member  States’  representatives,  at  different 
levels, across Europe will be crucial to determine ‘what’ and ‘how’ to finance our joint 
future. Against this background, the Commission will engage at different levels in an inclusive 
process as part of its preparation for the next multiannual financial framework.  

48 Budapest Declaration on the New European Competitiveness Deal, 8 November 2024. 

13 

 
 
 
Comprehensive dialogue with stakeholders will support the preparation of the EU budget 
of  the  future.  This  includes  a  series  of  thematic  public  consultations  launched  today  in 
preparation  of  the  next  generation  of  EU  spending  instruments.  The  launch  of  a  citizens 
engagement platform will be a first step leading to a Citizens’ Panel on the future long-term 
budget, which will take place from March to May. The platform will invite citizens to join the 
debate. The Annual Budget Conference in May 2025 will be an opportunity to bring together 
the different views, in an inclusive and open debate, in preparation of an ambitious financial 
framework. 

The  European  Parliament  will  be  an  important  player  in  shaping  the  next  long-term 
budget.  In  this  regard,  the  Commission  looks  forward  to  the  European  Parliament’s 
forthcoming own initiative report. The involvement and input of other institutions and bodies, 
such  as  the  European  Court  of Auditors,  the  Committee  of  the  Regions  and  the  European 
Economic and Social Committee, as well as implementing partners will also enrich the debate 
on the design of the future EU finances. 

Against  this  backdrop  and  to  allow  for  sufficient  time  for  meaningful  consultations  of 
different stakeholders, the Commission intends to present the next financial framework 
in July 2025. The Commission proposal will ensure that the upcoming package constitutes a 
solid basis for a swift and timely agreement on the next financial framework well ahead of its 
start as of January 2028.  

The  next  multiannual  financial  framework  must  lay  the  groundwork  for  a  stronger  and 
future-oriented Union.  

14