COMMISSION STAFF WORKING DOCUMENT Accompanying the document 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 A dynamic EU budget for the priorities of the future: the Multiannual Financial Framework 2028-2034
Date: 2025-07-16
Institutions: European Commission, Secretariat-General
Subjects: EU budget, EU expenditure, budgetary procedure, budgetary resources, commitment of expenditure, financial management, financing of the EU budget, multiannual financial framework

EN 

  EN 

   EUROPEAN COMMISSION  Brussels, 16.7.2025  SWD(2025) 570 final  COMMISSION STAFF WORKING DOCUMENT Accompanying the document 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 A dynamic EU budget for the priorities of the future: the Multiannual Financial Framework 2028-2034 {COM(2025) 570 final} - {SWD(2025) 571 final}  
 
 
Executive summary 

The Commission’s proposal for the 2028-2034 Multiannual Financial Framework (MFF) 
comes  at  a  time  of  heightened  global  uncertainty,  and  it  matches  the  ambition  of  a 
stronger,  more  independent  and  more  competitive  Europe.  As  discussed  in  the 
Communication  accompanying  the  MFF  proposal,1  the  Union  is  facing  a  series  of 
generational challenges. The size and design of the next EU budget must fit the ambitions and 
the needs of the coming decade, in an environment that is increasingly uncertain. At the same 
time,  with  the  need  to  reimburse  NextGenerationEU  as  of  2028,  this  proposal  for  the  next 
long-term  budget  aims  at  squaring  the  circle  between  a  budget  fit  for  our  ambitions,  stable 
national contribution and the need for new sources of revenue. 

The Union needs a simpler, more flexible and sharper MFF. The ongoing implementation 
of the 2021-2027 MFF and of NGEU provides valuable lessons  for the next one. This Staff 
Working Document (SWD) identifies several key lessons learnt.  

1.  The  current  MFF  is  not  flexible  enough.  Predictability  is  key  in  the  EU  budget  for 
beneficiaries, project promoters and Member States. However, the current architecture is 
too  rigid  (also  because  of  the  high  number  of  headings),  and  flexibility  tools  are 
fragmented, small in size, and cannot be easily redeployed. Additional targets, objectives 
and  earmarking  of  amounts  further  constrain  budgetary  implementation.  The  constraints 
due to limited flexibility were compounded by the high inflation in the early years of this 
MFF. 

2.  The current MFF is  fragmented. In  comparison to  previous programming  periods, the 
current  budget  further  reduced  and  streamlined  the  number  of  programmes.  Yet,  the 
architecture  remains  complex,  with  52  programmes  and  instruments  that  often  finance 
similar  activities  but  differ  in  intervention  logic,  eligibility  criteria,  target  groups,  and 
administrative management. 

3.  There  is  significant  scope  to  reduce  administrative  burden.  For  programmes  with 
funds  allocated  to  Member  States,  this  burden  arises  mainly  from  complex  reporting 
requirements,  and  different  requirements  across  programmes.  In  addition,  technical 
assistance  and  support  to  administrations  and  beneficiaries  are  provided  in  a  scattered 
manner under different rules for eligibility.  

4.  The  EU  budget’s  impact  can  be  increased  further  by  accelerating  implementation, 
removing  gaps  and  overlaps  and  improving  leveraging.  In  the  financing  for 
competitiveness,  there  is  a  gap  in  EU  funding  for  higher  technology  readiness  levels. 
Addressing  the  new  and  unexpected  needs  during  this  funding  period  required  ad  hoc 
solutions  and  new  instruments  that  took  time  to  be  adopted.  The  slow  start  in 
implementation in the current financing period also resulted in a high level of outstanding 
commitments. 

5.  There  is  room  for  further  improvement  in  budgetary  performance,  particularly  in 
terms  of  simplification,  consistency  and  better  monitoring  of  EU  budget  results. 

1  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, COM(2025)570 final. 

1 

 
 
 
 
 
 
There  are  over  5,000  heterogeneous  and  non-aggregable  indicators  used  for  programme 
monitoring and evaluation, resulting in administrative burdens for all stakeholders. 

6.  The increased number of tasks on EU institutions in recent years has stretched the 
resources of EU administration, in a context of stable staffing. The additional staffing 
needs  presented  together  with  the  legislative  proposals  since  the  entry  into  force  of  the 
current  MFF  amount  to  over  1.660  full-time  equivalents,  which  were  matched  only  by 
redeployment of staff. This, combined with high inflation affecting rents and other fixed 
costs, made the current set-up of the administrative heading no longer fit for purpose. 

7.  The  current  own  resources  system  has  ensured  stable  and  predictable  financing  of 
the  EU  budget,  but  the  budget  is  largely,  and  increasingly,  dependent  on  GNI 
contributions,  which  will  reach  its  limits  as  financing  needs  increase.  Additional 
sources of revenue are necessary to match needs and ambitions and, at the same time, not 
weigh on national contributions. 

The Communication on “The road to the next MFF” adopted in February2 stressed that 
the  scale  of  the  challenges  ahead  thus  calls  for  an  ambitious  budget,  both  in  size  and 
design. The Commission’s proposal is ambitious, realistic and balanced. The proposed 2028-
2034 MFF is ambitious in size, at 1.26% of EU GNI (EUR 1,984 billion, including EUR 168 
billion  or  0.11%  of  EU  GNI  for  repayment  of  NextGenerationEU),  and  in  design,  as  it 
presents  a  thorough  simplification  of  the  EU  budget  architecture  and  an  unprecedented 
modernisation  on  the  revenue  side.  The  proposal  is  realistic,  as  it  aims  at  not  impacting 
national contributions. And it is balanced, as it puts its focus on EU added value. 

Based on the lessons learnt from the 2021-2027 MFF, the next MFF proposal is based on 
five  principles:  flexibility,  simplification,  impact,  protection  of  the  EU  budget  and 
modern  revenues.  Higher  budgetary  flexibility  will  be  achieved  reducing  the  number  of 
headings  from  seven  (plus  one  sub-heading)  to  four,  reducing  the  share  of  pre-programmed 
amounts  to  facilitate  reallocations  within  programmes,  simplifying  the  structure  of  special 
instruments over and above the ceilings and introducing an exceptional and temporary crisis 
mechanism  to  provide  additional  loans  to  Member  States  in  case  of  a  large  crisis.  The 
budgetary architecture will be simplified by reducing the number of programmes from 52 to 
16, introducing  a Portal  consolidating  information  on funding opportunities and providing a 
single  gateway  to  EU  project  promoters  for  simplified  access  to  information,  and  through  a 
single  framework  for  monitoring  and  performance.  In  terms  of  impact,  expanded  use  of 
financial instruments and budgetary guarantees will further leverage the EU budget to unlock 
private capital. Additional incentives in terms of pre-financing will speed up the impact of the 
EU budget on the ground. A new steering mechanism, with a reinforced dialogue between the 
European  Parliament,  the  Council  and  the  European  Commission  will  reinforce  the  link 
between  overall  policy  coordination  and  the  whole  EU  budget.  Respect  for  the  rule  of  law 
will continue to be a must for access to EU funding. On the revenue side, new own resources 
are essential. They should have a significant revenue potential, not create excessive burden for 
compliance and administration, and be consistent with the Union’s objectives and policies. 

2  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”, COM(2025) 46 final. 

2 

 
 
 
 
 
The  ambitious  multiannual  financial  framework  is  accompanied  by  an  enhanced 
proposal on own resources. The Commission is proposing the introduction of five new own 
resources: (i) an own resource based on revenue from the emissions trading system already in 
place,  ETS  1;  (ii)  an  own  resource  based  on  the  Carbon  Border  Adjustment  Mechanism 
(CBAM); (iii) an own resource based on e-waste; (iv) a Tobacco Excise Duty Own Resource 
(TEDOR) and (v) a Corporate Own Resource for Europe (CORE). The adjustments to current 
own resources include a reduction in Member States’ collection costs for customs duties and 
the  increase  in  the  call  rate  for  the  own  resource  based  on  non-recycled  plastic  packaging 
waste to account for inflation developments. 

3 

 
 
 
 
 
 
1. Context of the proposal 
The EU budget is at the heart of the Union’s policies. It supports long-term investments 
and  the  resilience  of  the  EU’s  economy.  Over  60%  of  the  funds  in  the  current  MFF  and 
NextGenerationEU  (NGEU)  are  focused  on  investment,  ranging  from  infrastructure,  skills, 
research and development, to space and defence3. At the same time, our long term budget has 
increasingly had to respond to shocks and crises that could not be foreseen at the time the 
long-term budget was conceived. 

The proposal for the next Multiannual Financial Framework (MFF) comes against the 
backdrop  of  a  drastically  changed  geopolitical  and  geoeconomic  setting  marked  by 
uncertainty. Our competitiveness and sovereignty are challenged. The next long-term budget 
will  start  in  more  than  two  years  from  the  time  of  the  proposal  and  will  cover  seven  years. 
Therefore, while this MFF provides for strategic responses to this new global environment, one 
structural lesson learned is that our budget has to cater for the unexpected and remain flexible 
to adjust to yet further change and challenge. 

The  MFF  proposal  is  based  on  current  expectations  on  the macro-economic  and  fiscal 
context.4 The EU economy is expected to continue to grow, despite high uncertainty on global 
economic developments and with increasing headwinds for economic growth stemming from 
the volatile trade and security situation. Inflation is set to decrease in 2025-2026, falling slightly 
below 2%. Fiscal consolidation is expected to continue at a moderate pace. The recent reform 
of  EU  fiscal  governance  reinforced  the  link  between  national  budgets  and  the  EU  budget: 
Member  States  have  undertaken  reforms  and  investments  financed  with  EU  funding,  and 
consistent and complementary with the commitments included in the Recovery and Resilience 
Plans and the Partnership Agreements agreed under the MFF. These reforms and investments 
will  be  taken  into  account  in  the  assessment  of  the  medium-term  fiscal  adjustment  paths. 
Moreover,  national  co-financing  on  Union-funded  programs  is  now  excluded  from  the 
calculation of next expenditure growth. 

Joint investment at the EU level on common goals can generate savings at the aggregate 
level, which benefit national budgets.5 The next MFF proposal thus provides an important 
opportunity to further increase the coherence between EU spending, EU priorities and national 
spending on priority investments. 

As of 2028, the EU is due to start repaying the debt contracted to finance NGEU. The needs 
to repay NGEU come alongside new policy needs generated by the challenging global context, 
and the financing of existing priorities. At the same time, many Member States are in the process 
of  fiscal  consolidation,  which  limits  the  possibility  to  increase  the  national  budgetary 
contributions.  While  a  budgetary  architecture  focused  on  EU  priorities  and  more  efficient 
delivery  systems  can  provide  some  relief  to  the  budget,  this  will  not  be  sufficient.  It  is 
imperative to reform the revenue side of the EU budget and equip it with more own resources 
to limit the need of national contributions. 

3 See box 2.1 on the EU budget support to investment activity 
4 See  also  European  Commission  (2025)  European  Economic  Forecast  –  Spring  2025.  European  Economy  – 
Institutional paper 318. 
5 Busse, M., Huidan Lin, H., Nabar, M. S. and J. Yoo (2025) “Making the EU’s Multiannual Financial Framework fit 
for purpose”, IMF Working Paper WP/25/114. 

4 

 
 
 
 
 
 
 
 
 
The  ongoing  implementation  of  the  2021-2027  MFF  and  of  NGEU  provides  valuable 
lessons for the design of the future one. As discussed in this Staff Working Document (SWD), 
the succession of unexpected crises and a changed geo-political and geo-economic landscape 
in recent years has brought the EU long-term budget to its limits. The mid-term revision agreed 
in  20246  provided  the  tools  to  address  the  most  pressing  needs,  in  particular  support  to 
Ukraine,  but  required  long  and  complex  discussions  despite  the  general  agreement  on  the 
priorities. Moreover, despite some improvements compared to the past, budgetary complexity, 
fragmentation  in  too  many  programmes,  and  overlaps  have  hampered  access  to  funding, 
reduced impact and slowed implementation. 
The 2028-2034 MFF has thus been designed with five key principles in mind: (i) flexibility; 
(ii) impact; (iii) simplification; (iv) coherence and (v) protection of the Union budget. 

This  SWD  describes  the  assessment  of  the  implementation  of  the  2021-2027  MFF  and 
provides the analytical assessment behind the proposal for the next long-term budget. 

2. The 2021-2027 MFF: lessons learnt 
2.1 Limited flexibility 

The EU budget has had to respond to new policy needs as well as to large and unexpected 
crises  in  and  outside  the  EU  in  the  past  years.  This  has  exposed  design  limitations,  as 
confirmed by the mid-term revision which enabled the bare minimum for coping with the 
multiple crises. It provided support to address the unforeseen shocks of the pandemic, Russia’s 
war of aggression against Ukraine, and also natural disasters of a new scale. To some degree 
this support to affected Member States and regions was enabled by means of built-in flexibilities 
and re-programming. However, this required in most cases changes to existing programmes and 
tools or even required new legislation which cost time. Examples are the Cohesion Action for 
Refugees in Europe (CARE),7 Flexible Assistance to Territories (Fast-CARE),8 RESTORE,9 
REPowerEU10 and the Ukraine Facility.11 This has allowed to address the most urgent needs, 
but added complexity to the budget and to its management. It provided fragmented responses 
to  repeated,  large  and  symmetric  shocks.  Also,  this  response  came  at  the  expense  of  other 
policy  objectives.  Cohesion  funding,  in  particular,  has  been  often  redeployed  towards  other 
needs  and  emergencies.  This  has  led  to  a  quick  depletion  of  the  anyhow  small  available 

6  Council  Regulation  (EU,  Euratom)  2024/765  of  29  February  2024  amending  Regulation  (EU,  Euratom) 
2020/2093 laying down the multiannual financial framework for the years 2021 to 2027. 
7 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). 
8  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. 
9 Regulation (EU) 2024/3236 of the European Parliament and of the  Council of 19 December 2024 amending 
Regulations  (EU)  2021/1057  and  (EU)  2021/1058  as  regards  Regional  Emergency  Support  to  Reconstruction 
(RESTORE). 
10  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. 
11 Regulation (EU) 2024/792 of the European Parliament and of the Council of 29 February 2024 establishing 
the Ukraine Facility. 

5 

 
 
 
 
 
 
 
 
 
 
flexibilities. 

The reason for such fragmented approach lies in the lack of flexibility of the architecture 
of the current MFF.  Whereas the MFF is designed to ensure predictability,  experience has 
shown that, the MFF in its current construction has been too rigid. Moreover, flexibility tools 
are  fragmented,  small  in  size,  and  cannot  be  easily  redeployed.  Finally,  additional  targets, 
objectives and requirements further constrain the implementation of the EU budget. 

The structure of the EU budget is too rigid. The 2021-2027 multiannual budget is the one 
with the highest number of headings (seven, plus one sub-heading), together with the 2000- 
2006 one. Furthermore, more than 90% of the 2021-2027 MFF and NextGenerationEU are pre- 
allocated for specific purposes, programmes or national envelopes, which makes very difficult 
to re-direct unused funds for new, emerging needs. 

Flexibilities,  in particular special instruments, are too fragmented.  For that reason,  they 
cannot  compensate  the  rigid  MFF  design.  With  seven  headings,  unallocated  margins  are 
scattered among the headings and cannot be moved across headings for the same year. There 
are  currently  eight  special  instruments  over  and  above  the  MFF  ceilings,  divided  between 
thematic and non-thematic ones. The non-thematic special instruments (Flexibility Instrument 
and  Single  Margin  Instrument)  are  the  only  tools  providing  the  possibility  to  address 
unpredictable  events  or  new  and  emerging  priorities  across  all  the  budget  lines.  The  Single 
Margin Instrument in particular allows for the use of available commitment and/or payment 
margins from the past to finance additional expenditure above the ceilings of another heading. 
Thematic  special  instruments  provide  additional  means  for  specific  objectives.  In  the  MFF 
2021-2027 these are the Solidarity and Emergency Aid Reserve (composed of the EU Solidarity 
Fund and the Emergency Aid Reserve), the European Globalisation Adjustment Fund (EGF), 
the  Brexit  Adjustment  Reserve  (BAR),  the  European  Union  Recovery  Instrument  (EURI) 
instrument and the Ukraine Reserve. 

Only some programmes have unallocated reserves or cushions.  These are the cushion in 
NDICI-Global Europe, the Thematic Facilities in the Home funds12 and the agricultural reserve 
in the European Agricultural Guarantee Fund (EAGF). 

instruments,  unallocated  margins, 

Finally, and on top of the rigidity in the design, flexibilities in the EU budget are simply 
too  small  to  be  able  to  respond  properly  to  changing  geopolitical  and  economic 
circumstances.  All  special 
the 
Neighbourhood,  Development,  and  International  Cooperation  Instrument  (NDICI)  –  Global 
Europe and the Thematic Facilities in the Home funds amounted to 4% of the MFF ceilings at 
the time of adoption compared to 6.2% in the Commission proposal in 2018.13 However, only 
considering  ‘pure’  flexibilities,  this  amounts  to  1.2%.  As  most  of  these  flexibilities  proved 
insufficient and were mostly depleted already at the time of the MFF mid-term revision14, they 
were overall reinforced for the period 2024-2027.  

the  cushion 

in 

Available  thematic  flexibilities  cannot  be  easily  redeployed.  The  Brexit  Adjustment 

12 Asylum, Migration, and Integration Fund; Border Management and Visa Instrument; Internal Security Fund. 
13 See Annex A.1.3 
14 SWD(2023) 336 final. 

6 

 
 
 
 
 
 
 
 
 
 
 
Reserve (BAR) and, in particular, the EGF were not fully used due to limited demand. 
However, they could not be easily redeployed as the BAR was pre-allocated to Member States 
and the EGF unused amounts could not be transferred. The BAR was first redeployed by giving 
Member States the possibility to voluntarily transfer part of their allocation to REPowerEU. In 
2024, remaining EUR 580 million were redeployed to contribute to finance the MFF mid-term 
revision. The EGF had only been mobilised by less than 20% annually at the time of the mid- 
term revision, and its annual amount was cut from EUR 186 million to EUR 30 million per year 
(in 2018 prices) to contribute to finance the mid-term revision. 

During the current MFF, substantial redeployments were implemented, especially in the 
MFF  mid-term  revision.  The  European  Chips  Act,  the  Act  in  Support  of  Ammunition 
Production, or the Union Secure Connectivity IRIS2, for instance, were all financed through 
redeployments (see annex A.1.1). However, this required very long and complex discussions 
and budgetary solutions: for instance, the envelope of the Union Secure Connectivity IRIS2 is 
split across three headings (heading 1, 5 and 6). The mid-term revision of the MFF included 
redeployments for a total amount of EUR 10.6 billion (Table 2.1). Redeployments also involved 
the use of instruments outside the MFF. For instance, REPowerEU provided additional grants 
to Member States through the revenues from the sale of ETS allowances worth EUR 20 billion, 
as well as adjustments within the Recovery and Resilience Facility (RRF), as well as transfers 
from the BAR and voluntary transfers from Cohesion Policy and Rural Development Funds as 
well as Connecting Europe Facility (CEF). 

Table 2.1. Redeployments in the MFF mid-term revision 

Redeployments (EUR billion, current prices) 

NDICI and IPA 
European Globalisation Adjustment Fund 

Horizon Europe 
Brexit Adjustment reserve 
Cohesion/CAP directly managed envelope 
EU4Health 

Total redeployments 

4.5 
1.3 

2.1 
0.6 
1.1 
1.0 

10.6 

The mid-term revision provided important corrections in the flexibility architecture of the 
MFF. First, it was acknowledged that the Solidarity and Emergency Aid Reserve covering both 
internal and external emergencies had proved inefficient, in addition to an insufficient size.15 
The  EU  Solidarity  Fund  (EUSF)  and  the  Emergency  Aid  Reserve  (EAR)  were  thus  split  in 
separate  envelopes.16  Second,  the  MFF  mid-term  revision  equipped  the  EU  budget  with  the 
necessary tools to withstand the impact of increasing interest rates for NGEU debt. The EURI 
instrument  and  the  ‘cascade’  approach  to  its  mobilisation  provided  budgetary  clarity  on  the 
treatment of the NGEU financing costs overrun. They also introduced the important novelty of 
financing the instrument by an amount equivalent to decommitments from other programmes. 

15 The largest cut compared to the Commission proposal of May 2020 affected the SEAR: the European Union 
Solidarity Fund was not retained as a separate instrument, and instead merged within the SEAR, which has itself 
an envelope 60% lower than the Commission proposal. 
16 The ‘European Solidarity Reserve’, to provide support to affected countries and regions under the EUSF and the 
EAR to provide budgetary reinforcements to relevant Union programmes in response to crises and emergencies 
within and outside the Union. 

7 

 
 
 
 
 
 
 
 
 
This increased the efficiency in the use of MFF resources and provided certainty over the source 
of financing and ultimately to Member States’ contributions to finance the budget. 

2.2 Volatile inflation and interest rates 
The  first  years  of  the  2021-2027  MFF  were  characterised  by  very  high  inflation  and 
increasing interest rates. The unfavourable price and interest environment affected negatively 
the  MFF.  The  purchasing  power  of  the  EU  budget  was  diminished  in  real  terms.  The  MFF 
expenditure ceilings are adjusted annually by a 2% fixed deflator which has been substantially 
below actual inflation over the period 2021-2024.17 The adjustment mechanism based on a fixed 
rate provides predictability for beneficiaries to enter in long term investments and for Member 
States  contributions.  At the same time, when inflation  deviates from  the fixed benchmark it 
affects the financial capacity of the budget in real terms. 

When  actual  inflation  deviates  from  the  2%  fixed  deflator,  this  has  an  impact  on  the 
purchasing power of the EU budget. When inflation is below 2%, which was the case from 
2009  to  2020,  the  real  value  of  the  programmes’  envelopes  increases.  The  MFF  ceilings  as 
adjusted based on the 2% deflator can provide increased expenditure capability – in real terms 
– for the budgetary authority (European Parliament and Council) and the Commission. It is then 
the budgetary authority’s choice, in principle, to decide whether to use such additional room, 
or keep expenditure rather stable in real terms.  In contrast, when inflation is above 2%, this 
erodes  the  real  value  of  MFF  expenditure.  In  theory,  the  budgetary  authority  could  use  the 
unallocated margins or special instruments to (partially) compensate for price increases above 
2%, but if the trend is sustained, it ultimately reduces the purchasing power of the EU budget. 

Figure 2.1. MFF 2021-2027: Annual ceilings in real terms: fixed deflator and actual inflation 
(2021 prices) 

Source. AMECO and European Commission Spring 2025 forecast for 2025-2027 

By  end  2027  the  MFF  will  have  lost  6.5%  of  its  value,  based  on  the  latest  forecasts.18 
Deviations of actual inflation from the fixed deflator in the early years have a bigger impact 
over  the  whole  period’s  envelope  as  they  accumulate  over  time.  Figure  2.1  shows  the  MFF 

17 Art. 4(2) of Council Regulation (EU, Euratom) 2020/2093 of 17 December 2020 laying down the multiannual 
financial framework for the years 2021 to 2027. 
18 European Commission – Spring 2025 forecast. 

8 

 
 
 
 
 
 
 
 
 
 
commitment ceilings in the 2021-2027 MFF converted from current prices, for comparability, 
into 2021 prices using both the fixed 2% deflator and actual inflation (as measured by the GDP 
deflator).  As  average  annual  inflation  is  forecast  at  3.49%  over  the  7-year  period,  with  the 
highest  values  in  2023  (6.1%)  and  2022  (5.5%),  the  real  value  of  MFF  expenditure  is 
significantly lowered. This effect increases over time, as high inflation in the early years of the 
MFF has a ‘snowball effect’ on later years. 

The  impact  of  higher-than-expected  inflation  differs  across  Member  States  and 
programmes. Member States that experienced higher inflation in 2022-2023 have been more 
impacted, other things being equal. High inflation reduces the real value of a grant in real terms 
(e.g., Horizon Europe, European Defence Fund, Erasmus+, Creative Europe, CEF). Grants to 
students  or  teachers  are  provided  mostly  as  lump  sums/flat  rates  in  Erasmus+.  Therefore, 
inflation  has  the  biggest  impact  on  low-income  beneficiaries.  The  number  of  projects  and 
researchers that can be supported (and the number of grants) under Horizon Europe decreases 
with  high  inflation.  For  programmes  in  shared  management,  with  a  given  nominal  amount, 
national and regional authorities will not be able to finance the same number of  of projects. 
Inflation is also felt by the farms that receive direct payments. For programmes that procure a 
given infrastructure, or service, such as the Space programme or the Union Civil Protection 
Mechanism, the costs for developers and operators increase when inflation is above target. 

The most direct impact of inflation is on indexed expenditures such as for administrative 
expenditure (rents, energy, contracts for services, IT etc), but also the budget lines paying 
the support expenditure of the programmes.19 For all the support expenditure, the increase 
in  costs  puts  pressure  on  operational  budget  of  the  programmes  concerned.  Moreover,  for 
programmes  in  indirect  management  such  as  Erasmus+,  implementing  partners  or  national 
agencies face higher salaries of their staff. 

The rapid increase in interest  rates has pushed the financing costs of NGEU upwards, 
necessitating the creation of the EURI Instrument in the MFF mid-term revision. The MFF 
2021-2027 planned EUR 14.9 billion (in current prices) under the MFF ceilings for covering 
the interest payments for NGEU non-repayable support, based on a historical mean reversal 
assumption.20 Because of the increase in interest rates in 2022-2023, this amount was no longer 
sufficient, putting pressure on other expenditures and the flexibilities of the budget. The MFF 
mid-term revision, as mentioned above, thus introduced a new special instrument exclusively 
to cover such cost overruns. All in all, with the benefit of hindsight, this experience shows that, 
from a budgetary perspective, inherently volatile and uncertain expenditures are better placed 
over  and  above  the  MFF  ceilings,  unless  other  ways  are  available  to  address  the  budgetary 
implications of interest rate volatility. 

2.3 Fragmentation and complexity 
In comparison to previous programming periods, the current budget further reduced and 
streamlined  the  number  of  programmes.  InvestEU  consolidated  several  heterogenous 
financial instruments and one budgetary guarantee. The Single Market Programme merged six 
predecessor programmes and several former prerogative budget lines, although the governance 

19 Heading  7;  research  staff  paid  from  Heading  1;  contract  agents  paid  from  various  shared  management  and 
external programmes; staff paid from NGEU resources. 
20 See also SWD(2023) 336 final, page 36. 

9 

 
 
 
 
 
 
 
 
 
structure remains  fragmented. Other examples  are the Citizens, Equality,  Rights and Values 
Programme  (which  merged  the  Citizens  Programme  and  Rights  and  Values),the  European 
Social Fund+ (which brought together the European Social Fund, the Fund for European Aid 
to  the  Most  Deprived,  the  Youth  Employment  Initiative  and  the  European  Programme  for 
Employment  and  Social  Innovation)  and  the  NDICI-GE  (which  combined  several  external 
action programmes as well as the off-budget European Development Fund). 

Yet, the architecture of the MFF remains complex, with 52 programmes and instruments 
that  often  finance  similar  activities  but  differ  in  intervention  logic,  eligibility  criteria, 
target groups, and administrative management. For instance, 13 programmes in and outside 
the  MFF  finance  energy  investments  in  the  EU,21  nine  finance  digital  technologies  and 
digitisation,22 and more than ten programmes support health and healthcare.23 Programmes for 
candidate and accession countries also pursue similar and partly overlapping objectives, such 
as  NDICI-GE,  the  Instrument  for  Pre-accession  Assistance  (IPA),  the  Reforms  and  Growth 
Facility for the Western Balkans and the Facility for Moldova.  In other cases, particularly in 
defence, new instruments had to be created to address new challenges for which the existing 
instruments were not fit for purpose (e.g. Act in Support of Ammunition Production (ASAP), 
European Defence Industry Reinforcement through common Procurement Act (EDIRPA), and 
the proposed European Defence Industry Programme (EDIP)). 

The Common Provisions Regulation (CPR) improved the coherence of the rules applied 
to  funds  under  shared  management.  The  coverage  of  the  funds  for  migration,  border 
management and internal security has enabled better alignment with the other 5 funds in shared 
management.24  However,  the  exclusion  of  rural  development  from  the  CPR  in  this 
programming  period  has  reduced  synergies  with  some  similar  policy  interventions  and 
multiplied the regulatory requirements for Member States. 

The multitude of funds with different legal bases has constituted a patchwork approach 
to crosscutting issues, including for instance crisis management. The increasing frequency 
of trans-national crises (e.g. the 2015 migration crisis, the COVID-19 pandemic, and various 
health, natural,  and man-made disasters) has resulted in the development of numerous crisis 
management  tools,  such  as  the  Emergency  Support  Instrument,  the  Support  to  mitigate 
Unemployment  Risks  in  an  Emergency  (SURE),25  NGEU,  support  related  to  health  and  the 
Health Emergency Response Authority (HERA), and the Ukraine Facility, among others. More 
specifically, financing for crisis management is currently scattered across (Figure 2.2): 
•  eight  specific  crisis  response-oriented  instruments:  HOME  funds’  emergency  assistance, 
European  Solidarity  Corps  (Voluntary  Aid  strand),  Macro  Financial  Assistance  (MFA), 
the  exceptional  measures  under  European  Maritime  Fisheries  and  Aquaculture  Fund 

21 Connecting Europe Facility-Energy, LIFE – Clean Energy Transition, European Regional Development Fund, 
Just Transition Fund, Cohesion Fund, ESF+, Horizon Europe Pillar II, InvestEU, ITER, RRF, Innovation Fund, 
Social Climate Fund, Modernisation Fund. 
22 ERDF, Cohesion Fund, Just Transition Fund, Digital Europe Programme, Connecting Europe Facility – Digital, 
Horizon Europe, Creative Europe, InvestEU, and the RRF. 
23 Including  e.g. EU4Health,  Horizon Europe Pillar  II,  Cohesion  Fund, ERDF,  ESF+,  JTF,  NDICI,  InvestEU, 
UCPM and the Single Market Programme. 
24 European  Regional  Development  Fund  (ERDF),  European  Social  Fund  Plus  (ESF+),  Cohesion  Fund,  Just 
Transition Fund (JTF), European Maritime, Fisheries and Aquaculture Fund (EMFAF). 
25 Council Regulation (EU) 2020/672 of 19 May 2020 on the establishment of a European instrument for temporary 
support to mitigate unemployment risks in an emergency (SURE) following the COVID-19 outbreak. 

10 

 
 
 
 
 
 
 
 
(EMFAF), EAGF reserve, EUSF, Emergency Support Instrument, Ukraine Facility. 

•  Nine programmes encompassing all aspects of crisis management (UCPM, Humanitarian 
Aid,  EU4Health,  CFSP)  or  provide  significant  support  (e.g.  RRF,  cohesion,  Common 
Agricultural Policy (CAP), HOME funds, NDICI, Space, Food and Feed under the Single 
Market Programme). 

•  Two programmes with limited crisis-related financing: Horizon Europe (Pillar 2, Cluster 3 
‘'Civil  Security  for  Society'’)  and  Digital  Europe  Programme  (Cybersecurity  strand), 
despite not having crisis management among their core objectives. 

Figure 2.2. Instruments relevant for crisis management available in the 2021-2027 MFF 

(*) Instrument outside the MFF ceilings. 

The complex structure of the EU budget also hampers the consistency among external 
policy  programmes  on  the  one  hand,  and  between  internal  and  external  policy 
programmes on the other. Today, there is limited coherence in the financing of internal and 
external  policies  which  hampers  the  Union’s  strategic  interests.  Internal  policies  such  as 
defence,  migration,  energy  security,  infrastructure  investment  and  the  objective  of  twin 
transition  have  an  intrinsic  external  dimension.  The  lack  of  policy  steer  and  structured 
coordination  hampers  strong  links  between  internal  and  external  programmes.  Stronger 
synergies occurred under NDICI and IPA via dedicated co-delegations to promote cross-border 
cooperation under Interreg or the external dimension under Erasmus+. 

The  financial  toolbox  in  relation  to  budgetary  guarantees  and  financial  instruments 
suffers  from  a  double  fragmentation  which  hampers  efficiency;  similar  objectives  are 
delivered in multiple programmes and with different rules. InvestEU successfully consolidated 
different existing instruments under a single framework with common governance and a first 
step towards a clearer set of rules, but it treated guarantees as an objective per se, instead of a 
tool to  deliver on policy. Moreover, rules  for internal  and external  policies remain different 
which led to double standards and brought an unnecessary burden for implementing partners 
and beneficiaries. For example, the European Investment Bank (EIB) and European Bank for 
Reconstruction and Development (EBRD) are facing different rules depending on whether they 
are the implementing partner of an internal or external programme. As a result, the financial 

11 

 
 
 
 
 
 
 
 
toolbox  is  fragmented  and  overly  complex.  The  European  Court  of  Auditors  pointed  to  the 
absence of a common set of rules in its recent EFSI audit.26 This situation renders more complex 
the oversight of the Union’s growing contingent liabilities linked to guarantees. 

Shared management programmes are currently mostly cost-based, while the take-up of 
financing not linked to costs and simplified cost options (including unit costs and flat rates) 
has increased in recent years. The Common Agricultural Policy (CAP) has taken on a more 
performance-based  orientation,  with  the  new  CAP  strategic  plans  adopted  early  2023.  The 
simultaneous  implementation  of  significant  EU  funding  under  different  delivery  modes, 
however,  has  created  complexity  for  the  implementing  authorities.  This  also  includes  the 
assessment  of  risks  of  double  funding.  The  RRF  contributed  to  further  amplifying  certain 
complexities, as this was the  first large-scale performance-based instrument implemented  by 
all  national,  managing  and  audit  authorities,  and  as  guidance  was  only  being  drawn  up  and 
updated gradually, as experience was further gathered. 

The RRF and the enabling conditions under cohesion policy have demonstrated how the 
EU budget can promote reforms strengthening the rule of law in Member States, but there 
is scope for streamlining provisions across funds. Certain rule of law reforms included in the 
Recovery  and  Resilience  Plans  have  a  similar  blocking  effect  (‘super  milestones’)  to  the 
Conditionality  Regulation  and  to  the  enabling  conditions.  However,  the  co-existence  of 
different  sectoral  frameworks  with  varying  scope  and  procedural  rules  poses  challenges  for 
beneficiaries,  national  authorities  and  other  stakeholders,  be  it  in  terms  of  clarity  of  the  EU 
action  or  predictability  of  payment  as  similar  deficiencies  may  lead  to  different  financial 
consequences depending on applicable rules. 

Different focus, administration and internal rules of programmes also limit the possibility 
to effectively combine different sources of funding. The main factors are the different cycles 
and timing of programmes in  direct,  indirect  and shared management; the transnational  (for 
directly managed programmes) or national (for shared management programmes) focus of the 
investments  and  related  rules;  the  different  authorities  responsible  for  cost  declarations;  the 
complexity  of  multi-beneficiary  projects,  and  the  use  of  different  forms  of  financing  -  cost- 
based or performance-based funding not linked to costs. There are consequently only limited 
examples of combined funding, for instance under Digital Europe and the European Regional 
Development Fund (for the Digital Innovation Hubs), and few cases under Horizon Europe, 
and the Space Programme. 

The Seal of Excellence and the Sovereignty (STEP) Seal were introduced to exploit better 
synergies between directly managed and shared management programmes. The Seal of 
Excellence  increases  coordination  between  programmes,  but  insufficient  awareness  of  the 
functioning of the scheme limited its impact. As concerns the STEP Seal, Member States have 
shown  interest  in  supporting  projects  awarded  seals  under  Cohesion  policy  funds.  For 
example, 20% of the submitted STEP programme amendments under Cohesion policy in 12 
Member  States  include  operations  aimed  at  funding  projects  awarded  the  STEP  Seal. 
However, there is still insufficient knowledge about the exact impact of the scheme, mainly 

26 European Court of Auditors, special report 07/2025: “The European Fund for Strategic Investments: Contributed 
substantially to addressing the investment gap, but had not fully reached the €500 billion target in the real economy 
by the end of 2022”, Publications Office of the European Union, 2025. 

12 

 
 
 
 
 
 
 
 
 
due  to  the  lack  of  obligation  for  MS  to  report  support  to  projects  awarded  seals  and  the 
relatively  early  stage  of  the  STEP  initiative.  Similarly  to  the  Seal  of  Excellence,  some 
elements that have limited its effectiveness include, for instance, conflicting applicable rules 
under direct and shared management programmes.27 

InvestEU  also  provided  an  opportunity  for  Member  States  to  add  funds  to  the  EU 
guarantee’s provisioning by voluntarily channelling a part of their Cohesion Policy Funds 
or of their RRF funds to the Member States compartment for each policy area. While the 
EU label, the higher leverage and the simplified process generated interest from Member States, 
only  728  Member  States  have  used  the  Member  State  Compartment  option  under  InvestEU. 
The lack of necessity due to a high performing existing setup in managing structural funds for 
this type of instruments was a key limiting factor in combination with unclarity regarding State- 
Aid rules and other administrative processes at the beginning of the MFF. 

2.4 Administrative burden 
The  administrative  burden  of  programme  implementation  weighs  on  beneficiaries, 
managing  authorities,  and  public  institutions  for  all  management  modes  of  the  EU 
programmes,  be  it  direct,  indirect  or  shared.  For  programmes  with  funds  allocated  to 
Member States, this burden arises mainly from complex reporting requirements, ‘gold plating’29 
at  the  national  level  as  well  as  inefficient  data  management  and  digital  integration.  For 
programmes  implemented  at  EU  level  the  administrative  burden  for  beneficiaries  arises  for 
instance from different eligibility rules and complex application processes. For example, the 
procedural burden of Erasmus+ can be challenging, as even a small grant requires navigating 
an  extensive  80-page  grant  agreement.  Horizon  Europe’s  very  long  and  complex  work 
programmes can discourage access by some beneficiaries or render it costly. The Digital Europe 
Programme  imposes  essential  participation  restrictions  and  security  scrutiny,  which  require 
often lengthy processes leading  to  project  delays. Similarly, the Connecting Europe  Facility 
faces challenges with its evaluation requirements for grants. These processes should focus on 
streamlined  project  delivery,  potentially  undermining  the  programme’s  objective  to  achieve 
high-impact outcomes. Simplifying these procedures – with a greater focus on delivery rather 
than excessive  documentation requirements – could make each program more efficient. 

The requirements under programmes implemented under shared management and the 
RRF are different. There is only limited synergy between the RRF and programmes under the 
Common Provisions Regulation administrative processes, which makes joint implementation 
by  responsible  authorities  challenging.  Moreover,  the  time  limits  for  the  RRF  led  Member 
States  to  focus  on  that  instrument,  which  in  turn  led  to  delays  in  the  implementation  of  the 
shared  management  programmes.  In  addition,  as  a  new  instrument,  the  RRF  created  ‘entry 
costs’,  and  the  administrative  costs  linked  to  the  RFF  implementation  have  increased  over 

27 Further information is provided in the STEP interim evaluation (COM(2025) 421 final). 
28 Whose Contribution Agreement was signed at the end of 2024, see COM(2025) 300 - June 2025, Draft General 
Budget of the European Union for the financial year 2026 - Working document part XI - Budgetary guarantees and 
contingent liabilities. 
29 Gold plating is the practice of adding national-level regulatory requirements that exceed those mandated by the 
European Union, leading to higher administrative burden for implementing agencies. 

13 

 
 
 
 
 
 
 
 
time.30 When it comes to the CAP, additional national mandates, such as specific environmental 
regulations of Member States, are considered as contributing to the complexity and increase 
both costs and workload for implementation. 

Digital integration emerges as an area with significant potential for improving efficiency 
across several programmes. The IT systems supporting the CAP, for example, currently face 
challenges in interoperability with Member States’ systems, affecting effective monitoring and 
evaluation. Advancing digital tools could help streamline processes and provide more efficient 
data management and reporting capabilities. Cohesion Policy faces similar digital integration 
challenges, where advances in data platforms could improve the efficiency and effectiveness of 
projects  by  enabling  smoother  data  flow  and  reducing  administrative  redundancies. 
Programmes aimed at improving local (urban) infrastructure are confronted with fragmented 
information  systems  and incompatible data formats  between the EU  and  national  databases. 
Regional development projects also face complex local regulatory requirements beyond the EU 
mandates that are resource intensive and can lead to delays. 

Technical assistance and support to administrations and beneficiaries are provided in a 
scattered  manner  under  different  rules  for  eligibility.  In  the  2021-2027  MFF,  there  are 
different types of technical assistance/support: a) technical assistance managed by the Member 
States as part of their national envelopes;  b) technical assistance managed at the initiative of 
the Commission which can be used to support its operations on fund management but also to 
support Member States (e.g. JASPERS, support to cross-border regions community building, 
EU CAP network, common reporting system SFC, FAMENET); c) demand-driven technical 
support managed by the Commission to design and implement reforms in the Member States 
(under the Technical Support Instrument). Despite efforts for simplification, for example by the 
CPR that sets out uniform rules to some extent,  different funds still have varying thresholds 
and different forms of EU contribution (flat-rate or eligible costs). The provision of technical 
assistance  and  support  is  highly  fragmented  and  would  greatly  benefit  from  streamlining. 
Different rules for payments and audits can also lead to inefficiencies. In addition, expanding 
the  use  of  lump-sum  funding  and  unit  cost  options  for  personnel  costs  could  reduce 
administrative burden. 

2.5 EU added value 
The  EU  budget  is  the  financial  arm  of  the  Union  policy  action.  By  pooling  together 
resources, the budget finances actions that would be too expensive for individual Member States 
or where the benefits of the investments do not coincide with the place of investments. The 
activities  financed  by  the  EU  budget  achieve  economies  of  scale,  avoid  costly  duplicative 
national  efforts  and  deliver  positive  externalities  across  national  borders  in  the  Union.  The 
Union’s cohesion policy has continued to support economic convergence, focused on the EU’s 
less  developed  regions  and  Member  States.  Under  the  2021-2027  programmes  70%  of  the 
European  Regional  Development  Fund  and  the  European  Social  Fund  Plus  are  allocated  to 
regions  with  a  per  capita  GDP  below  75%  of  the  EU  average.31  The  Common  Agricultural 

30 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social  Committee  and  the  Committee  of  the  Regions  –Strengthening  the  EU  through  ambitious  reforms  and 
investments, COM(2024) 82 final. 
31 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social Committee and the Committee of the Regions –on the 9th Cohesion Report, COM(2024) 149 final 

14 

 
 
 
 
 
 
 
 
Policy (CAP) has been contributing to the EU single market within the agricultural sector, by 
supporting  farmers’  income  through  direct  payments  and  remuneration  for  environmentally 
friendly  practices.  These  policies  have  also  shown  they  inherent  ability  to  contribute  to  the 
evolving  challenges  such  as  competitiveness  and  skills.  The  budget  also  finances  European 
priorities or public goods that transcend Member States frontiers to the benefit of all Europeans, 
such as finance for climate and digital transitions, defence or promoting European values. By 
reducing  the  need  for  fragmented  national  spending,  this  generates  tangible  net  savings  and 
helps ease pressure on national budgets, reinforcing fiscal sustainability. This unique benefit of 
the EU budget should be further developed building on past experiences. 

The  implementation  of  the  current  MFF  provides  examples  of  the  added  value  of 
financing EU public goods via the EU budget. Not only financing for EU public goods – for 
instance migration and border management, defence, cross-border interconnections, students’ 
mobility under Erasmus+, fight against climate change – has increased significantly compared 
to the previous MFF. Such added value is further increased by leveraging on the EU budget and 
using EU financing as an incentive for the implementation of reforms. For instance, common 
borrowing at EU level to finance loans under SURE is estimated to save beneficiary Member 
States  approximately  EUR  9  billion  in  interest  expenditure32.  The  joint  implementation  of 
reforms and investments, which has gained traction in several programmes under the current 
long-term budget (for instance, the RRF, the Ukraine Facility, the Reforms and Growth Facility 
for the Western Balkans), is further supporting productivity growth and competitiveness.33  

The current  MFF provides useful  lessons on how to better align policy objectives with 
spending priorities and maximise EU added value. The MFF and NGEU clearly identified 
policy priorities, notably in relation to the green and digital transitions, as well as to the energy 
transition following Russia’s war of aggression against Ukraine. The European Green Deal and 
the fit for 55 package have set a clear direction of travel which was reflected in the objectives 
of  programmes,  recommendations  under  the  European  Semester,  green  and  biodiversity 
mainstreaming  across  the  budget,  and  the  green  and  digital  targets  under  the  Recovery  and 
Resiliency facility. Member States have more ambitious environment and climate actions than 
in the previous programming period in their strategic plans under the CAP. 

However,  the  current  MFF  is  still  not  sufficiently  geared  to  focusing  on  EU  strategic 
actions and public goods, and this focus had to be reinforced during the implementation. 
Russia’s war of aggression against Ukraine and the ensuing energy crisis has put to the fore the 
urgency of reinforcing Europe’s strategic autonomy and preparedness. When the war led to a 
sharp increase in energy prices, the need to further reduce reliance on fossil fuels and accelerate 
deployment of renewable energy heightened. REPowerEU, the EU’s response to the economic 
fallout of Russia’s war of aggression against Ukraine provides another clear example of the 
benefits of being able to swiftly align the policy and budgetary framework. 

Financing for defence and security in the current MFF increased substantially compared 
to the previous MFF: from less than EUR 500 million in 2014-2020 to EUR 10.8 billion in 

32 Evaluation - European instrument for temporary Support to mitigate Unemployment Risks in an Emergency 
(SURE), SWD(2025) 47 final. 
33 Vogel,  L.  (2025)  “Reforms  and  Investments:  the  benefits  of  joint  implementation”,  European  Economy  – 
Economic Brief 084, European Commission 

15 

 
 
 
 
 
 
 
 
 
2021-2027.34  Still, the events since the start of implementation showed that the available 
amounts fell significantly short of the needs.  In the case of Military Mobility under CEF, the 
envelope was frontloaded and supported crises-related packages, and the available budget was 
exhausted in 2023. To provide a fast solution to the need of reinforcing EU defence industry 
and  production,  two  temporary  programmes  for  2023-2025  were  adopted:  ASAP35  and 
EDIRPA.36 ASAP provided direct  support to  the defence industry to  enhance its production 
capacity and EDIRPA to Member States for common defence procurement cooperation. The 
Commission proposed EDIP in March 2024 for EUR 1.5 billion, to bridge the gap between the 
end of ASAP and EDIRPA and the next MFF, but as of mid-June 2025 negotiations among the 
co-legislators  are  still  ongoing,  which  provides  uncertainty  over  EU  financing.  Lastly,  the 
ReArm Europe Plan, published in March 2025, boosted the Union’s  ambitions by proposing 
practical solutions to mobilise up to EUR 800 billion for defence investments paving the way 
for  putting  the  defence  sector  among  the  future  EU  priorities.  However,  limited  available 
funding proved a constraint in the face of the financing needs in the area of defence, including 
for the repair of critical infrastructure following various hybrid attacks. 

Common EU action via the EU budget improves efficiency of spending, in particular for 
defence, preparedness and security. In the area of defence, the European Defence Equipment 
Market is potentially the world’s second or third largest domestic defence equipment market 
(after  the  U.S.  and  similar  in  size  to  China’s).37  This  should  enable  leveraging  substantial 
economies of scale and efficiency gains. However, fragmentation along national borders with 
limited coordination and cooperation leads to duplications. Indeed, studies38 have shown that 
joint procurement at EU level could yield savings of up to 30%. Stockpiling ensures immediate 
access to critical goods in the event of an emergency. It is particularly beneficial for items that 
are subject to spiking global demand (for instance: personal protective equipment; therapeutics; 
large  generators).  rescEU  stockpiles  have  benefited  Member  States  in  a  variety  of  contexts, 
providing essential items in quantities that exceed what is typically available at a national scale. 
At the same time, however, financing for preparedness in health and civil protection was split 
between EU4Health and the Union Civil Protection Mechanism, limiting synergies. 

Research and innovation are key drivers for growth and competitiveness, but the current 
tools are hampered and diluted by a multitude of national and EU instruments and lack 
of focus.39  Research and innovation (R&I) should be treated as an EU common good requiring 
more coordinated investments. Compared to international peers, European public expenditure 
in  R&I  is  relatively  high.  However,  this  expenditure  is  not  efficient  enough.  It  is  highly 
fragmented across Member States and lacks directionality, scale and alignment with EU-wide 
priorities. There are large spillovers from public R&I investment to the private sector,40 still 

34 Including the European Defence Fund, ASAP, EDIRPA, the proposed EDIP and military mobility under CEF. 
35 Regulation  (EU)  2023/1525  of  the  European  Parliament  and  of  the  Council  of  20  July  2023  on  supporting 
ammunition production (ASAP) 
36 Regulation (EU) 2023/2418 of the European Parliament and of the Council of 18 October 2023 on establishing 
an instrument for the reinforcement of the European defence industry through common procurement (EDIRPA) 
37 Defence investment spending data from the Military Balance + database 
38  McKinsey  (2016),  The  Future  of  European  Defence: Tackling  the  Productivity  Challenge,  Munich  Security 
Conference (2017), More European, More Connected and More Capable 
39 Draghi, M. (2024). The future of European competitiveness. Part B – In-depth analysis and recommendations. 
40 Myers,  K.  and  Lanahan,  L.,  ‘Estimating  Spillovers  from  Publicly  Funded  R&D:  Evidence  from  the  US 
Department of Energy’, American Economic Review, Vol. 112, No. 7, July 2022. 

16 

 
 
 
 
 
 
 
only one tenth of spending takes place at the EU level.41  

In the current MFF, Horizon Europe promotes scientific excellence and generates new 
knowledge  and  technologies.  It  contributes  to  advancing  the  EU’s  general  and  specific 
objectives and policies, in terms of boosting sustainable growth, job creation and tackling global 
challenges. By financing large collaborative research projects and enhancing the collaboration 
and  exchange  of  knowledge  between  researchers  of  the  different  Member  States,  it  avoids 
overlapping and uncoordinated national support to research and development. Moreover, it also 
develops and scales up breakthrough technologies and game-changing innovations through the 
European Innovation Council. 

However, funding under Horizon Europe is spread across too many fields and access is 
excessively  complex. The interim evaluation points to inefficiencies in the governance with 
multiple impact-oriented streams, each with its own governance and sometimes weak internal 
links (EU Missions, European partnerships and clusters), and overlap of support in terms of 
activities and groups targeted. The overall landscape of EU programmes supporting innovation 
and deployment of research is increasingly perceived as complex and difficult to navigate for 
the  targeted  beneficiaries  due  to  the  many  different  subprogrammes  with  all  different 
programming cycles and timelines deadlines. 

Horizon Europe is still insufficiently focused on disruptive innovation and there is a gap 
in  EU  funding  for  higher  technology  readiness  levels,42  i.e.  concerning  most  mature 
technologies. To bring more strategic steer and focus on strategic disruptive technologies a new 
Strategic Technologies for Europe (STEP) platform was set up with the MFF mid-term revision 
to ensure 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. The 
fragmentation  of  the  R&I  landscape  in  Europe,  including  of  national  and  regional  funding 
programmes,  shows  that  EU  action  is  needed  to  pool  resources  to  achieve  critical  mass,  to 
provide  directionality  to  these  common  resources  towards  achieving  EU-wide  goals  and  to 
avoid duplication of efforts in different Member States. 

Cross-border  and  multi  country  activities  have  significant  EU  added  value  and  are 
supported in a variety  of ways across  EU programmes.  Without  financial support  at  EU 
level, Member States have suboptimal incentives to finance actions with a cross-border impact, 
due  to  asymmetry  between  the  benefits  at  individual  Member  State  level  and  Union-wide 
benefits.  EU support and coordination is  thus  essential  for the successful implementation  of 
these  activities.  Cross-border  activities  can  also  generate  net  positive  savings  as  the  value 
created  by  these  investments  exceeds  the  costs  that  individual  Member  States  would  incur. 
Thus, net positive savings from joint actions can also ease financial pressure on Member States 
and their national budgets. Cross-border projects for example related to digital, energy, transport 
and  military  mobility  are  essential  to  improve  EU  competitiveness,  security  and  to  reduce 
strategic  dependencies.  At  the  same  time,  cross-border  projects  (e.g.  collaboration  between 
regions) also promote cohesion, and strengthens the single market by removing border obstacles 

41 Draghi, M. (2024), ibid. 
42 Technology Readiness Levels (TRL) are different points on a scale used to measure the progress or maturity 
level of a technology with lower TRL level linked to fundamental research and higher TRL levels  linked to the 
testing of prototypes in an operational environment or system proven in an operational environment. 

17 

 
 
 
 
 
 
 
 
 
(e.g. development of common European electronic system). 

The main instrument under the current MFF  that provides financing for cross-border 
infrastructure  investments  between  countries  is  the  Connecting  Europe  Facility  which 
covers transport, energy and digital infrastructure. By definition, as the networks it finances 
are trans-European, part of the investments has a cross-border/cross-country nature and part of 
it is be implemented within a single Member State, even if it still belongs to a trans-European 
network or corridor. Whereas all CEF investments belong to trans-European corridors, in the 
current MFF 53% of CEF for Transport (CEF-T) investments are at least partially cross-border 
–  although  it  is  36%  for  military  mobility  investments.  The  share  reaches  73%  under  CEF- 
Energy.43  

Despite  the  widespread  support  for  cross-border  actives  across  the  MFF,  cross-border 
projects  did  not  always  materialise.  While  the  RRF  contributed  to  the  implementation  of 
multi-country  projects,  notably  supporting  the  green  and  digital  transitions,  the  inclusion  of 
cross-border projects  was hampered due to  additional complexity stemming from  the multi- 
partner component. Cross-border projects can also be hampered due to differing regulatory and 
procedural  frameworks  across  Member  States.  Moreover,  defining  the  precise  scope  and 
endpoint of cross-border investments remains a challenge. 

Several EU funding programmes currently also finance the roll-out of central IT systems 
in different sectors and/or support cooperation among national administration, contributing  to 
the  completion  of  the  single  market.  For  example,  Customs  and  Fiscalis mainly support the 
roll-out  of  an  EU  wide  electronic  system  for  respectively  Customs  and  Tax  authorities  in 
conjunction  with  cooperation  activities.  The  EU  budget  also  supports  cross-  borders 
investments and cooperation at the regional and local level for example via Interreg. 

EU financing for cross-border mobility, culture, rights and values contributes to address 
EU-wide  challenges  while  promoting  cooperation  and  mutual  understanding  and 
upholding  EU  values.  EU-level  financing  through  Erasmus+,  European  Solidarity  Corps, 
Creative  Europe,  and  the  Citizens,  Equality,  Rights  and  Values  programme  is  enabling 
cooperation,  capacity  building,  mutual  learning  and  the  pooling  of  resources,  sharing  of 
expertise  and  best  practices  across  Member  States.  EU-supported  transnational  cooperation 
supports skills investments and the scale up of innovative solutions in education and training. 
In  addition,  Member  States  have  differing  capacities  to  counter  global  phenomena  such  as 
online hate speech, cyberviolence, data protection issues, threats against the information space 
and risks associated with the use of generative AI  – all of which affect EU values, citizens’ 
fundamental rights and economic development of media and culture. EU action in the field of 
culture  and  media  supports  transnational  cooperation,  cross-country  circulation  of  cultural 
works, (co)creation, networking, capacity-building and cultural diversity. 

The  added  value  of  common  EU  action  has  been  further  proved  by  the  strong  and 
unwavering support to Ukraine also via the EU budget. Since the beginning of the Russian 
war of aggression against Ukraine on 24 February 2021, the EU budget enabled support at EUR 
148.3 billion as of 31 May 2025 (see Table 2.2). This support is provided in the form of grants 
(including budget support and humanitarian aid), loans and budgetary guarantees. At the onset 

43 European Commission calculation based on CINEA data as of 2024. 

18 

 
 
 
 
 
 
 
 
 
 
of  Russia’s  war  of  aggression  against  Ukraine,  existing  availabilities  within  Heading  6, 
including the NDICI-GE cushion, traditional Macro-Financial Assistance44 and relevant special 
instruments (Solidarity and Emergency Aid Reserve) were used. This was clearly not sufficient. 
Given the limited resources within Heading 6 for a provisioning adequate to the risk of lending 
to a country at war, the exceptional MFA loans of 2022 were provided with additional counter- 
guarantees  from  Member  States  to  complement  limited  availabilities  in  the  Common 
Provisioning Fund (CPF). 

As Russia’s war of aggression ravaged, the headroom was used as a tool to leverage on the 
EU budget and provide support at a larger scale. A first MFF revision allowed the coverage 
of the MFA+ loan of EUR 18 billion in 202345. In February 2024, the Ukraine Facility was 
established as part of the MFF mid-term revision for a maximum volume of EUR 50 billion, 
out of which EUR 17 billion of non-repayable support funded over and above the MFF ceilings 
and EUR 33 billion of loans backed by the headroom46. In October 2024, following agreement 
within the G7, an additional EUR 18.1 billion macro-financial assistance loan backed by the 
EU budget was adopted, whereby the repayment will be financed by the extraordinary revenues 
stemming from immobilised Russian sovereign assets as part of the Ukraine Loan Cooperation 
Mechanism.47  

Table 2.2. Support to Ukraine by Team Europe since 2022 (as of July 2025) 

TEAM EUROPE SUPPORT TO UKRAINE 

Amount (EUR million) 

OVERALL SUPPORT SINCE 2022 

of which 

REPAYABLE SUPPORT 

Direct loans 

Guarantees 

Member States 

NON-REPAYABLE SUPPORT 

Breakdown by Instrument/Type of support 

DIRECT SUPPORT ENABLED BY THE EU BUDGET 

Humanitarian aid 

NDICI-GE (all pillars) 

Other grants (ENI, INSC, CFSP) 

Connecting Europe Facility 

Macro-financial assistance loans 2022 

164.760 

60.903 

49.396 

9.429 

2.078 

103.857 

69.555 

1.130 

2.095 

367 

535 

7.200 

44 i.e., MFA loans guaranteed by the Common Provisioning Fund with a 9% provisioning. 
45 Council  Regulation  (EU,  Euratom)  2022/2496  of  15  December  2022  amending  Regulation  (EU,  Euratom) 
2020/2093 laying down the multiannual financial framework for the years 2021 to 2027. 
46 EUR 17 billion in grants and EUR 33 billion in loans. 
47 Regulation (EU) 2024/2773 of the European Parliament and of the Council of 24 October 2024 establishing the 
Ukraine Loan Cooperation Mechanism and providing exceptional macro-financial assistance to Ukraine. 

19 

 
 
 
 
 
 
 
 
 
MFA+ (incl. interest rate subsidy) 

Support through EU guarantees (excl. Ukraine Guarantee) 

Ukraine Facility (all pillars) 

Exceptional MFA part of G7 ERA initiative 

WINDFALL PROFITS STEMMING FROM RU SOVEREIGN ASSETS 

European Peace Facility 

Ukraine Facility 

MILITARY SUPPORT (estimated value of military equipment from MS) 

Amounts to be reimbursed through the European Peace Facility 

EUMAM Ukraine (financed via the European Peace Facility) 

BILATERAL ASSISTANCE FROM EU MEMBER STATES 

FUNDING MADE AVAILABLE FOR UA REFUGEES 

19.135 

2.828 

28.265 

8.000 

3.605 

3.245 

360 

59.600 

5.774 

362 

15.000 

17.000 

Source: Factsheet - EU solidarity with Ukraine (incl. more recent update not yet reflected in factsheet. For 
example, 
for HUMA that latest DEC approved by the BA from the EAR). Available here: 
https://ec.europa.eu/commission/presscorner/detail/en/fs_22_3862 Last accessed: 2025 July 9. 

2.6 Impact 

2.6.1 Financing not linked to costs, simplified cost options and focus on 

performance 
Contributions from the EU budget may take different forms, as defined in the Financial 
Regulation. Such forms of Union contribution include financing not linked to costs (FNLC), 
based  on  the  fulfilment  of  conditions  or  achievement  of  results;  reimbursement  of  eligible 
costs incurred, or payments based on simplified cost options (SCO: unit costs, lump sums, flat 
rate  financing).  Simplified  forms  of  funding  were  introduced  as  a  way  of  simplification  to 
reduce error  rates,  resulting  from  the complexity of reimbursing  expenditure based on  costs 
actually  incurred.  Despite  simplifications,  checks  and  controls  are  still  necessary  on 
implementation to ensure that the conditions for reimbursement have been achieved. 

The RRF is  the first fully performance-based instrument, with disbursements of funds 
linked to the achievement of pre-defined milestones and targets.  This allows for quicker 
release of funds, as important launch steps can be rewarded with EU funds, providing early 
liquidity to Member States for the implementation of investments and reforms. Budget support 
can be used to provide a non-cost based financial contribution to third countries, on the basis 
of  the  fulfilment  of  certain  general  conditions.48  In  the  Reform  and  Growth  Facility  for  the 
Western  Balkans,  payments  are  conditional  on  the  achievement  of  milestones,  measured  by 
performance  indicators,  reflecting  results  and  reform  progress.  Using  an  incentive–based 
approach  to  reward  reforms  in  the  Eastern  and  Southern  Neighbourhood  has  also  provided 
positive results in NDICI-Global Europe. 

Shifting towards a more performance-based delivery model may simplify and accelerate 
implementation, but has not always brought simplification. The use of SCO has increased 
in past years, nearly doubling from 2014-2020 to 2021-2027 (Figure 2.3). In Cohesion policy, 

48 As per article 236 of the Financial Regulation. 

20 

 
 
 
 
 
 
 
 
 
the use of SCOs and FNLC significantly reduces administrative burden for both authorities and 
beneficiaries. In particular, the European Social Fund+ is rapidly moving from a cost-based to 
a  result-based  approach.  The  use  of  SCOs  also  increased  in  the  European  Regional 
Development Fund (ERDF), but is still limited for the Cohesion Fund, EMFAF and HOME 
funds. As regards CAP, the move to a performance-based approach entailed a big shift in the 
focus of the system with a major change in CAP governance and it required significant efforts 
by  Member  States.  However,  the  flexibility  given  to  Member  States  did  not  translate 
automatically into simplification for beneficiaries as Member States were free to establish the 
requirements  for  farmers  as  well  as  their  own  penalty  and  control  systems.  In  addition,  the 
streamlined programming and reporting required Member States to integrate data and to further 
develop their IT systems. 

Figure 2.3. Share of budget covered by finance-not-linked-to costs and simplified cost options 
ESF and ERDF 

Source: Final Report on the study on the uptake of Simplified Cost Options (SC) and Financing Not Linked to 
Costs (FNLC) for the CPR (Inforegio - Simplified Cost Options) 

The extent to which current programmes in direct and indirect management use financing 
not  linked  to  costs  and  simplified  cost  options  varies  greatly.  Some  programmes  make 
significant  use  of  output-based  lump  sums.  For  example,  the  Innovation  Fund  almost  fully 
provides a contribution either in the form of lump sums or unit costs for defined outputs (for 
example, GHG avoidance or production of Hydrogen). Horizon Europe is targeting 50% of its 
funding to be reimbursed using lump sums, while in 2021/2022, 25% of the European Defence 
Fund (EDF) was committed using lump sum grants. Erasmus+ and European Solidarity Corps 
almost exclusively use unit costs and lump sums. While those unit costs are in practice input- 
based  unit  costs  (for  example  reimbursing  travel  or  organisational  costs),  they  contribute 
extensively to simplification. For other programmes like EU4Health, instead, the introduction 
of  simplified  cost  options  has  not  been  considered  or  is  not  considered  appropriate  for  the 
implementation  of  procurement  actions  in  indirect  management  (for  instance,  in  the  Space 
Programme) or for large infrastructure deployment. 

Some factors still hinder more extensive use of the simplified cost options and financing 
non linked to costs. For instance, these include limited administrative capacity of managing 
authorities, the time needed to develop the SCO methodology, and a lack of historical data (for 
innovative operations). The combination of a heterogenous pool of projects in a programme 
combined with procured projects also hinders the use of SCO and FNLC. 

21 

 
 
 
 
 
 
 
 
2.6.2. Implementation pace and outstanding commitments 

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  ten  funds  that  are  pre-allocated  to 
Member States49 and that require a separate planning and programming efforts. This creates a 
heavy administrative burden for 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-2022. 

The  slow  implementation  of  some  programmes  on  the  ground  results  in  higher 
outstanding commitments or “Reste à liquider” 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.  Nevertheless,  the  initiatives  put  forward  to  support  Member  States,  third 
countries  and  specific  sectors  recently  accelerated  payments  for  the  outstanding  and  new 
programmes.  The  improved  implementation  of  2021-2027  cohesion  policy  programmes 
decreases the risks of decommitments.50 

2.6.3. Monitoring, reporting and mainstreaming 

The 2021-2027 MFF benefits from a more modern performance framework than in the 
previous  MFF  period51.  The  overall  number  of  core  performance  indicators  was  reduced 
compared  to  the  2014-2020  MFF,  while  the  quality  of  the  indicators  and  performance 
information was enhanced, providing a more accurate and representative annual indication of 
performance.  Additionally,  programmes  such  as  the  RRF  and  the  Ukraine, Western  Balkans, 
and Moldova facilities have adopted delivery models more focused on objectives and results. 
At the same time, more robust mainstreaming methodologies have been put in place. 

Despite  these  advancements  in  the  performance  framework,  there  remains  room  for 
further  enhancement,  particularly  in  terms  of  simplification,  consistency  and  better 
monitoring  of  EU  budget  results.  In  the  2021-2027  MFF,  there  are  more  than  5,000 
heterogeneous and non-aggregable indicators used for programme monitoring and evaluation. 
Different programmes operate under different systems. This fragmentation creates significant 
administrative  burdens  for  all  stakeholders  and  makes  it  difficult  for  the  Commission  to 
aggregate and compare performance data at the EU budget level. It also hampers transparency 
and  access  to  information  for  budgetary  authorities  and  MFF  beneficiaries.  As  a  result,  the 
Union  lacks  a  comprehensive  overview  of  performance  across  programmes.  This  limits  the 

49 The following programmes are nationally pre-allocated: Cohesion Fund, European Regional Development Fund, 
European  Social  Fund+,  the  Just Transition  Fund,  the  RRF,  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. 
50  Further  information  is  available  in  the Long-term forecast  of  future  inflows  and  outflows  of  the  EU budget 
(2026-2034), COM(2025)573. 
51 Communication on the EU budget performance framework 2021-2027 - European Commission. 

22 

 
 
 
 
 
 
 
 
 
 
 
extent to which performance information can guide the implementation of the EU budget as 
well  as  the  role  it  plays  in  informing  the  EU’s  political  decision-makers.  To  address  these 
challenges,  the  post-2027  MFF  will  benefit  from  reducing  administrative  burdens  and 
strengthening  accountability  and  transparency  through  a  simplified,  single  performance 
framework  for  the  entire  EU  budget.  A  streamlined  common  list  of  output  and  result 
indicators  will  reduce  the  number  of  EU  budget  performance  indicators  from  over  5,000  to 
around  900,  allowing  the  aggregation  of  resuls  at  the  level  of  the  EU  budget.  A  single 
methodology  will  also  enable  to  monitor  the  expenditure  supporting  climate  mitigation, 
climate adaptation, biodiversity, environmental and social objectives. 

features  heterogeneous  mainstreaming  provisions  and 
The  2021-2027  budget 
requirements  at  MFF  and  programme  levels  (such  as  on  ‘Do  No  Significant  Harm’  and 
gender equality). In the 2021-2027 MFF, the ‘Do No Significant Harm’ (DNSH) principle has 
been applied to the most relevant programmes, but not in a harmonised manner. A 2023 study 
by the European Commission’s Joint Research Centre (JRC) shows the varied and inconsistent 
application  of  DNSH  across  programmes.  As  noted  in  the  report,  this  heterogeneity  creates 
challenges for implementation and complicates the identification of applicable frameworks and 
criteria.  As  a  result,  it  creates  complexity  and  burden  for  Member  States,  and  project 
beneficiaries  such as Small  and Medium Enterprises (SMEs)  and other businesses.  Looking 
ahead, the post-2027 MFF will be aligned with recent legal developments, including the 2024 
Financial  Regulation  recast52  –  which  introduces  new  requirements  on  the  principles  of 
DNSH,  gender  equality,  performance  indicators  as  well  as  transparency  rules  regarding 
beneficiaries of EU budget programmes  – and ensure a more consistent  application of these 
requirements across the EU budget while ensuring proportionality and simplification. 

A 35% climate and environment target will help steer support from the budget towards 
the  goals  set  out  in  the  European  Green  Deal.    The  mainstreaming  of  horizontal  policies 
has proven to be an effective tool to prioritise climate spending into the 2021-2027 spending 
programmes.  For  the  first  time,  in  the  current  MFF  there  are  overarching  climate  and 
biodiversity targets that apply at the level of the EU budget supported by dedicated monitoring 
methodologies.  However,  some  mainstreaming  provisions  lacked  consistency  and  tools  to 
achieve  their  true  potential.  The  next  MFF  will  build  on  this  experience  and  ensure  a 
consistent approach covering all the six environmental objectives.  

The system to monitor EU spending and its performance for the post-2027 MFF will be 
simpler,  less  burdensome  and  more  consistent,  thereby  strengthening  a  results-driven 
approach and providing greater transparency and accountability. The new performance 
framework will apply horizontal priorities in a consistent way across the EU budget. It will also 
simplify  the  way  in  which  EU  spending  and  performance  are  monitored,  reducing 
administrative complexity and enabling a more comprehensive overview of the EU budget as a 
whole. 

52 Regulation (EU, Euratom) 2024/2509 of the European Parliament and of the Council of 23 September 2024 on 
the financial rules applicable to the general budget of the Union (recast) 

23 

 
 
 
 
 
 
 
 
 
 
2.6.4 Leveraging on the EU budget: budgetary guarantees, financial instruments 

and borrowing 
The  2021-2017  Multiannual  Financial  Framework  put  a  strong  focus  on  de-risking 
private  sector  investment  to  strengthen  its  impact.  To  support  competitiveness  and 
innovation, the EU budget provides support for high-risk projects and companies in selected 
industries  (e.g.  energy)  and  groups  of  economic  actors  (e.g.  start-ups)  of  European  interest 
that do not find sufficient funding in the market helping to overcome market failures. 

If  a  project  is  likely  to  generate  revenues,  leading  to  a  repayment  capacity,  repayable 
support such as budgetary guarantees or loans are an efficient policy instrument. The EU 
budget uses different financial products such as guarantees, loans, and equity investment for a 
much larger impact than the budgetary endowment itself (generating leverage). For example, 
the  InvestEU  budgetary  guarantee  mobilised  so  far  around  EUR  200  billion  in  private 
investment (with a multiplier of 14.8, i.e. EUR 14.8 mobilised for each euro of EU guarantee).53 
95% of project promoters reported that their projects would have either not proceeded at all or 
not as planned without InvestEU financing. Moreover, 58% of project promoters stated that the 
InvestEU guaranteed financing had impacted other financiers or investors’ decisions to commit 
to the project.54 

The  EU  budget  also  has  a  wide  range  of  non-repayable  support  tools  to  de-risk 
investments and mobilise additional  private sector investments, including in particular 
grants. Joint Undertakings (JUs) and other public private partnerships (PPPs) also leverage and 
pool  resources,  notably  from  industry.  In  the  area  of  semiconductors,  the  Chips  Joint- 
Undertaking will raise EUR 11 billion in R&I investment until 2030. However, the leverage 
across the large number of partnerships and JUs is highly variable and not always sufficient. 

Still, mobilising private funding at necessary levels continues to be challenging across the 
EU. The Draghi Report on EU competitiveness shows that the capacity of the EU budget to 
mobilise  private  investment  through  risk-sharing  instruments  is  hampered  by  limited  risk 
appetite  by  implementing  partners  who  remain  mostly  focused  on  relatively  low-risk 
investment55. The Draghi Report also shows that there is scope to improve the capacity of the 
EU  budget  to  complement  and  attract  private  investments  for  example  from  institutional 
investors,  and  venture  capital  into  innovation  and  fast-growing  companies  which  is  much 
needed  in  Europe56.  Support  from  the  EU  budget  makes  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.  However,  attracting 
investments also requires a necessary degree of predictability and stability. 

Capital market borrowing has further increased the impact of the Union budget, and has 
become a powerful policy tool. While the EU has been present on capital markets for several 
decades, the decision to empower the Commission to finance NGEU through joint borrowing 
brought  a  fundamental change to  the Commission’s debt  management architecture. By end- 

53 InvestEU Operational Reports as at 31/12/2024 
54 SWD(2024) 228 final. 
55 Draghi, M. (2024). The future of European competitiveness. Part A – A competitiveness strategy for Europe. 
56 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. 

24 

 
 
 
 
 
 
 
 
 
 
2024, outstanding EU debt has reached over EUR 550 billion (Figure 2.4), making the EU the 
fifth  largest  issuer of euro-denominated bonds and a large supplier of highly rated and very 
liquid safe assets in euro. EUR 73.2 billion of this debt has been issued as green bonds, making 
the EU also one of the largest green bond issuers in the world. Borrowing programmes since 
2021 have supported Member States with SURE and the RRF, and third countries including 
Ukraine through MFA loans and the Ukraine Facility. The proposed Security Action For Europe 
(SAFE) will additionally provide up to EUR 150 billion in loans to Member States backed by 
EU borrowing between 2025 and 2030. 

Figure 2.4 Outstanding EU bonds (EUR billion), 2019-2024 

Box 2.1. The EU budget support to investment activity 

Source: European Commission 

Public  investment  supports  economic  growth  in  a  durable  manner  by  expanding  the 
productive capacity of the economy. Public investment also crowds-in private investment. 
In  recent  decades,  the  investment  contribution  of  the  EU  budget  has  steadily  gone  up. 
Expenditure  that  can  be  classified  as  investment  expenditure*  represented  almost  65%  of 
the EU budget in 20234. This reflects a sharp increase from a level of around 40-45% at the 
turn of the century (left panel). Especially NextGenerationEU reinforces the contribution of 
the EU budget to investment since 2021. As a percentage of public investment at Member 
State  level,  the  budgetary  allocations  stemming  from  the  EU  budget  are  around  20%  in 
recent years. Prior to NextGenerationEU, the level was around 10%. 

Figure  B1.  Investments  as  a  share  of  total  MFF  including  NGEU  (left)  and  as  a  share  of 
public investment (right) 

25 

 
 
 
 
 
 
 
 
 
The  ratio  of  investment  financed  by  the  EU  budget  to  public  investment  differs 
substantially  across  Member  States  and  over  time  (Figure  B2).  Zooming  in  at  the 
national  level,  EU  investment  funds  represented  more  than  30%  of  the  total  public 
investment in Greece, Latvia, Hungary and Portugal in over the period 2000-2020. For other 
Member States the ratio was lower, depending on the importance of cohesion funding and 
size  of  the  economy.  Mainly  following  the  implementation  of  the  investments  under 
NextGenerationEU,  the  ratio  increases  dramatically  in  the  years  2021-2023.  In  Bulgaria, 
Greece,  Croatia,  Portugal  and  Slovakia  the  investment  financed  by  the  EU  budget 
represented around 70% of public investment, and also for large economies such as Spain 
and Italy, the importance of EU investment funds increased substantially. 

Figure B2. Investments including NGEU as a share of national public investment 

(*).  Selected  programmes  providing  investments  expenditure  (graph  1)  are:  European  Regional  Development  Fund, 
European Social Fund, Cohesion Fund; Rural Development; Framework Programmes for research and development; large 
infrastructure projects (TEN in 2007-2013 and CEF in 2014-2027); funding devoted to key, strategic projects such as the 
Space Programme, Euratom R&T, ITER, European Defence Fund, EFSI and Invest EU; NextGenerationEU in the period 
2021-2023. 

To calculate the investment financed by the EU budget (graphs 2 and 3) the following assumptions were made: 
- For cohesion policy  funds, only the thematic objectives relevant  for  public investment  were considered,  such  as those 
related to research, SME’s or climate change adaptation as available in the Cohesion Open Data Platform. The shares that 
these thematic objectives related to public investment represented over the total cohesion policy funds for the period 2014-
2020 were calculated at Member State level and then applied to the disbursement of cohesion policy funds for the period 

26 

 
 
 
 
 
 
 
 
 
2000-2023. This assumption was made based on the data availability in the Cohesion Open Data Platform for the periods 
2014-2020  and  2021-  2027,  while  the  choice  of  the  period  2014-2020  was  based  that  this  programming  period  was 
implemented  from 2014 onwards  and  would  give  the  best  estimate  of  the  investment  related  thematic  objectives  in  the 
cohesion policy funds. 

- 40% of the total rural development is considered to be investment relevant structural expenditure. 
-  For  the  other  funds,  such  as  the  programmes  NextGenerationEU,  for  Research  and  Development,  large  infrastructures 
and  other  strategic  projects  were  considered  the  full  annual  reimbursements  for  the  period  2000-2023  were  taken  into 
account. 

Source of the EU budget data EU spending and revenue (Spending and revenue - European Commission)  and AMECO for 
public investment. 

The  increase  in  exposure  via  guarantees  and  financial  assistance  has  required 
reinforcing  the risk oversight. The objective to use the EU budget to leverage on private 
sector investments and to provide support by borrowing for loans has fostered an increase in 
contingent  liabilities  on the  budget,  from  EUR  163  billion  in  2021  to  EUR  296  billion  by 
end-2024.  This  is  an  increase  of  more  than  80%.  These  contingent  liabilities  are  either 
provisioned trough the Common Provisioning Fund (budgetary guarantees and loans to third 
countries) or backed by the headroom of the budget (loans to Member States and to Ukraine 
since 2023).57  

Risk oversight has been reinforced by strengthening the role of the Commission’s Chief 
Risk Officer (CRO) as an independent second line of defence at the corporate level and 
expanding the scope of its oversight to  cover all the Union’s financial operations. The 
main tasks of the CRO are to develop and implement the Commission’s risk and compliance 
framework for managing financial risks in the Union’s operations and independently assess, 
monitor,  and  report  on  key  risk  types.  The  Commission  has  thus  implemented  all 
recommendations  in  the  ECA  report  to  further  improve  its  operations,  processes,  and 
reporting, including to (i) establish a separate middle-office function, (ii) reinforce the role 
of  the  Chief  Risk  Officer,  (iii)  implement  a  workforce  strategy,  (iv)  formulate  clear  debt 
management  objectives  and  related  indicators,  and  (v)  ensure  consistency  on  internal 
documentation. 

The  Commission  monitors  the  adequacy  of  provisioning  and  sustainability  of 
contingent  liabilities  on  a  regular  basis  and  informs  the  budgetary  authority  and 
market  participants58.  These  assessments  confirm  the  EU  budget’s  ability  to  cover  the 
existing  obligations  of  the  EU  in  relation  to  both  spending  programmes  and  financial 
markets  (for  debt  issued  under  financial  assistance  programmes  to  Member  States  and  the 
MFA+ instrument) even under extreme adverse circumstances59. 

57 The headroom of the budget is the difference between the maximum amount of funds that the EU can request 
from Member States to cover its financial obligations (own resources ceilings) and the own resources it needs to 
finance its spending in a given period, and serves as a guarantee that the Union budget will be able to withstand 
sudden shocks and the Commission is always able to satisfy its payment obligations, including for example to 
investors in NGEU bond 
58  This  includes  the  in  the  annual  draft  budget  (Working  document  XI  on  budgetary  Guarantees,  Common 
Provisioning Fund and Contingent Liabilities) and the consolidated Report on contingent liabilities arising from 
budgetary guarantees and financial assistance and the sustainability of those contingent liabilities, published each 
year in autumn. 
59 Report from the Commission to the European Parliament and the Council on contingent liabilities arising from 
budgetary guarantees and financial assistance and the sustainability of those contingent liabilities Situation at 31 
December 2023, COM(2024) 507 final. 

27 

 
 
 
 
 
 
 
 
 
 
Figure 2.5. Provisioned and headroom backed contingent liabilities, 2021-2024 

2.7 Administration 
Despite  the  increasing  number  of  tasks,  the  Commission  has  sought  to  uphold  the 
principle  of  stable  staffing,  except  in  a  limited  number  of  cases,  notably  where  the  co- 
legislators have added additional tasks to the Commission, on top of the original proposals. In 
total, the additional staffing needs presented together with the legislative proposals since the 
entry into force of the current MFF to date, amount to over 1.660 fulltime equivalents (FTE)60. 
Adhering to the stable staffing principle under the 2021-2027 MFF meant that these posts were 
not created, and solutions had to be sought through redeployment of staff within the institution 
– leading to a large saving for the budget. However, the approach has increased the challenge 
of ensuring business  continuity, in  the face of major challenges,  and has  had a considerable 
impact on staff. 

The increased cost of living observed in recent years had a direct impact on the evolution 
of  salaries  of  civil  servants  in  the  Member  States  and  consequently  on  the  annual 
adjustment of salaries and pensions of EU staff. This has resulted in additional pressure on 
administrative  expenditure.  The  level  of  salary  update  is  based  on  an  automatic  non- 
discretionary method  provided under Annex XI  to  the Staff Regulations  relying on two key 
factors: 

60 The  figure  is  based  on  the  number  of  fulltime  equivalents  (FTE)  requested  in  the  Legislative  Financial  and 
Digital Statements accompanying all proposals from the adoption of the current MFF to date. This does not include 
the needs identified for cybersecurity experts, nor any need in other Institutions. 

28 

 
 
 
 
 
 
 
 
 
•  The net evolution of the purchasing power of national civil servants from a basket of ten 
Member States61, representing at least 75% of the EU GDP. This constitutes the Global 
Specific Indicator (GSI). 

•  The Joint Index (JI), which takes account of inflation in Belgium and Luxembourg. 

The automaticity of the salary update method of the Staff Regulations ensures the system 
is fair and efficient. It duly mirrors political decisions by Member States regarding their civil 
servants remunerations and the events in real economy (inflation). When Member States’ real 
purchasing power of officials’ salaries increase or decrease, this has a corresponding impact on 
the salaries of the EU staff and pension beneficiaries and their purchasing power. The method 
proved its efficiency, including in 2020, when the automatic implementation of the exception 
clause limited salary increases in a time of economic downturn and generated net savings for 
the EU budget. 

The Commission has made extraordinary efforts to comply  with the target of no more 
than 2% annual growth of non-salary expenditure. High energy costs and exceptionally high 
inflation  in  recent  years  have  had  a  direct  impact  on  non-salary  administrative  expenditure, 
much of which is automatically indexed (rents, IT costs, contracts for services such as security, 
translation, interpretation, cleaning etc.). Compliance with the 2% limit has only been possible 
through a very strict approach, which has certainly come at the expense of investments in IT, 
including  cybersecurity,  and  the  automation  which  could  help  alleviate  staff  pressure.  The 
Commission has adopted a new building strategy, with a move to dynamic collaborate space, 
reducing the surface area occupied, and reducing costs. The Commission has also first cut and 
then frozen expenditure on professional travel and the organisation of meetings and committees, 
despite inflationary pressures. Moreover, the Commission has used the possibility granted to it 
under the Treaty to adjust the requests of the other institutions in the annual budget procedures, 
which had an impact on the staffing, cybersecurity, physical security and building infrastructure 
of those institutions. This has been particularly difficult for the smaller institutions, which have 
less margin for adjustments and redeployments. 

Despite important savings, heading 7 on public administration in its current set-up has 
proven  unsustainable.  As  shown  by  the  use  of  availabilities  table  in  Annex  A.1.2,  the 
challenge of  respecting  all of the  Union’s legal  and contractual obligations  while remaining 
within  the  ceilings and respecting stable  staffing  was  already  clear from the second year  of 
implementation of the current MFF. Increasing the ceilings of Heading 7 was therefore part of 
the  proposal  for  the mid-term revision of the MFF in 2023, when the anticipated gaps were 
estimated at the level of EUR 1,9 billion and 885 staff. At present, the total cumulative deficit 
on heading 7 has reached EUR 1 billion over the years 2021-2025, despite respecting a stable 
staffing  principle  at  the  level  of  the  Commission  and  important  savings,  in  particular  in 
building space. 

2.8 Protection of the EU budget 
The management, control and audit of the EU funding are governed by specific rules to 
ensure transparency, accountability and the proper use of EU funding. These rules are set 

61 Austria, Belgium, France, Germany, Italy, Luxembourg, Netherlands, Poland, Spain and Sweden. 

29 

 
 
 
 
 
 
 
 
 
out  in  the  Financial  Regulation62  and  the  main  sectoral  regulations.  In  the  current  MFF,  the 
key  requirements  for  the  management,  control  and  audit  of  EU  funding  differ  across 
programmes,  with  the scope and intensity of  controls  varying according to the management 
mode, payment mode and legal framework of each fund. 

Under the shared management mode, the Commission implements the funds and carries 
out  controls  and  audits  in  cooperation  with  the  Member  States.  Nevertheless,  there  are 
significant differences between the Common Agricultural Policy (CAP) and Cohesion Policy 
linked to the delivery system that make the day-to-day management and implementation on the 
ground  of  the  EU  funding  programmes  at  national  and  regional  level  very  different  for  the 
managing authorities. 

Under the direct management mode, the Commission implements the funds and carries 
out  controls  and  audits.  Still,  while  the  RRF  is  implemented  under  direct  management,  it 
implies a strong reliance on assurance provided by Member States. 

Under  indirect  management,  the  Commission  entrusts  budget  implementation  to 
implementing partners. It thus relies on their systems for the proper management, audit and 
control of EU funds. Those systems are assessed before implementing partners are allowed to 
manage EU funds. 

The Commission puts in place control strategies that are tailored to the specificities of the 
funds and the related risks of errors. Cost effectiveness is obtained with the differentiation 
of controls: riskier areas trigger a higher level of scrutiny and or frequency of controls whereas 
low-risk areas should lead to controls that are less intensive, less costly and less burdensome. 

The  co-existence  of  different  sectoral  frameworks  and  reporting  requirements  poses 
challenges and adds more complexity for beneficiaries, national authorities, external audit 
bodies and other stakeholders, be it in terms of clarity of the EU action, administrative burden 
or predictability as similar deficiencies may lead to different financial consequences depending 
on the fund and management mode. 

Since 2021, with the entry into force of the regulation on a general regime of conditionality 
(‘conditionality  regulation’)63,  the  EU  budget  has  added  another  layer  of  protection  in 
cases when breaches of the rule of law principles affect or risk affecting the EU budget. 
The instrument complements other tools and procedures to protect the EU budget, for example 
checks  and  audits  or  financial  corrections,  or  investigations  by  the  EU's  anti-fraud  office 
(OLAF). The Commission can only recur to the Regulation if there is a sufficiently direct link 
between the breach of the principles of the rule of law and the Union budget and if the other 
Union budget tools cannot protect the Union budget more effectively. 

The general regime of conditionality, applying to all Member States and covering both 
expenditure  and  revenues,  has  contributed  to  bring  more  protection  to  EU  taxpayers’ 

62 Regulation (EU, Euratom) 2024/2509 of the European Parliament and of the Council of 23 September 2024 on 
the financial rules applicable to the general budget of the Union. 
63 Regulation (EU, Euratom) 2020/2092 of the European Parliament and of the Council of 16 December 2020 on a 
general regime of conditionality for the protection of the Union budget. 

30 

 
 
 
 
 
 
 
 
 
 
 
 
money and to the protection of the rule of law in the EU  thanks to both its deterrent and 
corrective effects. The regime has been recognised as a step forward in the protection of the 
Union budget by both the European Parliament and the European Court of Auditors, in addition 
to contributing to promote the protection of the rule of law in the EU. The general regime of 
conditionality defines which situations are indicative of breaches of the principles of the rule of 
law  in  the  Member  States,  such  as  endangering  the  independence  of  the  judiciary,  allowing 
arbitrary or unlawful decisions by public authorities or failing to ensure the absence of conflicts 
of interest.  It also  defines how such breaches should  be linked to  the  Union  budget,  for the 
regime to apply. Where the conditions are met, the European Commission can propose to the 
Council the adoption of measures to protect the EU budget such as the suspension or reduction 
of EU funding. The final decision is taken by the Council of the EU. Following a proposal by 
the Commission, measures adopted by the Council can be adapted or lifted if the Member State 
concerned adopts remedies that are adequate to address respectively partly or in full the relevant 
findings. 

Conditionalities systems have been designed and implemented across the EU budget in a 
different  way.  While  the  RRF  and  the  enabling  conditions  for  funds  under  the  Common 
Provisions  Regulation  have  demonstrated  how  the  EU  budget  can  promote  reforms  that 
strengthen the rule of law in Member States, the co-existence of different sectoral frameworks 
with different scope and procedural rules may pose challenges as deficiencies of the same type 
and nature in the Member States may lead to different financial consequences depending on the 
rules that are applied. 

2.9 Lessons learned on the revenue side 
In the current MFF, the EU budget is financed through long-established own resources 
and other revenue, but also through a more recent own resource based on non-recycled 
plastic  packaging  waste.  Established  revenue  items  include  Traditional  Own  Resources  – 
mainly customs duties on imports from outside the EU – that Member States collect on behalf 
of  the  Union,  a  resource  based  on  a  fixed  percentage  of  Member  States’  Value Added  Tax 
(VAT) bases, and a contribution based on a uniform percentage of each Member State’s Gross 
National Income (GNI). The GNI-based contribution is the largest source of EU revenue and 
serves as the budget’s balancing item, i.e. it covers the difference between total expenditure and 
all other own resources  and other revenue to ensure that total budgeted revenue equals total 
budgeted  expenditure.  The  Own  Resources  Decision  202064  made  the  VAT  own  resource 
simpler and more transparent  and introduced the own resource based on  a uniform  call rate 
applied  to  the  weight  of  non-recycled  plastic  packaging  waste.  Other  revenue,  defined  as 
sources of revenue that are not own resources, is an intrinsic part of a Union policy and can be 
general  (i.e.  non-assigned),  which  reduces  the  need  for  GNI  contributions,  or  assigned  to  a 
specific purpose based on a relevant legal basis. 

The current own resources system has ensured stable and predictable financing of the EU 
budget,  but  the  budget  is  largely,  and  increasingly,  dependent  on  GNI  contributions, 
which will reach its limits as financing needs increase.  The share of GNI contributions in 
total  revenue  has  been  consistently  growing  over  the  years  (see  Figure  2.5).  Given  the 
increasing financing needs and the strained budgetary situation of Member States, it cannot be 

64 Council  Decision  (EU,  Euratom)  2020/2053  of  14  December  2020  on  the  system  of  own  resources  of  the 
European Union and repealing Decision 2014/335/EU, Euratom. 

31 

 
 
 
 
 
 
 
 
expected that the dependence of GNI contributions can continue to increase at a similar pace in 
the future. The focus on GNI contributions has also strengthened the ‘net balances’ approach, 
which only compares how much Member States contribute to the EU budget with how much 
they  receive  back  as  direct  cashflow.  This  ignores  the  numerous  cross-border  benefits  of 
European public good character by allocating expenditure to individual Member States solely 
based on the residence of the main beneficiaries. It also ignores the broader benefits of Union 
membership.  Member  States  with  the  most  negative  ‘net  balances’  have  traditionally  been 
granted rebates on their contributions to the EU budget. Currently, five Member States benefit 
from lump-sum reductions in their GNI contribution, replacing all other previous corrections. 
17 Member States also benefit from a lump-sum reduction in their plastics contribution. 

Figure 2.5. EU budget revenues: evolution over time, 1988-2025 (% of EU GNI) 

To  repay  the  NextGenerationEU  borrowing  without  expenditure  cuts  or  a  further 
increase in GNI-based contributions, the Commission put forward proposals in 2021 and 
2023  on  new  own  resources,  but  so  far  with  limited  success.  According  to  the 
Interinstitutional Agreement of 2020, which paved the way for the current MFF, the EU budget 
expenditure for the repayment of NextGenerationEU should not lead to an undue reduction in 
programme expenditure or investment instruments while avoiding an increase in the Member 
States’ GNI-based contributions. Therefore, the Commission proposed in 2021 a package of 
new own resources, including a 25% share of the revenue from the Emissions Trading Scheme 
(ETS), 75% of the revenues from a Carbon Border Adjustment Mechanism (CBAM), and 15% 
of  the  share  of  residual  profits  from  multinationals  that  will  be  re-allocated  to  EU  Member 
States under the OECD agreement on a re-allocation of taxing rights (‘Pillar One’). Given the 
lack  of  progress  in  implementing  the  OECD  agreement,  the  proposal  was  complemented  in 
2023 by a new statistical own resource based on company profits (CPOR). In addition, the 2023 
package increased the call rate for the proposed ETS-based own resource to 30% in view of the 

32 

 
 
 
 
 
 
 
increased carbon price and included a technical adjustment to the control framework of CBAM. 
However, so far negotiations in the Council have not reached the required unanimity on the 
new own resources proposals. 

3. Key principles for the EU budget of the future 
Based on the lessons learned presented in the first part of this document, the following section 
explains the approach adopted with the new MFF package with a view to addressing the main 
shortcomings. 

3.1 Flexibility: new needs, crisis response and political steering 
The next EU budget must be able to respond fast and efficiently to the evolving priorities 
of the future. Against the lessons learnt and depicted in section 2, a seven-year MFF can only 
work if it is equipped by design with the necessary flexibility. This MFF proposal addresses 
this issue in a holistic way. 

First  and  foremost,  the  proposed  MFF  reduces  structural  rigidity.  The  reduction  of  the 
number of headings from seven in the 2021-2027 MFF (plus one sub-heading and two sub- 
ceilings) to four in the proposal for 2028-2034 facilitates redeployments  across the MFF. In 
addition,  the  MFF  Regulation  proposed  by  the  Commission  retains  the  Single  Margin 
Instrument as a tool to use past margins (and, as a last resort, current and future margins) across 
headings. 

Second, as the current fragmentation of special instruments over and above the ceilings 
increases  complexity  to  the  MFF  and  its  implementation,  their  architecture  will  be 
simplified. Special instruments allow the mobilisation of additional amounts over and above 
the MFF ceilings, providing the flexibility to increase expenditure in the face of unexpected 
needs. However, the existence of several thematic special instruments limits such flexibility. 
The 2028-2034 MFF proposal retains only two non-thematic special instruments, the Flexibility 
Instrument, reinforced  compared to the  current  period  and  the  Single Margin  Instrument,  as 
well as one thematic special instrument, the Ukraine Reserve. The annual reference amount of 
the  Flexibility  Instrument  will  be  EUR  2  billion  (in  2025  prices),  compared  to  EUR  1.33 
billion (2025 prices) in the current MFF on average, also including the MFF mid-term revision. 
In addition, it is proposed to reinforce the Flexibility Instrument with an amount equivalent to 
decommitments (as currently done in the EURI Instrument)65 and amounts equivalent to the 
revenue from net fines and other penalties or sanctions imposed by Union institutions (that top 
up selected programmes in the current MFF). Moreover, it is proposed that any unused amount 
can be carried over throughout the whole MFF period. 

The  restructuring  of  special 
instruments  has  two  benefits:  predictability  and 
simplification. First, it reduces substantially the flexibilities over and above the ceilings, thus 
increasing  predictability  for  Member  States  concerning  national  contributions,  other  things 
being equal. Second, it simplifies implementation: the thematic special instruments that address 
disasters  and  emergencies  under  the  current  MFF  (i.e.,  the  EUSF  and  the  Emergency  Aid 
Reserve)  have  important  synergies  with  the  relevant  policies  in  the  national  and  regional 
partnership plans and the Global Europe Instrument. By integrating this type of support within 
the programmes, more a consistent approach towards, prevention, preparedness, and response 

65 Except for those cases where reuse of decommitment is included in the sectoral legislation. 

33 

 
 
 
 
 
 
 
 
 
 
to disasters is achieved. Finally, the BAR, the European Globalisation Adjustment Fund and the 
EURI instrument are discontinued. The first two instruments were largely redeployed to other 
objectives under the current MFF, as discussed in Section 2. The EURI instrument is no longer 
necessary, as no new net bond issuances under the EURI will occur in the next MFF, and thus 
interest  rate  risk  will  be  limited  to  refinancing  operations.  Remaining  interest  risk  can  be 
managed within the fixed envelope for NGEU repayment (see Section 4). 

The third piece of future MFF flexibility will come from the design and implementation 
of the future generation of programmes. Such increased flexibility comes from the presence 
of  unallocated  amounts  or  cushions  in  largest  programmes  and  increased  possibility  to 
reprogramme when it is necessary. The merge of several programmes into larger programmes 
or instruments also contributes to increasing flexibility. 
Section 4 discusses the structure of future programmes more in detail. 

i. 

National and regional partnership plans 

A share of Member States’ initial allocation will remain unprogrammed (‘flexibility amount’), 
becoming available both for crisis support, in case natural or man-made disasters hit a Member 
State or region, and for the new policy needs identified at the time of the mid-term review of the 
plans.  This  will  allow  the  plans  to  adjust  to  new  policy  needs,  while  ensuring  certainty  to 
Member States and regions on the overall amounts available to them from the onset. A layered 
approach will allow for a cumulative and tailored response to crises. Member States will first 
reprogramme amounts available under their Plans, which they will be able to complement with 
their  flexibility  amount.  Where  the  scale  of  the  disaster  or  urgency  calls  for  more  significant 
support,  a  centrally  managed  EU  Facility  will  provide  emergency  assistance  to  top  up  to 
national envelopes, as currently done by the EU Solidarity Fund, the Thematic Facility of Home 
Affairs funds (e.g. in case of a migration crisis) or the Agricultural reserve under the EAGF. As 
the Facility will also provide financing for other priorities, a cushion will ensure that funding 
can be accessed for emergencies or new priorities throughout the entire period. 

ii. 

European Competitiveness Fund (ECF) and Horizon Europe 

The  ECF  will  focus  on  strategic  sectors  and  technologies,  structured  into  a  small  number  of 
broad policy windows. These policy windows will have an indicative allocated amount and in-
built capabilities to allow shifting funding within and between them. This will allow for broad 
policy  flexibility  and  will  ensure  covering  new  emerging  needs  within  the  Fund.  Policy 
windows under the ECF will have access  
to  the  full  financial  toolbox  of  the  EU  budget  including  the  use  of  budgetary  guarantees, 
financial  instruments  and  blending  operations,  which  creates  the  flexibility  to  ensure  that  the 
appropriate tool is used for the different policy needs and beneficiaries. In the same vein, the 
proposed  architecture  of  Horizon  Europe  will  ensure  predictability  and  continuity  in  funding 
priorities with agility to respond to emerging or unforeseen priorities. 

iii. 

Global Europe 

Each macro-region under Global Europe will have an indicative financial allocation. There will 
be the possibility to transfer across geographies and among countries in the same geography, as 
well  as  moving  funding  more  effectively  and  swiftly  between  policy  tools  when  needs  or 
priorities change. 

34 

 
 
 
 
 
 
 
 
 
 
 
Not all funding will be pre-programmed for the whole period from the onset to leave enough 
flexibility.  Each  macro-region  will  have  a  set  of  unprogrammable  actions  such  as 
humanitarian aid, crisis response, resilience, and competitiveness. Particularly, the resilience 
actions  should  enable  the  Union  to  step  up  its  cooperation  where  needed  in  light  of  the 
volatility  of  the  external  context.  They  should  be  flexible  in  responding  to  and  reinforcing 
actions addressing fragility, crisis, the humanitarian-development-peace-nexus, reconstruction 
and recovery needs, as well as balance of payment crises. This will be essential, since some 
needs (e.g. Syria or Gaza reconstruction) will have to be catered for under the allocations  of 
Global  Europe,  but  the  timing  of  these  funding  needs  is  yet  unclear.  In  addition,  non-
programmable  competitiveness  actions  will  enable  the  Union  to  respond  to  economic 
challenges  and  to  swiftly  seize  opportunities,  including  via  the  support  to  the  external 
dimension of the Union’s internal policies. 

A centrally managed cushion will enable Global Europe to react to unforeseeable events, needs 
or  emergencies,  and  new  policy  priorities  that  will  arrive  during  the  MFF  period  and  may 
affect  different  geographies.  Building  on  the  experience  from  the  NDICI-GE  cushion  under 
the current MFF, it will be important to preserve the cushion in the first years of the MFF and 
design specific safeguards so that the cushion is not earmarked from the onset. 

iv. 

Other programmes 

One of the limitations of the current MFF, constraining the EU budget’s ability to reallocate 
resources in case of new needs, is the detailed decomposition and earmarking across strands 
and  sub-envelopes,  as  well  as  other  targets,  even  in  the  legal  acts  of  relatively  small 
programmes.  With  the  exception  of  the  three  main  pillars  mentioned  above,  the  sectoral 
proposals  for  the  next  MFF  do  not  provide  such  legal  earmarking  and  other  programme-
specific targets.66  

Figure  3.1  below  provides  a  visual  representation  of  the  correspondence  between  special 
instruments and programme-specific cushions in the 2021-2027 and the 2028-2034 long-term 
budget. 

Figure 3.1. Flexibilities in the 2021-2027 MFF and the 2028-2034 MFF 

66 An indicative split is provided in the Legislative Financial and Digital Statements accompanying each sectoral 
proposal. 

35 

 
 
 
 
 
 
 
 
 
 
 
(*) See also Section 4 for a discussion on future support to Ukraine.  
(**) NGEU repayment will be fully below the ceilings. 

The  use  of  flexibilities  to  address  new  priorities  and  unexpected  needs  will  be  guided  by  a 
steering mechanism that will allow to agree on key priorities to be financed in the annual budget 
(see section 3.4).  The budgetary authority will decide, with each annual budget, how and where 
flexibilities are used, according to its prerogatives. 

A  new  extraordinary  and  temporary  mechanism  will  be  established  to  respond  to  the 
consequences of severe crises, severe hardship or serious threat thereof affecting the Union 
or its Member States. Recent years have shown that the frequency, severity and depth of crises 
and hardships have increased. The  rigidity  of the current  budget  infrastructure restricted the 
Union in its response to such crises, although in specific areas the Union did eventually manage 
to put in place dedicated instruments for the EU/EA (e.g. EFSM), Banking Union (SRF) or even 
outside the EU framework (ESM). This underlined the importance of ensuring that the Union 
is structurally equipped with flexible and sufficient tools to respond to them. An extraordinary 
crisis  response mechanism  will therefore be  embedded in  the Own Resource Decision. This 
extraordinary crisis tool will apply solely to the period of the upcoming MFF 2028-2034 and 
will enable only repayable forms of support. 

The activation of this extraordinary and targeted crisis response tool will be decided by 
the Council taking into account the specificities and needs arising from such severe crises, 
severe hardship or serious threat thereof. Given the exceptional nature of the tool, it should 
not be activated if Union instruments are already in place allowing to adequately address the 
consequences of the situation. The Council will act by means of a Council regulation adopted 
in accordance with the procedure set out in the fourth paragraph of Article 311 TFEU having 
obtained  the  consent  of  the  European  Parliament.  The  Council  regulation  will  authorise  the 
borrowing  by  the  Commission,  on  capital  markets,  of  the  amount  for  the  loans  to  Member 
States.  The  Council  regulation  will  also  establish  the  principles  for  the  repayment.  This 
extraordinary crisis response tool will be backed by a dedicated compartment in the headroom. 
Should such extraordinary crisis response tool be activated by the Council, its implementation 
will be determined in the basic act most relevant to the circumstances related to severe crises, 
severe hardship or serious threat thereof at stake. The implementation of this crisis response 
tool  ensures  the  involvement  of  the  European  Parliament  in  line  with  its  institutional 
prerogatives. 

36 

 
 
 
 
 
 
 
 
3.2 Simplification 
The  Commission  proposes  to  substantially  streamline  the  EU  budget  structure.  As 
mentioned in Section 3.1, the number of headings will be reduced to 4. In the same vein, from 
the  current  52  programmes  within  and  outside  the  MFF,  the  MFF  proposal  includes  16 
programmes. This reduces overlaps, maximises synergies and economies of scale and reduces 
administrative burden. 

Instruments  financed  via  external  assigned  revenue  or  outside  the  EU  budget  are 
embedded in a coherent manner in the architecture. Currently, revenues from the Emissions 
Trading Schemes (ETS) allowances fund EU action through several programmes outside the 
MFF:  the Modernisation Fund (outside the EU  budget), the Innovation Fund and the Social 
Climate Fund. The contribution of these instruments to fostering a clean transition and helping 
mitigate the unintended social impacts of the transition will be enhanced by aligning them with 
other instruments. The Innovation Fund will be interconnected with the ECF architecture and 
governance, while the Social Climate Fund  will  be integrated into the national  and regional 
partnership  plans,  allowing  national  authorities  to  use  a  single  framework  and  consistent 
processes to access all the funding available to them. 

Delivery  models  are  modernised.  An  increased  focus  on  objectives-based  delivery  will 
integrate the best practices and lessons learned from the current MFF. Milestones and targets, 
ex-ante costing and Financing Not Linked to Cost (FNLC) will be used in shared management 
to further increase objective-based funding. Under direct management, there will be increased 
use of FNLC and Simplified Cost Options to reduce administrative burden. This significantly 
reduces the reporting obligations on recipients of funds by focusing checks and controls on the 
deliverables of the project rather than on the costs. Recipients also no longer need to maintain 
detailed financial records  to  prove what  costs were incurred. Simplification is  not an end in 
itself but is a means to support faster implementation and increase the impact of the EU budget 
(see also section 3.3 below). 

Across the MFF, a single Portal will consolidate information on funding opportunities and 
provide a single gateway to EU project promoters for simplified access to information, 
building  on  the  experiences  of  the  Funding  and  Tenders  Portal  and  the  STEP  Portal. 
Advisory  and  business  support  services  will  be  streamlined  and  targeted  to  mitigate today’s 
overlaps and focus on where EU support can make a difference. 

Finally,  a  simpler  and  coherent  framework  for  monitoring  and  evaluation  will  be 
applicable  to  the  entire  EU  budget  through  a  dedicated  horizontal  regulation.  This 
regulation  lays  down  the  elements  for  a  streamlined  expenditure  tracking  and  performance 
framework  for  the  whole  budget,  including  rules  on  the  monitoring  of  budget  spending, 
monitoring  and reporting on the performance of Union  programmes and activities, rules for 
establishing a single online portal for information about Union funding opportunities, and rules 
for  the  evaluation  of  the  programmes.  It  also  establishes  provisions  on  applying  horizontal 
principles  such  as  ‘do  no  significant  harm’  and  gender  equality,  as  well  as  other  horizontal 
provisions applicable to all Union programmes. 

3.3 Efficiency and impact 
Expanded use of financial instruments and budgetary guarantees will further leverage the 
EU  budget  to  unlock  private  capital  and  to  maximise  the  impact  of  the  Union  budget. 
37 

 
 
 
 
 
 
 
 
 
 
Private  partners  and  private  sector  investment  are  increasingly  relevant  for  a  wide  range  of 
policies and programmes. At the same time, uncertainty, challenging financing conditions and 
slowing economic growth are expected to negatively affect private investments in particular for 
investment in areas of common European interest. The EU budget must thus play a stronger 
role  in  de-risking  private  investments.  Budgetary  guarantees,  financial  instruments  and 
blending  operations  combining  repayable  support  with  a  grant  component  and  financial 
instruments will be used in situations where market failures require some level of public support 
for the project to materialise. Union funding will only de-risk projects to the degree necessary 
for the private sector to take over and for the project to be successfully delivered. 

EU budget programmes will provide the most appropriate form of funding depending on 
the objective and recipient, to ensure sound financial management and maximise the impact 
of  every  euro.  Budgetary  guarantees,  financial  instruments  and  blending  operations  will 
become an integral part of the funding toolbox. The MFF will have one EU budgetary guarantee 
for internal policies, established in the basic act for the ECF and one EU budgetary guarantee 
for external policies, established in the basic act of the Global Europe Instrument. They will 
become the delivery vehicle to serve respectively internal policy programmes and the external 
policy programme. The size of each budgetary guarantee will be defined in the basic acts of the 
ECF and the Global Europe Instrument. This approach builds on the experience of InvestEU 
for internal policies, which streamlined the management of budgetary guarantees and financial 
instruments,  as  well  as  on  the  experience  of  NDICI-GE  for  external  policies,  which  brough 
different  forms  of  EU  support  under  one  single  programme.  Furthermore,  it  allows  to  pool 
technical expertise across the Commission. 

The  horizontal  toolbox  of  the  EU  budget  will  be  expanded  with  a  harmonised  set  of 
technical  rules  (‘instruction  manual’)  for  budgetary  guarantees,  financial  instruments, 
and  blending  operations  to  foster  simplification  and  coherence  across  the  budget 
implementation. Harmonised technical rules will create a stable framework across the budget 
and reduce the administrative burden for implementing partners by aligning technical rules for 
internal and external programmes. Moreover, the manual will contain options for the use of pre- 
agreed off-the-shelf risk sharing structures to facilitate the roll-out of new financial products 
(e.g.  for  equity,  guarantees  and  other  risk  sharing  products),  while  still  allowing  for  the 
necessary  flexibility  to  create  new  innovative  products.  The  open  architecture  (allowing 
different implementing partners such as the European Investment Bank Group, the European 
bank  for  reconstruction  and  development,  national  promotional  banks  and  national 
development finance institutions) will remain a key aspect of the set-up as it has broadened 
collaboration and expertise under the current MFF. 

Additional incentives will speed up the impact of the EU budget on the ground. Every euro 
spent from the EU budget should matter. The speed of implementation needs to be increased, 
reducing outstanding commitments (Reste à liquider), which have increased under the current 
MFF.  As  such,  the  proposed  MFF  Regulation  does  not  include  a  provision  for  automatic 
recommitment of the first tranche of commitments for shared management programmes in case 
of late adoption, to provide clear incentives to finalise the implementation of the national and 
regional partnership plans in a timely manner.67 With objective-based delivery, funding will be 

67 Article  7  of  the  2021-2027  MFF  Regulation  allowed  to  reprogramme  one  full  year  of  commitments  (about 
EUR 50 billion) to the following years. 

38 

 
 
 
 
 
 
 
 
disbursed  to  authorities  implementing  the  plans  for  the  completion  of  pre-agreed  concrete 
steps (milestones and targets). Such gradual disbursement incentivises faster implementation 
every step of the way. Similarly, faster implementation will be supported with a combination 
of  reforms  and  investments  under  the  plans,  with  reforms  guaranteeing  more  optimal 
investment  conditions  fostering  further  impact  of  the  EU  budget.  Within  the  Connecting 
Europe Facility, the “use it or lose it” principle, where delays in implementation may lead to 
project promoters losing funding of future years, will continue to guarantee an efficient use of 
the EU budget, along with strong incentives for fast implementation. This in turn increases the 
performance of the EU budget and maximises its impact. For budgetary guarantees, following 
the example of the Ukraine Facility, gradual granting of the guarantee will be applied across 
the board to foster flexibility to choose the relevant policy tools (grants, budgetary guarantees, 
financial  instruments  or  a  combination  of  those)  and  to  create  clear  incentives  for  the 
implementing partners. 

Co-financing  can  provide  a  substantial  leverage  of  EU  funds.  This  will  be  particularly 
relevant  in  the  national  and  regional  partnership  plans  and  the  Connecting  Europe  Facility. 
For the ECF and other programmes, the applicable co-financing rules will be set at the level of 
programme or work programme taking the degree of market failures or sub-optimal investment 
situations  into  account  in  a  proportionate  manner  and  ensuring  clear  EU  value  added,  to 
maximise  flexibility  during  the  programme’s  implementation  and  ensure  co-  financing  is 
tailored to the needs of the projects. 

The recent reform of EU fiscal governance provides an opportunity to increase coherence 
between EU spending, EU priorities and national spending. The revised fiscal governance 
framework excludes expenditures on national co-financing from the calculation of the growth 
in net expenditure. This provides an opportunity to decouple EU funds’ implementation from 
Member  States’  fiscal  consolidation  and  improve  the  coherence  between  national  and  Union 
cofinancing on investments of common interest. 

The future national and regional partnership plans will allow the European Commission, 
Member States and regions to align investment and reform priorities. Ensuring consistency 
between EU and national and regional investment priorities is crucial to maximize the impact 
of  funding.  The  national  and  regional  partnership  plans  will  help  aligning  policy  priorities, 
regulatory frameworks and implementation processes, in order to crowd in additional resources 
from national and regional governments as well as the private sector. The plans will integrate a 
place-based, multi-governance approach, putting regions at the centre. 

3.4 Coherence and synergies among programmes 
To enhance coherence, create synergies, and allow the funding to be delivered where it can 
have  the  most  impact,  the  rules  of  EU  instruments  will  be  aligned  from  the  start.  For 
example, cumulative funding will also allow to combine different sources of EU funding where 
it  is  warranted,  for  instance  for  large  projects  where  a  single  instrument  will  not  be  able  to 
mobilise amounts commensurate to the needs. Moreover, Member States will be able to include 
via  milestones  and  targets,  contributions  to  the  ECF  investment  guarantee  (Member  State 
compartment). 

A new steering mechanism will reinforce the link between overall policy coordination and 
the  whole  EU  budget.  It  will  facilitate  the  identification  and  political  discussion  on  key 
39 

 
 
 
 
 
 
 
 
 
 
priorities to be financed for the following financial years. The steering mechanism will develop 
along the annual budget  procedure and will allow the EU  budget to be more flexible and to 
respond to a fast-changing reality and new Union priorities. On that basis, the Commission will 
engage in a dialogue with the European Parliament and the Council, in accordance with their 
respective  internal  procedures,  on  political  priorities  for  the  upcoming  annual  budgetary 
procedure. Such strengthened cooperation is necessary especially given the greater flexibility 
to address evolving needs proposed in the MFF. It will lead to a more substantial and meaningful 
budgetary procedure as compared to the current MFF where around 90 % of funds were pre- 
allocated from the outset. 

3.5 Protection of the Union budget 
Building on the lessons learned from the implementation of EU funds, the management, 
control and audit framework of the national and regional partnership plans will aim at 
providing  the  Commission  with  strong  assurance  that  the  funds  have  been  used  for  their 
intended purpose, in line with applicable law, sound financial management principles and the 
Commission’s overall responsibility for the management of the EU budget (article 317 TFEU). 

Key  requirements  of  the  management  and  control  systems  of  the  Member  States, 
including on the prevention, detection and correction of cases of fraud, corruption and 
conflicts of interests as well as on compliance with public procurement and State aid rules, 
will be clearly defined ex ante and will have to be met throughout implementation. These 
requirements  will  reflect  the  expected  key  components  of  the  national  control  system  and 
should enable a maximum use of existing structures already in place for the management of EU 
funds,  with  possible  adaptations  of  their  procedures  to  ensure  adequate  assurance.  Before 
approving  each  plan,  the  Commission  will  assess  whether  Member  States  have  adequate 
arrangements  in  place  to  comply  with  these  requirements  and  ensure  the  protection  of  the 
Union’s financial interests. In case serious deficiencies are identified, Member States will have 
to take corrective action before payments can be undertaken. 

Similar to the approach applied so far, the level and intensity of controls will be tailored 
to  the  delivery  model  of  the  instrument  and  based  on  clear  sequencing  and  division  of 
duties between the Commission and Member States. In line with the single audit principle, 
Commission audits will first and foremost consist of systems audits to avoid duplications of 
controls  and  audits  and  reduce  the  administrative  burden,  thereby  addressing  demands  for 
simplification  and  predictability.  These  audits  will  verify  that  the  systems  in  place  in  the 
Member States are appropriate, reliable  and function effectively. The system will allow that 
each layer will be able to build its assurance on the layer below, if the lower layer meets certain 
pre-conditions. The Commission will however retain the possibility to conduct more targeted 
checks, for instance in case of a specific risk or suspicion of fraud, corruption or conflicts of 
interest  or  a  serious  breach  by  the  Member  State  of  its  obligations,  and  act  in  a  timely  and 
proportionate manner if deficiencies have not been properly addressed by Member States. 

Respect for the rule of law will continue to be a must for EU funds. Compliance with the 
principles of the rule of law and the Charter of Fundamental Rights of the European Union will 
therefore be ensured throughout the implementation of the national and regional partnership 
plans with a view to ensuring both continuity with current practices and greater coherence in 
the EU action. Building on features of the CPR and the RRF, this will allow to address issues 
before resorting, if needed, to the Conditionality Regulation, which will continue to apply to 
the entire EU budget. There will be a possibility to block part or all payments at any time during 
40 

 
 
 
 
 
 
 
 
implementation  and  in  line  with  the  principle  of  proportionality,  considering  the  nature, 
duration, gravity and scope of the identified breach. 

The Plans will also seek to support reforms that strengthen the rule of law in Member 
States and measures protecting Europe’s democracy by building, in particular, a closer link 
between  the  recommendations  in  the  annual  Rule  of  Law  Report  and  financial  support  for 
related reforms under the EU budget. 

Regarding  direct  and  indirect  management,  since  the  implementation  modalities  will 
remain  very  similar  to  those  under  the  MFF  2021-2027,  the  management,  audit  and 
control  framework  will  be  a  continuation.  The  Commission  will  nevertheless  pursue  its 
simplification objectives here as well, namely by reducing the number of rules, clarifying and 
harmonising. In parallel, it will continue adjusting its control and audit approach so that, while 
ensuring  the  sound  financial  management  and  protection  of  the  EU  budget,  the  weight  of 
controls remains limited. 

3.6 Inflation 
Against the background of more uncertain geopolitical and geoeconomic developments, 
and to remove rigidities that have a negative impact on the EU budget in case of a volatile 
economic environment, it is proposed to introduce a novel price adjustment method. MFF 
ceilings  will  be  defined  in  2025  prices,  and  the  annual  adjustment  is  based  on  a  fixed  but 
adjustable deflator. In practical terms, the annual price adjustment will be equal to 2% whenever 
EU  inflation  is  between  1%  and  3%,  and  equal  to  the  actual  inflation  rate  whenever  actual 
inflation is lower than 1% or higher than 3%. The inflation rate of reference will be the EU-27 
GDP deflator. This is preferrable to the harmonised index of consumer prices (HICP) since (i) 
conceptually,  the  GDP deflator  refers  to  the  full  set  of  goods  and  services  produced  by  the 
economy, whereas the HICP is based on a (theoretical) basket of goods and services consumed 
by the average consumer and (ii) the GDP deflator is less volatile than the HICP. Had this system 
been in place in 2014-2027, the MFF adjustment would have been lower in 2 years, higher in 3 
years and the same for the remaining 9 years (Figure 3.2). 

Figure 3.2. Counterfactual analysis: the fixed-but-adjustable deflator in 2014-2027 

Source: AMECO and European Commission calculations 

3.7 Revenues 
To support an ambitious MFF that responds effectively to the Union’s strategic priorities, 
new own resources are essential. They should have a significant revenue potential, not create 
41 

 
 
 
 
 
 
 
 
 
 
excessive burden for compliance and administration, and be in sync with the Union’s objectives 
and policies. In addition, it should be possible to mobilise them quickly. New own resources 
will reduce the burden on Member States, and ensure the sustainability of common policies, in 
particular  the  repayment  of  NextGenerationEU  debt  without  reducing  the  ambition  when  it 
comes to financing both new challenges and traditional policies and priorities. The Commission 
put forward proposals in 2021 and 2023 to introduce new own resources, but so far with limited 
success. These proposals were in line with the Interinstitutional Agreement of 2020, negotiated 
with  the  current  MFF. According  to  this  agreement,  the  expenditure  from  the  Union  budget 
related  to  the  repayment  of  NextGenerationEU  should  not  lead  to  an  undue  reduction  in 
programme expenditure or investment instruments while mitigating the increases in the GNI- 
based own resource for the Member States. 

Existing own resources and other revenue could also help reduce the need for national 
contributions from Member States. The removal of the de minimis exemption for customs 
duties  on  small  shipments  will  contribute  to  this  objective.  In  addition,  for  traditional  own 
resources, the amount retained by Member States to cover the collection costs of customs duties 
should be reduced, in view of the improvements brought by the customs package. Additional 
other revenue could be generated by adjusting existing fees such as for the European Travel 
Information  and  Authorisation  System  (ETIAS)  or  introducing  new  ones  related  to  Union 
policies, where appropriate, such as the e-commerce handling fee. 

4. A policy-based Multiannual Financial Framework 
The proposal for the next MFF establishes the future long-term budget for a period of 7 
years,  in line with  the  requirement of Art. 312 of  the Treaty on  the  Functioning of the 
European Union of a duration of at least 5 years. Confirming the 7-year duration, in line 
with all previous long-term budgets since 1993, ensures stability and predictability of Union 
financing,  especially  concerning  long-term  investments.  At  the  same  time,  the  increased 
flexibility provisions, also discussed in Section 3, provide for the necessary adaptability of the 
EU budget within such long duration. 

This section briefly discusses the architecture of the sectoral programmes in the proposed 
MFF  2028-2034.  Detailed  analysis  supporting  the  sectoral  proposals  is  provided  in  the 
respective Impact Assessments and ex-ante evaluations accompanying the proposals. 

4.1 National and regional partnership plans for investments and reforms68 

Reinforcing Europe’s economic, territorial and social cohesion and investing in people will 
remain key priorities as Europe is only as strong as its citizens are empowered. European 
integration has contributed to upward convergence in living standards throughout the decades. 
However, significant territorial disparities persist: 29% of EU citizens live in regions with a 
GDP per capita below 75% of the EU average. About 135 million people live in places which, 
in the last two decades, have slowly fallen behind.69 

68 Further detail is provided in the Impact Assessment accompanying the proposal for the National and Regional 
Partnership Plans. 
69 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. 

42 

 
 
 
 
 
 
 
 
 
 
 
At the same time, food security and nature protection sustain Europe’s quality of life with 
the  Common Agricultural  Policy  (CAP)  able  to  guarantee  that  450  million  Europeans 
have access to safe, high quality and diversified food products at affordable prices, while 
contributing  to  preserve  vibrant  rural  areas  and  make  significant  progress  towards 
sustainability.  Yet,  long-term  risks  for  food  security  and  the  effects  of  climate  change  and 
environmental degradation put  the agricultural  sector under increasing  pressure. In  addition, 
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. For 
example,  despite  the  substantial  support  from  the  CAP,  the  agricultural  income  per  worker 
remains volatile and significantly below the average wage in the EU economy (60% in 2023). 

War, insecurity, poverty and a lack of opportunities have strengthened migration flows, 
and the weaponisation of migration at the EU borders has illustrated new forms of threats. 
At  the  same  time,  the  global  political  and  economic  landscape  poses  challenges  of 
unprecedented  magnitude,  with  war  still  raging  on  the  European  continent  and  also  in  the 
neighbourhood. The national and regional partnership plans will ensure that the EU’s support 
to  migration,  border  management  and  security  challenges  is  tailored  to  the  needs  of  each 
Member  State  and  its  regions. At  the  same  time,  they  are  an  opportunity  to  build  stronger 
synergies between migration and cohesion policy, to better equip regions to integrate migrants 
in the labour market while protecting their borders. The legal specificities of migration, border 
management  and  security  policies,  as  reflected  in  the  Treaties  with  variable  geometry  is 
safeguarded through separate Regulations setting out the objectives for Union support, which 
will be delivered through the plans. 

Priorities  ranging  across  social,  agriculture,  fisheries,  climate,  environment,  migration, 
security will be delivered through national and regional partnership plans. Each Member 
State, with close involvement of regional and local authorities and other relevant stakeholders, 
will  be  responsible  for  drawing  up  their  plan  and  proposing  the  relevant  key  investments, 
reforms  and  other  interventions.  This  integrated  programming  will  allow  for  better 
coordination across policy areas. It will also provide a more tailored approach, reflecting the 
national and regional needs of each Member State, while ensuring coherent support to all EU 
policy objectives. 

The  current  several  hundreds  of  programmes  adopted  within  the  cohesion  policy 
framework will be subsumed into one national and regional partnership plan per Member 
State and one Interreg plan. The plan will integrate the dimensions currently covered in the 
partnership  agreement  and  the  programmes,  enhancing  policy  coherence  through  a  single 
programming  exercise  and  maximising  synergies. A single  framework  will  set  out  the  rules 
governing the plans’ funding for pre-allocated envelopes, reducing  risks  of overlap between 
frameworks,  and  massively  cutting  administrative  costs  for  Member  States’  authorities  and 
beneficiaries  alike.  Each  Member  State,  with  close  involvement  of  regional  and  local 
authorities  and  other  relevant  stakeholders  such  as  social  partners  and  civil  society 
organisations, will be responsible for drawing up their plan and for proposing the relevant key 
investments,  reforms  and  other  interventions,  which  could  be  organised  in  thematic/sectoral 
and/or regional chapters. 

The preparation of the plans will take into account the findings of the steering mechanism 
(as discussed in Section 3.4), which will link EU priorities with the EU budget. The main 
challenges that Member States face in all relevant policy areas will be identified in country- 
43 

 
 
 
 
 
 
 
 
specific recommendations, as well as other relevant documents for the concerned policy areas. 
This  will  contribute  to  ensuring  that  the  reforms,  investments  and  other  interventions 
supported in the plans address common priorities and hence have a strong EU added value – 
while,  at  the  same  time,  ensuring  these  are  tailored  to  each  Member  States’  national  and, 
where  relevant,  regional  needs. A  social  target  of  14%  will  apply  to  National  and  Regional 
Partnership Plans. 

In line with the partnership principle and multi-level governance arrangements, regions 
and  other  territorial  and  local  actors,  including  civil  society,  and  specific  sectors  will 
remain at the centre of the plans. Like in cohesion policy today, Member States could choose 
to have regional/territorial chapters, similar to an operational programme, in accordance with 
their constitutional, legal and administrative setting or preference, as well as thematic/sectoral 
chapters. The plan should also specify how responsibilities, including the delivery model and 
following  payments,  are  shared  among  different  levels  of  government.  Hence,  while  there 
would be one coordinating authority in each Member State, other authorities, such as regional 
and  other  relevant  managing  authorities,  implementing  bodies,  would  be  in  charge  of  the 
implementation of specific regional or thematic/sectoral chapters. Monitoring committees will 
be  established  to  examine  progress  in  implementation,  approve  amendments  to  the  relevant 
chapters  of  the  Plan,  identify  issues  affecting  performance,  monitor  compliance  with 
overarching  principles,  the  administrative  capacity  and  the  effectiveness  of  the  partnership 
set-up.  Managing  authorities  will  not  be  affected  by  possible  delays  or  incomplete 
implementation of reforms at national level, as the Plan will set out the amount which is due to 
them, for every milestone and target, regardless of how implementation progresses on national 
reforms. This ensures that no entity is penalised for something that they are not in control of. 

Figure 4.1. National and regional partnership plans: pre-allocated amounts and EU Facility 

The  experience  gained  over  the  years  with  EU  funds  with  nationally  pre-allocated 
envelopes  has  shown  that  there  is  a  need  to  complement  national  and  regional 
programming with  funding at EU level  (Figure 4.1).  This  is important both  to deliver on 
areas of high EU added-value, that are not necessarily prioritised by Member States (e.g. cross- 
border  or  multi-country  projects,  such  as  Important  Projects  of  European  Common  Interest, 
with higher coordination efforts) as well as to cater for uncertainty, with  a number of new needs 
and priorities likely to arise during the programming period. To combine the predictability of 
planned  investments  in  the  plans,  with  the  flexibility  and  agility  needed  to  respond  to  new 
44 

 
 
 
 
 
 
 
 
 
issues,  an  EU  Facility  will  complement  funding  at  national  and  regional  level. Through  the 
“Union actions” strand,  the Facility will support projects  with  a high  EU added-value to  be 
implemented throughout the programming period and provide additional support to Member 
States in the event of e.g. natural or man-made disasters, market disturbance in the agricultural 
sector  or  increased  migration  flows.  An  “emerging  challenges  and  priorities”  cushion  will 
provide additional room of manoeuvre to respond to new crises and priorities that may emerge 
during the programming period. 

Building on the positive experience of the thematic facilities of the home affairs funds, it 
will be possibly to rely on all three management modes depending on the needs. From a 
budgetary  standpoint,  the  EU  Facility  will  simplify  the  current  budgetary  landscape,  by 
consolidating  the  tools  and  instruments  used  to  achieve  these  objectives  and  reducing  the 
number of instruments “over and above” the MFF ceilings. 

4.2 Competitiveness, Defence and Single Market 

4.2.1  The  European  Competitiveness  Fund  and  Horizon  Europe  supporting 

strategic investments70 
A  European  Competitiveness  Fund  (ECF)  is  proposed  to  pool  capacity  at  EU  level  for 
investment  in  strategic  technology  sectors.  The  fund  will  merge  11  programmes71  in  an 
investment facility under direct and indirect management into a single governance framework. 
This investment impulse should benefit the entire Single Market – from AI to space, from clean 
tech to biotech. The Fund will be structured into four vertically integrated sectoral windows: 
clean transition and decarbonisation; resilience, defence industry and space; digital leadership; 
health and bioeconomy. Each window could support project needs along the entire investment 
journey – from applied research to innovation and manufacturing, through a tight connection 
with Horizon Europe.  

The Fund will select the best cutting-edge projects. The identification of funding priorities 
and projects will be underpinned by: (i) a robust methodology to assess EU needs and areas 
where  EU  action  adds  value  to  national  action,  l;  (ii)  a  consultation  with  a  stakeholder 
advisory board attached to the Fund and composed of investors and research/start- up/industry 
experts to gather input from the private and research sector,  as well as the use of independent 
experts in selection processes to ensure excellence is a core selection criteria. Project selection 
under both the ECF and Horizon Europe will be driven by excellence with a view  to  select 
the  best  projects  across  the  EU  to  improve  overall  competitiveness  in  terms  of  research, 
innovation and reduction of strategic dependencies of the EU as a whole. This will boost the 
innovation and competitiveness profile of the EU, benefit value chains across the EU and scale 
up the Union’s standing as an industrial leader. 

70 Further detail on Horizon Europe and the European Competitiveness Fund is provided in the Impact Assessment 
accompanying the Regulation. 
71    Digital  Europe  Programme,  Connecting  Europe  Facility  –  Digital,  European  Defence  Fund, ASAP,  EDIRPA, 
European Defence Industrial Programme, European Space Programme, Union Secure Connectivity-IRIS2,, parts of 
the LIFE programme and of EU4Health, InvestEU.   

45 

 
 
 
 
 
 
 
 
 
 
 
Figure 4.2. European Competitiveness Fund: distribution among policy windows 

Note: amounts for the ECF four policy windows include the ECF InvestEU instrument 

To explore all possible venues to improve European competitiveness, the ECF will provide 
a structured framework for targeted experimentation by the  Commission in the award 
and implementation of Union funding, in particular to better target and accelerate Union 
award  procedures  and simplify  and  accelerate  their  implementation. This  should  allow, 
within  a  concretely  defined  frame,  to  specify  on  a  case-by-case  basis  certain  actions  or 
categories of actions to benefit from certain additions, derogations and exceptions from other 
Union law and tests the impact in a real-world environment for the limited period of the duration 
of the ECF and ensuring that appropriate safeguards, in particular a common European interest, 
are in place. 

The ECF and Horizon Europe will be tightly connected ensuring a seamless flow from 
fundamental  research  to  applied  research,  scale-up,  manufacturing  and  deployment. 
Common rules would cover timelines and tools offering the best support to project promoters 
–  while  allowing  specific  measures  to  be  taken,  if  necessary,  under  certain  windows  (e.g., 
restricting eligibility or procurement rules for security reasons). The common architecture under 
the ECF and Horizon Europe will allow the setting  policy priorities around common policy 
clusters  to  effectively  target  support  from  early  research  to  manufacturing  and  deployment, 
including infrastructure and specific skills. This will be done via the development of integrated 
work programmes for each policy window covering the entire investment journey per sector, 
from applied research to deployment, allowing a more strategic  support. 

46 

 
 
 
 
 
 
 
 
The European Innovation Council within Horizon Europe, will support innovative start- 
ups and SMEs, with a focus on promoting disruptive innovation both in a bottom-up and top- 
down  manner,  and  will  be  strongly  interlinked  with  the  ECF  with  priority  funding  areas 
stemming  from  the  policy  windows  of  the  European  Competitiveness  Fund.  The  ECF  and 
Horizon Europe will thus offer a seamless investment journey for project promoters. 

Research will continue to be at the heart of Horizon Europe. It will continue to rely on a 
successful  bottom-up  approach  and  thereby  preparing  the  future  engines  of  growth  and  of 
technological  leadership  Horizon  Europe  will  be  simplified  and  refocused  to  strengthen  the 
EU’s  scientific  and  technological  bases,  with  reinforced  financing  for  excellence-driven 
disruptive research and innovation, e.g. via the European Research Council (ERC) and Marie- 
Sklodowska-Curie Actions (MSCA). 

The ECF will feature a standardised toolbox of financing tools to tailor the best funding 
solution  to  each  beneficiary,  the  ECF  Investment  Instrument.  The  ECF  investment 
instrument will bring together all funding instruments include grants, financial services such as 
equity, guarantees,  loans, and procurement and be open as  a horizontal service to  all policy 
windows  of  the  Fund.  Synergies  with  other  programmes  will  be  ensured,  thanks  to  a  more 
integrated approach at strategic level and at operational level, under which the  ECF will  serve 
as delivery tool for all internal policy programmes using financial instruments and budgetary 
guarantees.  A  Competitiveness  Hub  would  support  cross  cutting  activities  enhancing 
investment opportunities, identification and development and bankability of projects made in 
Europe across strategic areas (e.g. advisory services, dedicated support to SMEs).  As such, the 
Fund will become a catalyst to crowd in private investment, so that each public euro spent makes a 
difference in de-risking investments in strategic value chains or strategic technologies. The Fund 
will also provide support to public-private partnerships including Important Projects of Common 
European Interest (IPCEIs). 

Cross-border infrastructure projects related to energy, transport and military mobility are 
essential  to  improve  EU  competitiveness,  security  and  to  reduce  strategic  dependencies. 
Investment  needs  in  EU’s  energy  infrastructure  are  expected  to  grow:  total  needs  in  energy 
infrastructure  for  electricity72,  hydrogen  and  CO2  amount  to  EUR  570.57  billion  from  2028  to 
2034.73 The expansion and upgrade of energy infrastructure is an essential condition for the uptake 
of the generation and consumption of renewable energy and thus avoid congestion and disruption 
problems  with  negative  consequences  for  energy  prices  and  for  economic  activity.  Within 
investment  needs,  those  related  to  electricity  distribution  are  the  largest.  In  the  area  of  transport 
(both civilian and dual-use), the investment needs associated to the realisation of the TEN-T core 
network  by  2030  are  estimated  at  around  EUR  515  billion.74  Implementing  the  new  TEN-T 
requirements for the core network and completing the extended core network will require up to 
EUR 330 billion until 2040. Investments in military mobility have become even more urgent with 
Russia’s war of aggression against Ukraine, and urgent to fast-forward capacity increases. Overall, 

72 This category includes national electricity transmission, electricity transmission lines with a significant cross- 
border impact, transmission lines related to offshore generation, distribution networks and electricity storage. 
73 European Commission: Directorate-General for Energy, Artelys, LBST, Trinomics, Finesso, A. et al.,  Investment 
needs of European energy infrastructure to enable a decarbonised economy – Final report, Publications Office of 
the European Union, 2025, https://data.europa.eu/doi/10.2833/8232521. 
74 TEN-T Coordinator's position paper | Mobility and Transport (europa.eu). 

47 

 
 
 
 
 
 
 
 
investments  in  cross-border  infrastructure  also  have  an  important  external  dimension  as  EU 
security corridors related to energy, transports and raw materials should not stop at the EU border. 

A  re-focused  Connecting  Europe  Facility  (CEF)  will  cover  energy,  transport  and  military 
mobility  projects  with  a  strong  cross-border  dimension.  Its  scope  will  be  focused  on  those 
essential projects with a strong cross-border impact which are absolute top priority in the coming 
years for the completion of the TEN-T and TEN-E networks, as well as seamless military mobility, 
and which require due to their complexity a dedicated intervention logic. 

Synergies  will  be  better  exploited  with  other  EU  funds.  For  example,  to  complement  CEF 
investments, Member States could use their national and regional partnership plans to invest in the 
completion of all parts of the TEN-T and TEN-E networks, in particular national TEN-T sections 
which  connect  to  the  cross-border  links,  as  well  as  national  energy  grid  infrastructure  and 
generation. Synergies with transport and energy projects in Horizon Europe and the ECF will also 
be ensured. The CEF, ECF as well as National and Regional Partnership Plans and the new UCPM 
will further contribute to the resilience of critical EU infrastructure – for energy, transport, digital 
and space in particular. 

The  EU  will  remain  at  the  forefront  of  research  for  the  nuclear  energy  of  the  future,  in 
particular  fusion.  The  new  Euratom  Research  and  Training  programme  will  provide  the  EU’s 
contribution  to  ITER,  support  nuclear  research,  innovation  and  safety,  and  maintain  and  further 
develop expertise and competence in the nuclear field. The programme further confirms the EU’s 
commitment as a lead contributor to the ITER project. 

4.2.2 Defence 

The increase in global instability and Russia’s war of aggression against Ukraine require 
large investments to reinforce defence in EU Member States. Decades of underinvestment, 
combined with the structural cost escalation characteristic of the defence sector, have exerted 
a  profound  negative  impact  on  the  European  Defence  Technological  and  Industrial  Base 
(EDTIB). The defence spending of the EU and its Member States has increased by only 40% 
between 1999 and 2023, against 68% in the US, 523% in Russia and 651% in China.75 While 
EU Member States that are also NATO members have committed to spending at least 2% of 
GDP  on  defence,  some  have  not  yet  reached  this  target,  leading  to  a  cumulative  defence 
spending gap by EU Member States of approx. EUR 1 250 billion over 2006-2022.76 The cuts 
in defence investment spending were even more important. In addition, cooperative defence 
R&D among EU Member States is still well below the target: only 18% of defence equipment 
spending  in  202177  was  devoted  to  EU  collaborative  procurement,  well  below  the  35% 
collective  benchmark78  set  by  the  Member  States.  The  EU  Member  States’  demand  for 
defence equipment, despite recent growth, remains thus fundamentally fragmented, depriving 
the EDTIB of the benefits of a truly functioning EU defence market. 

75 Source : SIPRI. 
76 Calculations based on EDA defence data. 
77 European  Commission,  A  new  European  Defence  Industrial  Strategy:  Achieving  EU  readiness  through  a 
responsive and resilient European Defence Industry, JOIN/2024/10 final, 2024. 
78 Established by the EDA Ministerial Steering Board in 2007. 

48 

 
 
 
 
 
 
 
 
 
 
 
As global security threats are on the rise amid growing geopolitical tensions, support to 
defence  is  one  of  the  priorities  of  this  MFF  proposal.  Strengthening  defence  in  the  EU 
requires  an  effort  both  on  the  demand  side  (Member  States’  buildup  of  their  defence  and 
military  capabilities)  and  the  supply  side  (EU  defence  industry  competitiveness).  On  the 
demand  side,  the  ReArm  Europe  plan  is  providing  a  boost  to  Member  States’  defence 
expenditure  through  (i)  activation  of  the  national  escape  clause  of  the  Stability  and  Growth 
pact  and  (ii)  loans  backed  by  the  EU  budget  with  the  Security Action  for  Europe  (SAFE) 
instrument.  The  next  MFF  can  provide  a  significant  boost  on  the  supply  side,  fostering  the 
competitiveness  of  EU  defence  industry  while  ensuring  strategic  autonomy,  in  particular 
through the European Competitiveness Fund and the national and regional partnership plans. 

The Union support to defence industry under the next EU budget will come mainly from 
the ECF. Financing  for defence in  the 2021-2027 MFF increased substantially compared to 
the past but remained very limited (EUR 11.4 billion for the overall MFF). Moreover, funding 
remained  fragmented.  The  ECF  will  provide  support  to  strategic  technologies  in  defence 
throughout  the  investment  journey,  from  research  to  development,  manufacturing  and 
deployment,  in  its  defence  and  space  window.  The  ECF  will  provide  a  combination  of 
different  forms  of  support  on  the  supply  and  demand  side  (grants,  guarantees,  financial 
instruments,  etc.),  also  contributing  to  de-risk  common  defence  projects  and  defence 
innovation,  thus  facilitating  access  to  private  finance  for  the  defence  industry,  particularly 
SMEs.  In  this  respect,  the  ECF  might  also  support  Defence  Projects  of  Common  European 
Interest. 

Member  States  will  also  be  able  to  support  defence-related  projects  via  their  national 
and regional partnership plans. The projects will need to contribute, for instance, to one of 
the  following  objectives:  (i)  the  competitiveness  of  the  European  defence  and  technological 
industrial  base;  (ii)  cooperative  projects  involving  several  Member  States  (in  synergy  with 
what done under the ECF); or (iii) dual-use  (civilian-military) infrastructure investments,  in 
particular  in  trans-European  Transport  Networks  (TEN-T)  sections  within  national  borders. 
Member  States  will  also  have  the  possibility  to  finance  Important  Projects  of  Common 
European Interest (including those in the defence area) via their plans. 

The  support  to  the  supply  and  demand  side  of  defence  will  be  complemented  by 
infrastructure  investments  for  military  mobility  under  the  Connecting  Europe  Facility 
(CEF). The CEF will continue supporting dual-use infrastructure investments in the TEN-T, 
to support the transport of troops and equipment via railways, roads, airports, maritime ports, 
inland  waterways  and  multimodal  terminals.  Unlike  the  2021-2027  MFF,  where  military 
mobility  was  placed  in  a  separate  MFF  heading  with  limited  possibilities  for  redeployment 
and reinforcements, the simplified design of the 2028-2034 MFF will increase possibilities to 
redeploy funds across CEF strands in case of need. 

Finally, the European Peace Facility (EPF) will remain as an off-budget instrument, in 
line with the requirement of the Treaties. The EPF has shown its value in the current period 
in  numerous  areas,  but  especially  in  supporting Ukraine against Russia’s war of aggression. 
The initial budget of EUR 5.7 billion for 2021-2027 in March 2021 was gradually increased 
to its current envelope of EUR 17 billion. 

49 

 
 
 
 
 
 
 
 
 
4.2.3 Single Market79  

Completing  the  Single  Market  requires  investments  to  implement  and  enforce  EU 
legislation,  fostering  cooperation  among  national  administrations  and  going  forward 
with the EU Customs reform. The future SMP will support the Customs Union and customs 
authorities,  and  provide  the  necessary  financing  for  the  customs  reform,  including  the  EU 
customs  data  hub.80  In  addition,  there  is  a  need  to  improve  the  Union  taxation  systems  to 
protect the Union’s and its Member States’ economic and financial interest from fraud; and to 
improve tax collection. 

To enhance synergies, efficiency and flexibility while reducing the overall administrative 
burden,  programmes  supporting  the  completion  and  implementation  of  the  single 
market will be bundled. A modernised Single Market Programme+ (SMP+) will expand its 
current scope, by merging with the Fiscalis, Customs, Customs Control Equipment Instrument 
and Union Anti-Fraud Programmes. The expanded programme will thus support: (i) flanking 
measures  necessary  to  the  correct  functioning  of  the  Single  Market  (e.g.  standardisation 
measures;  European  Statistics); 
to  support  cross-border 
administrative  cooperation  (such  as  common  IT  tools  for  custom  and  tax  authorities);  (iii) 
Anti-  Fraud  measures.  As  such,  Internal  market,  market  surveillance,  standardisation, 
competition,  consumer  protection,  company  law,  custom,  taxation  and  anti-fraud  initiatives 
supported by the EU budget will be covered by a single regulation, with one set of legal and 
institutional requirements for all activities. This approach aims at reducing the fragmentation 
observed  in  the  current  legal  framework  ranging  from  diverse  rulebooks  to  overlapping 
programmes,  which  can  lead  to  EU  funding  not  reaching  the  right  beneficiaries  at  the  right 
time. 

(ii)  EU-wide 

investments 

Consumers,  businesses  and  administrations  will  benefit  from  simpler  access  to  better 
information with funding channeled via the new Single Market Programme+. This will 
include  central  (EU-level)  digital  solutions,  interoperable  EU-wide  digital  portals  and  tools. 
The  flexibility  offered  by  a  single  rulebook  allows  to  better  address  in  an  agile  manner 
complex and emerging challenges affecting the production and dissemination of information. 

Cooperation  between  national  administrations  and  with  the  Commission  will  be 
enhanced via the SMP+. Supporting capacity-building will reduce administrative burden on 
national  administrations  and  stakeholders,  inter  alia  by  simplifying  procedures  (faster  and 
digitalised  procedures).  The  SMP+  will  focus  on  simplified  rulemaking  and  uniform 
interpretation,  harmonised  EU  and  international  standards  in  order  to  develop  an  effective 
enforcement at EU level. 

To improve policy synergies, some of the actions currently covered by the Single Market 
Programme  will  be  moved  under  the  umbrella  of  other  programmes.  The  SME 
competitiveness  strand  of  the  2021-2027,  which  focuses  on  facilitating  access  to  markets, 
promoting  entrepreneurship  and  entrepreneurial  skills  as  well  as  the  modernisation  of 
industry,  is  covered  by  the  ECF.  Given  the  synergies  between  the  food  safety  strand  and 

79 Further detail on the Single Market Programme+ will be provided in the Impact Assessment accompanying the 
Regulation. 
80    Proposal  for  a  Regulation  of  the  European  Parliament  and  of  the  Council establishing  the  Union  Customs 
Code and the European Union Customs Authority, and repealing Regulation (EU) No 952/2013. 

50 

 
 
 
 
 
 
 
 
 
actions  supported  by  the  CAP,  actions  relating  to  food  safety  will  be  addressed  through  the 
EU Facility of the national and regional partnership fund. 

4.3 Stronger financing for a global Europe 

4.3.1 Global Europe 81 

In light of unprecedented instability at global, continental and regional level, the stakes 
for  the  EU’s  geopolitical  ambition  are  higher  than  ever.  In  its  external  action,  the  EU 
operates  in  a  highly  volatile  and  unpredictable  environment,  characterised  by  geopolitical 
rivalry,  armed  conflicts,  humanitarian  emergencies,  geoeconomic  competition,  strategic 
dependencies,  competitiveness  challenges,  the  worsening  triple  planetary  crisis  of  climate 
change, biodiversity loss, and pollution, and increasing global fragility. 

New  global  realities  call  for  the  EU  to  revamp  its  framework  of  international 
cooperation  by  shaping  a  new  EU  economic  foreign  policy.  The  EU  should  move  away 
from programme- based financing to a policy-based approach through tailor-made partnership 
offers that are based on mutual interests. The EU needs external action financing instruments 

81  Further  detail  on  the  Global  Europe  Instrument  is  provided  in  the  Impact  Assessment  accompanying  the 
Regulation. 

51 

 
 
 
 
 
 
 
 
 
that effectively advance the EU’s strategic interests and needs of EU’s partners, while being 
responsive to evolving priorities and crisis situations. 

To pursue its economic foreign policy agenda and to address the increasingly uncertain 
geopolitical environment, Global Europe aims at: 

(1) increasing efficiency and impact by creating a common policy toolbox with tools to be 

deployed depending on objectives and circumstances, 

(2) striking  the  right  balance  between  flexibility  and  predictability  mobilising  both 

structural and crisis policy tools, 

(3) better  targeting  external  action  financing  to  our  partners,  with  integrated  tailor-made 

partnership packages, 

(4) advancing  policy  coherence  and  the  EU’s  strategic  interests  by  linking  internal 

priorities with external action objectives. 

Global Europe will optimise, consolidate, and streamline EU external  action financing. 
To this end, the current  standalone external  financing  instruments82 will be merged into one 
instrument removing the financial and operational barriers between them. Global Europe will 
incorporate indicative allocations into the following pillars: i) Europe; ii) Middle East, North 
Africa, and the Gulf; iii) Sub-Saharan Africa; iv) Asia and the Pacific; and v) Americas and 
the Caribbean, as well as a Global Pillar for actions that are inherently global in reach. 

Figure 4.4. Composition of Global Europe 

All external action policy tools will be at the EU’s disposal to target our support to each 
macro-region.  Global  Europe will enable the EU to  deploy  the right combination of policy 
tools designed to respond most effectively to evolving foreign policy objectives and specific 
needs of EU’s partners. 

To ensure predictability for implementing partners and beneficiaries, the instrument will 
include structural policy tools to continue multiannual cooperation programmes with partners, 
the  development  of  investment  strategies  under  Global  Gateway,  engagement  on  socio- 
economic,  migration,  security  interests  and,  where  applicable,  technical  assistance  for  pre- 
accession.  Global  Europe  will  also  embed  crisis  policy  tools83  that  can  swiftly  respond  to 
crises and urgencies on the ground. 

Global  Europe  will  enable  EU  external  action  funding  to  be  channelled  flexibly, 
effectively, and swiftly. The EU will be able to reallocate funding between policy tools and 
geographies when needs on the ground emerge or political priorities evolve. Unprogrammable 
resilience actions should enable the Union to step up its cooperation where needed in light of 
the  volatility  of  the  external  context  to  flexibly  respond  and  reinforce  actions  addressing 
multitude of challenges. Competitiveness non-programmable actions will enable the Union to 
respond  to  economic  challenges  and  swiftly  seize  opportunities  to  support  Union 

82 Instruments: NDICI-Global Europe, IPA III, various Facilities (Ukraine, Western Balkans, Moldova), macro- 
financial assistance, as well as humanitarian aid funding. 
83 Such as Humanitarian Aid, macro-financial assistance, and crisis, peace and foreign policy needs. 

52 

 
 
 
 
 
 
 
 
 
 
 
 
competitiveness.  Allocations  for  an  overall  cushion  would  be  retained  allowing  to  boost 
funding in case of emerging needs or new priorities across Global Europe and the toolbox. 

To  advance  EU  strategic  interests  and  target  external  action  better,  the  EU  will  offer 
comprehensive mutually beneficial partnership packages. The packages will be tailor-made 
for partners, mobilising the appropriate set of policy tools to maximise EU impact on the ground 
and improve visibility and understanding of EU external action. 

At  the  same  time,  Global  Europe  aims  to  optimise  the  alignment  between  internal 
priorities  and  external  action.  It  will  advance  a  new  European  Economic  Foreign  Policy, 
strengthening  the  alignment  with  EU  internal  priorities,  such  as  economic  security  and 
competitiveness,  energy  security, migration, climate, connectivity, and  access  to  critical  raw 
materials84. It will also crowd in more support from International Financing Institutions and the 
private sector.85  

4.3.2 Enlargement 

Enlargement is a geostrategic investment in peace, security, stability, and prosperity,86 as 
well  as  an  economic  and  geopolitical  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. 

Enlargement candidates will be able to benefit from the entire toolbox of Global Europe, 
in  particular  technical  pre-accession  assistance  and  policy-based  assistance  to  help  them 
progress  on  their  respective  reform  agendas.87  This  will  strengthen  the  coherence  of  EU 
support  to  enlargement  candidates,  substantiate  the  EU’s  commitment  to  welcome  new 
members, and leverage the EU financial firepower to foster reforms in the region. 

4.3.3 Ukraine  

Ukraine’s medium and long-term needs remain a top priority for the Commission and a 
constitutive  element  of  the  next  MFF  proposal.  From  support  in  the  accession  process  to 
longer-term reconstruction, the EU will provide support to Ukraine for as long as it takes. The 
support will be implemented under the geographic pillar of Global Europe and sourced from a 
special dedicated Ukraine Reserve over and above the MFF ceilings. This will anchor Ukraine 
into the pre-accession policy framework supported by the instrument while ensuring sufficient 
resources to deal with the unpredictable and extraordinary needs of a country at war.  

84 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social Committee and the Committee of the Regions ‘A secure and sustainable supply of critical raw materials in 
support of the twin transition’, COM(2023) 165 final. 
85  Over  half  of  the  respondents  to  the  open  public  consultation  on  the  MFF  funding  for  external  action  also 
thought that loans, grants and guarantees would produce better results in the beneficiary countries compared to 
the use of grants alone. 
86 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social Committee and the Committee of the Regions, ‘2023 Communication on EU Enlargement Policy’, COM 
(2023) 690 final 
87 Policy tools include technical pre-accession assistance, policy-based assistance, humanitarian aid, investments 
under Global Gateway, MFA, and crisis response actions. 

53 

 
 
 
 
 
 
 
 
 
 
 
The  Ukraine  Reserve  will  have  a  capacity  of  up  to  EUR  100  billion,  to  be  provided  to 
Ukraine  over  the  7-year  period  in  grants  and  loans.  The  construction  of  the  Ukraine 
Facility allows for full flexibility in the split between loans and grants, given the uncertainty 
in terms of needs on the ground.  

4.3.4 Other programmes in external action 

The  future  EU  budget  will  continue  supporting  the  Common  Foreign  and  Security 
Policy  (CFSP).  CFSP  finances  (i)  various  types  of  civilian  Common  Security  and  Defence 
Policy  (CSDP)  missions;  (ii)  EU  special  representatives  around  the  world;  and  (iii)  actions 
related  to  non-proliferation  and  disarmament,  implemented  through  agreements  with 
international organisations. Civilian CSDP missions and EU special representatives are often 
deployed  in  the  same  regions  where  international  cooperation  programmes  are  active, 
ensuring strong synergies in external action. 

Support to Overseas Countries and Territories (OCTs) will continue to be covered by a 
separate instrument under the next MFF. The OCTs, with special attention to Greenland, 
are  of  high  political  and  strategic  importance  to  the  EU  as  a  whole.  Despite  being  small  in 
either  size  or  population,  they  play  a  vital  role  as  strategic  outposts  of  the  Union  in  their 
geographical areas. 

4.4 Cross-border education and skills, culture, media and values88 

EU funding in the area of cross-border education, solidarity, culture, media and values 
contributes to strengthen societal resilience and support a vibrant, value-based Union also 
by fostering mutual understanding within our societies. The impact of EU funding in this 
area is tangible: despite the negative impact of the COVID-19 pandemic, Erasmus+ supported 
learning mobility abroad of around 1.6 million in 2021-2023, helping to increase their skills 
and competences. The European Solidarity Corps programme involved over 63,000 participants 
over the same period. Seven out of ten tickets sold for non-national European films in the EU 
is directly attributable to support from the MEDIA strand of Creative Europe.89 The Citizens, 
Equality, Rights  and Values programme occupies a space in  the funding landscape  for Civil 
Society Organisations that would otherwise be vacant. 

However, limited flexibility, the multiplication of instruments, and differences in the legal 
provisions  have  prevented  synergies  among  EU  programmes  in  this  area.  Coordination 
within and across programmes is hampered by a lack of common operational frameworks - with 
aligned  criteria,  funding  rules,  and  implementing  tools  (e.g.  work  programmes90,  consistent 
third  country  participation,  monitoring  and  reporting  indicators).  Different  programme 
committee  structures,  each  governed  by  their  own  rules  and  procedures,  adds  to  the 

88  Further  detail  on  the  proposal  for  this  policy  area  is  provided  in  the  Impact Assessment  accompanying  the 
Regulation. 
89 Admissions for non-national European films in Europe and in largest ten non-European markets: The targets of 
71  million  tickets  in  Europe  and  85  million  outside  were  each  exceeded  (95  and  88  million);  SWD  Interim 
evaluation of the Creative Europe programme 2021-27. 
90 Mandatory Annual Work Programmes for Creative Europe and multiannual Work Programmes for the CERV 
programme. 

54 

 
 
 
 
 
 
 
 
 
 
complications of coordination91. For cross-border education and skills, fragmented EU support 
limits  impact,  coordination,  and  scalability.  In  specific  cases,  a  more  coordinated  funding 
approach  is  needed  between  European  and  national  funds.  The  next  MFF  provides  for  an 
opportunity to structurally improve synergies. 

The Commission proposes an objective-based consolidation of the existing programmes 
in this policy area, to ensure at the same time simplification for beneficiaries and strong, 
continued support in this policy area. Erasmus+ in the next MFF will merge and streamline 
the actions currently funded under Erasmus+ and the European solidarity corps, enhancing the 
Union’s  support  to  cross-border  education  and  training,  youth,  sport  and  solidarity.  Support 
for  the  media  sector,  culture,  democracy  and  values  will  be  strengthened  in  the  AgoraEU 
programme  merging  the  current  Creative  Europe  and  Citizens,  Equality,  Rights  and Values. 
The Justice programme will remain a standalone programme for legal reasons.92 

The consolidation will simplify access to EU funding while maintaining policy focus and 
accessibility.  It  will  enhance  synergies  between  the  EU  programmes  financing  this  policy 
cluster  while  maintaining  thematic  clarity  and  focus  on  specific  policy  areas.  Moreover,  it 
aligns with  stakeholders' calls  for simplification,  flexibility, and common rules, and  reduces 
overlaps. In the open public consultation ahead of this MFF proposal, administrative burden 
and  different  or  complex  fund-specific  rules  were  by  far  the  two  main  obstacles  that 
beneficiaries of EU funds identified as preventing the EU budget from fully delivering on its 
objectives in these policy areas.93 

The  new  Erasmus+  will  be  the  key  instrument  addressing  structural,  horizontal, 
sectoral,  and  cross-border  challenges  related  to  skills  in  the  EU.  It  will  advance  the 
priorities  established  by  the  Union  of  Skills  with  a  focus  on  long-term  skills  development 
connected  to  competitiveness. This  will  reinforce  the  Union’s  contribution  to  labour  market 
resilience  by  offering  a  more  comprehensive  approach  and  a  coherent  landscape  of 
opportunities for young people, aiming to boost skills and social cohesion. 

AgoraEU will support a viable, competitive and pluralistic media and audiovisual space, 
safeguard cultural and linguistic diversity and heritage and the EU’s fundamental rights 
policy,  the  rule  of  law,  equality  and  EU  values.  Being  a  single-entry  point  to  all 
stakeholders active in these policy fields, it will streamline the current architecture and ensure 
a  robust  EU  response  to  emerging  priorities  such  as  democratic  resilience,  support  to  news 
media or the fight against disinformation. To enhance synergies and improve the transparency 
of EU funding in this area, the new programme will also incorporate the multimedia actions 
(currently funded under a prerogative budget line). 

91 Lack of alignment in funding rules and criteria as well as the absence of a common operational framework is 
also a barrier to mainstreaming horizontal provisions for equality and inclusion. 
92 The legal bases of the Regulation establishing the 2021-2027 Justice programme are article 81(1) and (2) and 
article  82  TFEU.  These  articles  are  part  of  Title  V  TFEU,  which  covers  the  Area  of  Freedom,  Security  and 
Justice. Denmark has an ‘opt out’ on decisions made under Title V in line with Protocol No 22 and Ireland can 
choose to take part in certain measures (‘opt-in’), in line with Protocol No 21. 
93  In  particular,  “administrative  burden  for  beneficiaries”  was  an  obstacle  “to  a  large  extent”  for  53%  of 
respondents,  and  “somewhat”  for  28.7%.  “Different  and  complex  fund-specific  rules”  were  identified  as  an 
obstacle  “to  a  large  extent” by  50.2% of respondents,  and “somewhat”  by  29.7%. The  full  results  of  the  open 
public consultation are reported in the Impact Assessment accompanying the MFF proposal in the area of Cross-
border education, media, culture and values. 

55 

 
 
 
 
 
 
 
 
 
4.5 Preparedness 

The European Union has been increasingly confronted by different crises, ranging from 
climate-related disasters to health crises and security threats. These crises have a strong 
transnational and transboundary dimension as they have political, social, and economic effects 
all over the Union. As a result, they must be managed by means of an integrated, all-hazards 
approach to crisis prevention, preparedness and response. 

The EU’s risk landscape is becoming structurally more adverse. Continued environmental 
degradation, the increasing severity and frequency of extreme weather events and associated 
economic  impacts  and  emergencies  driven  by  climate  change,  geological  hazards  (e.g. 
earthquakes) and slower- moving phenomena (e.g. sea-level rise, sea temperature rise, glacier 
melt, desertification) will continue to impact the EU risk landscape. Climate-related disasters 
drive  up  economic  losses:  the  average  annual  cost  of  disasters  has  doubled  from  EUR  8 
billion in the 1980s to EUR 16 billion in the last decade. Recent years have seen particularly 
high spikes, with EUR 59 billion in damages recorded in 2021 and EUR 52 billion in 2022.94 
While  climate  change  affects  all  Member  States,  the  specific  impacts  and  severity  vary 
widely, contributing to regional disparities between and within countries. Other risks are also 
on  the  rise,  for  instance  hybrid  attacks,  including  foreign  information  manipulation  and 
interference and electronic warfare. Cyberattacks on EU institutions and Member States have 
surged,  doubling  in  2024  compared  to  previous  years,  as  have  physical  acts  of  sabotage 
targeting critical assets. 

Strengthening  resilience,  prevention  and  preparedness  in  such  volatile  risk  landscape 
provides  significant  benefits.  Benefits  in  cost-efficiency,  knowledge-exchange,  pooling  of 
resources and  improved  coordination  at  EU  level  from  the  existing  instruments  financed  by 
the  EU  budget  are tangible and clear for all countries involved, whether on the receiving or 
giving end, in civil protection activities.95 The World Bank recently provided a review of more 
than  70  investments  across  Europe,  showing  that  investing  in  climate  resilience,  disaster 
prevention and preparedness provides a benefit typically ranging between 2-10 EUR for every 
Euro spent. Importantly, many benefits materialise regardless of whether a disaster happens or 
not.96  

The 2028-2034 MFF proposal builds on the Preparedness Union Strategy by embedding 
the  “preparedness  by  design”  principle.  According  to  this  principle,  preparedness  and 
security  considerations  should  be  mainstreamed  across  EU  legislation,  policies  and  future 
programmes. As  a  result,  different  dimensions  of  preparedness  and  security  are  covered  in 
different programmes in line with the appropriate policies and implementation modes. 

First, a strengthened instrument combining the Union Civil Protection Mechanism and 
support  for  health  emergency  preparedness  and  response  (Union  Mechanism)  will 
provide  EU-level  prevention,  preparedness  and  response  across  different  areas,  with 

94 Economic losses from weather- and climate-related extremes in Europe. EEA, Oct 2024. 
95 Independent support study, UCPM Evaluation 2017-2022, ICF 
96 World Bank and European Commission (2021): Economics for Disaster Prevention and Preparedness: Financial 
Risk and Opportunities to Build Resilience in Europe - Investing in Disaster Risk Management 

56 

 
 
 
 
 
 
 
 
 
 
 
increased synergy with health preparedness actions.97 The anticipation, strategic foresight, 
and early warning activities that are currently undertaken by different actors at the EU level in 
a  largely  disconnected  way,  will  be  streamlined  under  a  single  programme  supporting  the 
Union’s  action  in  response  to  crisis  of  different  nature  from  the  risk  assessment  to  the 
deployment  of  response  capacities.  The  Union  Mechanism  will  be  characterised  by  two 
working modalities: a regular emergency working modality and an exceptional crisis working 
modality  hence  ensuring  the  right  balance  between  the  need  to  have  a  sufficient  margin  of 
manoeuvre  to  respond  to  unexpected  external  shocks  -  from  large-scale  natural  hazards  to 
complex  cross-sectoral  threats  -  and  the  need  to  invest  in  prevention  and  preparedness 
including  a  sufficient  stockpiling.  It  will  maximise  the  EU  added  value  by  coordinating  the 
use  of  European  and  Member  States’  capacities  resulting  in  substantial  economic  benefits. 
Furthermore, it will optimise the health crisis management by removing the current overlaps 
existing between UCPM and EU4Health preparedness activities. 

Second,  prevention,  preparedness  and  response  will  be  supported  in  the  national  and 
regional partnership plans through dedicated reforms and investments. Such reforms and 
investments will be tailored to each territory’s specific challenges and needs. The incorporation 
of the European Union Solidarity Fund (EUSF), currently a special instrument over and above 
the MFF ceilings, within the Union actions strand of the EU Facility under the National and 
Regional Partnerships Fund will maximise synergies with the implementation of the national 
and regional partnership plans, providing a top-up to national allocations in case of natural or 
man-made disasters. 

The reasons for integrating the EUSF with the national and regional partnership plans 
are threefold: 

•  The  EUSF  is  a  medium-term  crisis  response  instrument  that  complements 
cohesion  policy.  Funding  can  be  used  for  e.g.,  repairing  non-insurable  damaged 
infrastructure,  reconstruction,  restoring  public  facilities,  cleaning  up  of  disaster-
stricken areas, rescue services, etc. In this respect, the interventions it finances present 
significant synergies with investments supported in the area of cohesion policy. 

•  Support  is  already  implemented  in  shared  management.  The  top-up  to  national 
envelopes  granted  via  the  “Union  actions”  strand  will  be  channelled  to  the  specific 
objectives of response/reconstruction. 

•  It  will  maximise 

for  response  and 
the  consistency  between  support 
investments/reforms  aimed  at  prevention  and  preparedness.  Currently,  when 
submitting  an  application,  countries  have  to  include  a  short  description  of  the 
implementation of EU legislation on disaster risk management related to the nature of 
the disaster. If there are ongoing infringement procedures in this field, the support may 
be rejected or reduced. The top-up granted to the national envelopes will be linked to 
relevant objectives in the national and regional partnership plans. 

Third,  the European Competitiveness Fund will play  a key role in enhancing the EU’s 
preparedness,  strategic  autonomy  and  economic  security  in  key  areas.  These  are  in 
particular  digital  infrastructure  and  cybersecurity,  energy,  defence,  space  and  health.  In  the 
area  of  health,  the  European  Competitiveness  Fund  will  complement  the  future  Union 

97 Further detail on the proposal for the future “UCPM+” is provided in the Impact Assessment accompanying 
the Regulation. 

57 

 
 
 
 
 
 
 
 
Mechanism  with  regards  to  scale-up  and  manufacturing  capacity,  and  in  the  field  of  health 
security  through  support  to  health  promotion  and  disease  prevention,  access  to  medical 
products, digital transformation of the healthcare systems, health data reinforcement etcetera. 

Fourth, actions for preparedness with a global dimension will be supported by the future 
Global Europe. In third countries, crisis preparedness and response will continue to benefit 
from humanitarian aid and other tools (e.g. macro-financial assistance). 
This new cross-cutting architecture will strongly reinforce the Union’s preparedness and will 
ensure the EU ability to react swiftly, decisively, and collectively to future crises. 

Lastly,  the  next  MFF  will  continue  to  support  the  process  of  nuclear  decommissioning 
and nuclear safety, including via cooperation with third countries. After the completion of 
the decommissioning of the Kozloduy and Bohunice power plants in 2027, decommissioning 
of  the  Ignalina  power  plant  in  Lithuania  will  continue,  as  well  as  the  decommissioning  and 
radioactive  waste  management  of  obsolete  Joint  Research  Centre  nuclear  research 
installations.  The  integration  of  the  current  “Nuclear  Safety  and  Decommissioning” 
programme98 with the “Instrument for Nuclear Safety and Cooperation”99 will maximise the 
synergies between internal and external action in the field. 

4.6 Repayment of NextGenerationEU 
Under the next MFF, the repayment of NextGenerationEU will start. The Own Resources 
Decision  provides  that  the  NGEU  repayments  lead  to  ‘steady  and  predictable  reduction  of 
liabilities’ in accordance with the principle of sound financial management, with no new net 
borrowing as of 2027, and no outstanding debt after 2058100. A stable repayment profile will 
provide predictability. 

The MFF proposal includes a fixed annual amount (in current prices) for repayment of 
NextGenerationEU principal  and interest. This  annuity payment is  based on a best  effort 
forecast  of  borrowing  costs  and  a  100  basis  point  safety  buffer,  leading  to  full  repayment 
within  the  timeframe  set  by  the  Own  Resource  Decision  through  a  steady  and  predictable 
reduction in liabilities. NGEU repayment will be kept under the MFF ceilings. Since interest 
rate risk will be very limited as of 2028, given that there will not be new net issuances after 
the end of 2026, the EURI instrument currently placed ‘over and above the ceilings’ becomes 
obsolete and is proposed to be discontinued. The separate ceiling of 0.6% of EU GNI under 
the  Own  Resources  Decision  providing  guarantee  for  the  repayment  of  NextGenerationEU 
remains in place. 

The  Commission  has  assessed  alternative  scenarios  for  repayment,  and  the  selected 
option presents several advantages. As the amount is fixed each year (in current prices), it 

98 Council Regulation (Euratom) 2021/100 of 25 January 2021 establishing a dedicated financial programme for 
the  decommissioning  of  nuclear  facilities  and  the  management  of  radioactive  waste,  and  repealing  Regulation 
(Euratom) No 1368/2013. 
99 Council Regulation (Euratom) 2021/948 of 27 May 2021 establishing a European Instrument for International 
Nuclear  Safety  Cooperation  complementing  the  Neighbourhood,  Development  and  International  Cooperation 
Instrument – Global Europe on the basis of the Treaty establishing the European Atomic Energy Community, and 
repealing Regulation (Euratom) No 237/2014. 
100 Article 5 and 6 of Council Decision (EU, Euratom) 2020/2053 of 14 December 2020 on the system of own 
resources of the European Union and repealing Decision 2014/335/EU, Euratom. 

58 

 
 
 
 
 
 
 
 
 
 
contributes  to  providing  Member  States  and  the  Parliament  with  clear  and  stable  budget 
planning. The annuity structure implies a natural hedge: if interest rates are higher in a given 
year than forecasted at the time of adoption of the MFF, the actual repayment in that year will 
be somewhat lower, whereas if borrowing costs are lower than expected the actual repayment 
will increase. This option also reduces the expected NGEU reimbursement-related costs under 
the next MFF (EUR 168 billion) compared to an alternative option of linear repayment101 of 
the  principal  (EUR  195  billion,  based  on  forecasts  as  of  May  2025),  as  the  latter  would 
provide a more frontloaded repayment. On the downside, over the full repayment period, this 
option  leads  to  higher  interest  costs.102  Further  backloading  the  repayment  of  the  principal 
would reduce the annual amounts needed from the EU budget in the next years, but at the cost 
of shifting the burden to future MFFs as well as a higher overall envelope for interest costs 
from  NGEU.  Finally,  the  proposed  solution  ensures  market  confidence  through  predictable 
repayments, aligning with rating agency expectations. 

Figure 4.4. Debt service costs for NGEU non-repayable support (billion EUR, current prices) 

4.7 European Administration 
The EU budget should be an enabler for the European Administration to promptly react 
to new challenges by providing an adequate level of staff and resources. The experience 
of the last years has shown how important it is for the Commission to be able to react quickly 
to unforeseen situations. To do so, the European Institutions must be equipped with the right 
level of staff, having the right profiles. This also implies that they need to remain attractive as 
an  employer,  which  is  particularly  important  to  attract  the  best  talents  and  improve  the 
geographical balance of EU staff. 

Already before the entry into force of the current MFF, the Commission had been facing 
a  gap  in  its  human  resourcing  needs.  A  5%  reduction  in  staff,  followed  by  a  prolonged 
period of stable staffing has severely reduced the capacity to act in the face of urgent needs. 
During the current MFF, the drastically changed geo-political and -economic landscape (e.g. 

101 EUR 15 billion per year. 
102 Approximately EUR 3.3bn in interest expenses post-2034. 

59 

 
 
 
 
 
 
 
 
 
responding to the pandemic, war, cyber security) has created substantial new, additional tasks, 
which  often  required  specialised  profiles  that  cannot  be  found  through  redeployment  alone. 
These tasks have remained. 

Given this large gap, ‘business as usual’ is not an option. The proposal for the next MFF 
builds  on  the  methodology  used  for  the  proposal  of  the  MFF  mid-term  revision,  to  ensure 
adequate  staff  resources  for  the  Commission,  and  the  other  institutions,  as  well  as  a  critical 
mass of cybersecurity experts for all institutions. By phasing in an adequate number of staff 
over the first years of the next period, the Commission will have the necessary resources to 
ensure  the  proper  implementation  and  closure  of  the  current  programmes,  as  well  as 
accelerating the start- up of the new generation of programmes.  

The  MFF  mid-term  revision  proposal  had  put  forward  a  request  for  885  additional 
posts. These included 600 posts for the Commission, based on the needs set out in legislative 
proposals. Since the MFF mid-term revision proposal was presented, the number of legislative 
proposals has again increased. There has been no meaningful reinforcement for cybersecurity, 
despite the increased number and severity of attacks, and the other institutions have also been 
faced with new challenges, not least in relation to security, AI and new regulatory obligations 
which is  stretching their capacities. It is  therefore proposed to  factor in  an increase of 2500 
FTE for all EU institutions in the administrative heading over the first three years of the new 
period, covering the established needs, and potential developments  until  2027. Furthermore, 
the proposed level of expenditure for salaries and pensions in the next MFF is calibrated on 
preliminary  estimates  of  Eurostat  that  point  to  lower  needs  for  the  annual  salary  update  of 
2025, compared to the figures known at the time of the Commission’s proposal for the 2026 
draft budget. These estimates will be confirmed in the autumn this year. 

Looking  forward,  the  Commission’s  simplification  efforts,  including  the  measures 
proposed  for  the  next  MFF,  together  with  the  significant  reduction  in  the  number  of 
programmes, will ultimately reduce overlapping tasks and lead to efficiency gains. This, 
combined  with  the  upcoming  large-scale  review  of  the  Commission’s  organisation  and 
operations,  should  lead  to  a  situation  in  which  the  institution  is  ready  to  meet  future 
challenges head on, with the best possible staff structure and flexibility to act. 

With  respect  to  non-salary  related  expenditure,  an  annual  increase  of  2%  remains 
feasible, provided that the starting point takes account of the real needs, and the major 
works planned over the next years by several institutions. Both the European Parliament 
and  the  Council  have  clearly  signalled  the  need  for  considerable  investment  in  building 
infrastructure, while the Commission will need to renovate its flagship buildings (Berlaymont, 
Charlemagne) too. The European External Action Service must also be in a position to ensure 
the security of the delegations. 

Appropriate and timely investments in IT, including AI tools, are paramount to help to 
rationalise  other  costs  going  forward.  This  does  not  only  concern  cybersecurity,  but  also 
investment  in  IT  systems  and  infrastructure  which  will  in  turn  bring  new  efficiencies  and 
allow  the  European  public  service  to  face  new  challenges  head  on,  rather  than  constantly 
seeking to make-do and by. 

60 

 
 
 
 
 
 
 
 
 
 
A dynamic European administration will attract an enthusiastic workforce from across 
the  EU,  ensuring  a  geographical  balance  and the  implementation  of  European policies 
and values. 

5. A tailored Multiannual Financial Framework 
The scale of the challenges ahead calls for an ambitious long-term budget. Well-designed 
policies must be equipped with adequate resources. As discussed in the Communication “The 
road  to  the  next  MFF”,  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.103   

Figure 5.1 Current and previous MFFs (% GNI) 

The  MFF  proposal  squares  the  circle.  First,  it  provides  an  ambitious  response  to  the 
challenges faced by the Union, reinforcing the EU budget to address new policy needs while 
starting  the  repayment  of  NextGenerationEU.  Second,  it  stabilises  national  contributions  at 
the level of 2027, in constant prices. This takes into account the fact that the policy objectives 
of  some  thematic  special  instruments  (EU  Solidarity  Fund,  Emergency Aid  Reserve)  in  the 
2021-2027  MFF  are  now  embedded  in  the  spending  programmes  below  the  ceilings  (in 
particular,  the  national  and  regional  partnership  plans  and  Global  Europe. Third,  it  matches 
the increased  ambition with  a solid proposal for new own resources (detailed in  Section 6). 
Figure 5.2 presents the MFF proposal for the period 2028-2034.  

Many  of  the  needs  that  were  present  at  the  time  of  adoption  of  the  2021-2027  MFF 
remain and require a modern approach for a more efficient delivery. The introduction of 
national  and  regional  partnership  plans,  covering  the  common  agricultural  policy  and 
cohesion  policy,  will  allow  these  policies  to  better  deliver  on  their  core  objectives,  by 
combining investments and reforms. Bringing several funds that are pre-allocated to member 
states  and  region  under  a  single  envelope  will  allow  Member  States  for  a  more  tailored 
allocation  of  resources,  while  focusing  on  EU  priorities.  The  reduction  in  the  number  of 

103 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”, COM(2025) 46 final. 

61 

 
 
 
 
 
  
 
programmes  under  direct  and  indirect  management,  exploiting  synergies  related  to  their 
policy focus, also aims at maximising efficiency in the implementation within the European 
Commission. 

Figure 5.2 Headings of the 2028-2034 MFF 

 The proposed budget ceiling for payments reflects the completion of the 2021-2027 MFF 
and in particular the outstanding commitments that are forecasted to remain by the end 
of  2027.  By  the  end  of  2027,  there  will  still  be  outstanding  commitments  to  be  paid  in  the 
course  of  the  next  MFF,  to  implement  the  current  and  future  spending  programmes  until 
2034.104 

6. Revenue and new own resources 
In  respect  of  the  2020  Interinstitutional  Agreement  and  to  give  new  impetus  to  the 
negotiations  in  the  Council,  the  Commission  enhances  its  proposal  for  new  own 
resources.  This  includes  adjustments  to  the  2023  proposal  on  new  own  resources  and 
additional, new candidates. The proposed package is in line with the EU’s political priorities 
and would generate sizeable revenue. The own resources are based on existing legislation or 
the Own Resources Decision itself and can be implemented with a reasonable administrative 
burden. 

EU  budget  revenue  should  also  be  increased  through  targeted  adjustments  to  existing 
own resources and other revenue. This includes a reduction in the amounts retained by the 
Member  States  to  cover  the  collection  costs  of  traditional  own  resources  as  well  as  an 
adjustment  to  inflation  of  the  call  rate  for  the  own  resource  based  on  non-recycled  plastic 
packaging waste. Higher revenue from traditional own resources would also help reduce the 
need  for  national  contributions  from  Member  States.  Finally,  while  outside  of  the  Own 
Resources  Decision,  other  revenue  such  as  fees  also  contributes  to  the  EU  budget.  To  the 

104 Long-term forecast of inflows and outflows of the EU budget (2026-2034) 

62 

 
 
 
 
 
 
 
 
extent  that  this  revenue  is  not  assigned  to  specific  expenditure,  it  also  reduces  the  need  for 
national contributions. 

6.1 New own resources 

6.1.1 ETS-based own resource 

The  ETS-based  own  resource  remains  an  important  element  of  the  Commission’s  own 
resources proposals, as it is closely linked to the Union’s climate targets. In its 2021 and 
2023  own  resources  packages,  the  Commission  proposed  that  part  of  the  revenue  from  the 
Emissions  Trading  System  (ETS)  would  be  transferred  to  the  EU  budget.  The  EU’s 
decarbonisation efforts – which aim to achieve climate neutrality by 2050 – require continued 
efforts in the next MFF, both on the revenue and the expenditure side. This proposal is closely 
linked with the EU’s policy objective to reduce greenhouse gas emissions further by 2030 and 
the  newly  proposed  target  for  2040.  The  Commission  decided  to  focus  solely  on  revenues 
from the emissions trading system that is already in place, ETS1.  

An ETS-based own resource has significant revenue potential. The Commission proposed 
in 2023 to increase the call rate from 25% proposed in 2021 to 30%, which is still considered 
appropriate. Based on the assumed carbon price105, revenue for the EU budget is estimated at 
around EUR 9.6 billion106 on average per year over the period 2028-2034. 

6.1.2 Own resource based on the Carbon Border Adjustment Mechanism 

The Carbon Border Adjustment Mechanism (CBAM) can be considered as the ‘external 
dimension’  of  the  ETS,  and  the  related  own  resource  therefore  remains  an  integral 
element  of  the  package.  The  mechanism  aims  to  reduce  the  risk  of  carbon  leakage  and  to 
encourage producers in third countries to abate carbon emissions. Imported goods would need 
to be covered by sufficient certificates to ensure that the same carbon price applies to imports 
as  to  products  manufactured  in  the  EU.  Member  States  would  be  responsible  for  collecting 
revenue from the sale of the certificates. Before the end of 2025, the Commission will assess a 
possible  extension  of  the  mechanism’s  scope  to  additional  ETS  sectors  and  make  a  first 
legislative  proposal  to  include  certain  downstream  products,  starting  with  steel  and 
aluminium-intensive products as announced in the Steel and Metals Action Plan107. 

The  CBAM  has  moderate  revenue  potential,  which  could  increase  somewhat  with  its 
planned extension. The Commission proposes to maintain the call rate of 75%. With this call 
rate,  the  mechanism  is  expected  to  generate  revenue  for  the  EU  budget  of  up  to  EUR  1.2 
billion  on  average  per  year  over  the  period  2028-2034.  A  possible  extension  of  the 
mechanism’s scope to certain CBAM downstream products may generate additional revenue 
of  up  to  EUR  0.2  billion  on  average  per  year  over  the  period  2028-2034.  In  contrast,  the 
envisaged solution to address carbon leakage for CBAM goods exported from the EU to third 

105 The revenue estimates are based on an assumed carbon price of EUR 88.33 in 2025 prices. 
106 All estimates of revenue from new own resources or changes to existing own resources are expressed in 2025 
prices. 
107 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social Committee and the Committee of the Regions, A European Steel and Metals Action Plan (COM(2025)125 
final). 

63 

 
 
 
 
 
 
 
 
 
countries  announced  in  the  Communication  on  ‘Delivering  on  the  clean  industrial  deal  I’108 
would lower the EU budget revenue from CBAM. 

6.1.3 Own resource based on e-waste 

The growing amounts of waste of electrical and electronic equipment (WEEE) represent 
a concern, but they are also, given their significant content of critical raw materials, of 
key  importance  for  the  Union’s  strategic  autonomy.  WEEE  represents  one  of  the  fastest 
growing  waste  streams.  Critical  raw  materials  such  as  copper,  platinum,  and  rare  earth 
elements  can  be  recycled  when  waste  is  managed  effectively.  At  the  same  time,  e-waste 
contains  hazardous  materials  such  as  heavy  metals  and  chemical  substances,  which  pose 
severe  environmental  and  health  risks,  if  not  properly  collected  and  treated.  However, 
Member  States  are  lagging  behind  binding  collection  targets  as  set  out  in  the  WEEE 
Directive109. Whereas  – once collected – the recycling  rates across Member States are high, 
the EU aggregated collection rate for e-waste in 2022 amounted to  just  40%. Following the 
own  resource  based  on  non-recycled  plastic  packaging  waste,  an  own  resource  based  on  e-
waste would provide incentives for Member States to  increase  e-waste collection and at  the 
same time foster the Union’s competitiveness and strategic autonomy. 

The  own  resource  contribution  would  result  from  a  uniform  call  rate  applied  to  the 
weight  of  non-collected  waste  of  electrical  and  electronic  equipment.  Non-collected 
WEEE  in  a  Member  State  for  a  given  year  would  be  calculated  by  subtracting  the  WEEE 
collected in that year from the average weight of electrical and electronic equipment that was 
placed  on  the  market  over  the  three  previous  years.  Using  the  electrical  and  electronic 
equipment  (EEE)  placed  on  the  market  methodology  provides  more  stable  estimates  than 
using the WEEE generated methodology assessed in 2023110 but for which reporting remains 
optional  for  Member  States.  Collected  WEEE  and  EEE  placed  on  the  market  are  statistical 
indicators  that  are  mandatorily  reported  to  the  Commission  and  are  expected  to  continue  to 
serve as the basis for any improved collection methodology resulting from a revision of the 
WEEE  Directive.  The  WEEE  Directive  has  been  transposed  by  all  Member  States.  Its 
applicable reporting obligations provide all elements that are necessary to introduce the own 
resource based on non-collected WEEE. Although the data reported by Member States have 
improved in recent years, there is still room to improve the comparability of the reported data 
before the implementation of the own resource. To this end, the Commission will provide the 
option  of  supplementary  technical  assistance,  already  during  the  current  MFF,  for  the 
improvement of the quality of WEEE statistics in view of the possible introduction of the own 
resource. 

An own resource based on e-waste would generate significant and stable revenue for the 
EU  budget.  In  2022,  the  EU-wide  non-collected  WEEE  amounted  to  around  7.5  million 
tonnes.  While  electrical  and  electronic  equipment  placed  on  the  market  is  expected  to 
continue  to  rise  over  the  coming  years,  albeit  at  a  slower  pace,  Member  States  should 
gradually approach the 65% collection target. Therefore, with a proposed initial call rate of 2 

108 Communication from the Commission to the European Parliament, the Council, the European Economic and 
Social Committee and the Committee of the Regions (COM(2025) 378 final). 
109 Directive 2012/19/EU of the European Parliament and of the Council of 4 July 2012 on waste electrical and 
electronic equipment (WEEE) (recast). 
110 Staff Working Document accompanying the 2023 Proposal on New Own Resources (SWD/2023/331 final). 

64 

 
 
 
 
 
 
 
 
EUR/kg  and  dynamic  inflation  adjustments,  a  relatively  stable  revenue  stream  from  non-
collected e-waste of around EUR 15.0 billion per year is expected for the period 2028-2034. 

6.1.4 Tobacco Excise Duty Own Resource (TEDOR) 

Despite differences between Member States, smoking remains an EU-wide health policy 
challenge. Around  24%  of  the  EU  population  (over  15  years  old)  smokes,  with  substantial 
differences  between  countries  and  population  groups.  In  some  Member  States  smokers  still 
account  for  more  than  35%  of  the  population,  while  in  others,  prevalence  has  fallen  below 
15%. In 2020, tobacco excise duties at EU level accounted for around 2% of tax revenue and 
0.93%  of  GDP.  The  Commission  proposal  for  a  recast  of  the  Tobacco  Excise  Duty 
Directive111 includes a revision of the EU minimum excise duty levels and certain categories 
for traditional tobacco products as well as an extension of the scope of the Directive to new 
products and raw tobacco. The application of the minimum rates under the updated Directive 
will  ensure  greater  fairness  between  Member  States  by  creating  a  level  playing  field  and 
generate additional revenue for several Member States. 

Differences  in  taxation  and  thus  also  in  retail  prices  for  tobacco  products  between 
Member  States  continue  to  be  a  major  driver  of  cross-border  shopping.  Cross-border 
shopping  driven  by  differentials  in  taxation  distorts  competition  and  market  functioning  by 
incentivising  businesses  to  cluster  in  countries  with  lower  tax  rates.  Excessive  cross-border 
flows  of  tobacco  products  undermine  national  efforts  to  deter  tobacco  consumption  through 
taxation and they have a distributional impact on Member States’ tax revenues.   

The  TEDOR  would  be  directly  related  to  the  consumption  of  tobacco  products  in  the 
individual  Member  States.  The  contribution  of  a  Member  State  would  be  calculated  by 
multiplying  the  quantity  released  for  consumption  across  all  categories  of  manufactured 
tobacco and tobacco-related products for a given year by the minimum rate applicable to that 
Member State. Revenue from a tax rate higher than the Member State’s minimum rate would 
accrue entirely to the Member State’s budget. The TEDOR’s base would be adjusted to reflect 
the scope and rate of the updated Tobacco Excise Duty Directive, in line with the timeline for 
its entry into force. With a call rate of 15%, EU budget revenue from the TEDOR is estimated 
to amount to EUR 11.2 billion on average per year for the period 2028-2034. 

6.1.5 Corporate Resource for Europe (CORE) 

Companies benefit in many ways from doing business in the European Union. In today’s 
interconnected  and  global  economy,  predictability,  stability  and  long-term  perspectives  are 
pre-conditions  for  investment,  growth  and  innovation.  Common  rules  on  competition, 
intellectual property, and environmental standards ensure fair practices and lower compliance 
costs. The EU plays a unique role in safeguarding these conditions – not just through laws and 
regulations, but through supporting long-term investments in infrastructure, climate resilience, 
education, digital transformation, research and innovation and cross-border security. The EU 
budget  has  a  major  role  in  building  a  strong  economic  European  home  market,  supporting 
companies  to  modernise,  expand,  innovate  and  compete.  Funding  programmes  like  Horizon 
Europe and the Single Market  Programme boosted industrial  competitiveness  and economic 
growth.  The  RRF  and  SURE  stabilised  the  European  economy  and  enhanced  its  growth 

111 Council Directive (EU) 2011/64/EU on the structure and rates of excise duty applied to manufactured tobacco 
(codification). 

65 

 
 
 
 
 
 
 
 
 
potential  during  the  pandemic.  The  next  MFF  will  continue  to  support  innovation  and 
competitiveness 
the  new  European 
Competitiveness Fund. 

the  corporate  sector,  especially 

through 

in 

A  Corporate  Resource  for  Europe  (CORE)  own  resource  would  ensure  that  large 
businesses  contribute  to  the  financing  of  the  EU  budget.  The  CORE  would  generate 
significant  and  sustainable  revenue,  supporting  EU  initiatives  to  strengthen  a  competitive 
business  environment.  It  would  be  established  as  an  annual  lump-sum  contribution  of  all 
companies  operating  and  selling  in  the  EU.  The  CORE  would  be  differentiated  per 
companies’  net  turnover  and  applied  at  the  entity  level.  Companies  with  an  annual  net 
turnover at or below EUR 100 million would be excluded. Therefore, in principle, small and 
medium-sized  companies  (SMEs)  would  not  be  in  the  scope  of  the  CORE.  Governmental 
entities, international organisations and non-profit organisations would also be excluded. The 
CORE has been designed with a view to mitigating the impact on individual companies (such 
that the lump-sum payments to be made represent only a very small fraction of net turnover), 
while enabling it to achieve its objectives. In principle, as a new revenue source, it would not 
reduce  existing  national  tax  revenue.  EU  budget  revenue  from  the  CORE  is  estimated  to 
amount to EUR 6.8 billion on average per year for the period 2028-2034. 

The CORE annual lump-sum contribution would be differentiated per company’s turnover as 
follows: 

Annual net-turnover of the company 

Not exceeding EUR 100 million 
Above EUR 100 million and below EUR 250 million 
Between EUR 250 million and below EUR 500 million 
Between EUR 500 million and below EUR 750 million 
EUR 750 million or more 

Annual amount of  
the CORE contribution 
Excluded 
EUR 100,000 
EUR 250,000 
EUR 500,000 
EUR 750,000 

Member  States  would  collect  the  CORE  revenue  from  the  companies  on  behalf  of  the 
Union. The companies subject to the CORE would make their payment in the Member State 
where  they  are  resident  for  tax  purposes.  Likewise,  the  CORE  would  apply  to  permanent 
establishments  of  third  country  entities  located  in  a  Member  State.  It  would  rely  on  basic 
corporate  data,  using  net  turnover  as  a  basis,  the  reporting  of  which  is  sufficiently 
standardised at EU and even at global level. Hence, it would not require new data collection, 
limiting  the  administrative  burden  for  Member  States  and  companies. The  CORE  would  be 
introduced through Article 311 TFEU serving as the sole legal basis for creating this new own 
resource. It does not require any underlying sectoral legislation, as all relevant rules would be 
laid out in the Own Resources Decision as well as in the Making Available Regulation (MAR) 
and in the Regulation as regards implementing measures for new own resources (IMSOR). 

6.2 Adjustments to existing own resources 
A reduction in Member States’ retention and the abolition of de minimis exemptions for 
customs duties would increase traditional own resources (TOR). TOR consist primarily of 
customs duties and are collected by the Member States on behalf of the Union. The  current 
level of 25% of customs duties that Member States retain appears higher than what would be 
needed  to  cover  collection  costs  and  provide  effective  incentives  for  diligent  collection  and 

66 

 
 
 
 
 
 
 
 
 
control. The retained amount is not assigned to national customs administrations nor linked to 
the  actual  costs  of  collection  and  control.  A  large  part  of  customs  duties  is  paid  without 
significant  intervention  by  customs  authorities,  financial  risks  such  as  fraud  are  not 
proportionate  to  regular  imports  and  customs  duties,  and  most  controls  target  non-financial 
aspects  like  product  safety  or  health.  The  continued  digitisation  of  customs  administrations 
has significantly reduced administrative costs, which will be further reduced by the customs 
reform.  Therefore,  the  collection  costs  should  be  lowered  to  their  traditional  level  of  10%. 
This  would  generate  additional  revenue  for  the  EU  budget  of  on  average  around  EUR  4.5 
billion per year in 2028-2034. Moreover, the abolition of the minimum customs value of EUR 
150  up  to  which  no  customs  duties  are  levied,  as  proposed  together  with  the  reform  of  the 
Union  Customs  Code  (UCC),112  should  generate  an  additional  EUR  2.3  billion  per  year  in 
revenue. Revenue related to the handling fee for goods sold in distance sales (e-commerce) as 
proposed under the UCC reform also falls under the definition of TOR. This could generate a 
further EUR 4.6 billion per year in customs revenue. 

Given  the  high  inflation  in  recent  years,  an  adjustment  of  the  call  rate  for  the  plastic-
based  own  resource  is  appropriate.  The  call  rate  for  the  own  resource  based  on  non-
recycled plastic packaging waste, which was introduced at the start of the current MFF, was 
set  at  a  fixed  amount  of  EUR  0.8  per  kg.  However,  the  relatively  high  inflation  that  has 
occurred in the meantime has reduced the real value of the revenue from this own resource, 
which might also reduce incentives for Member States to intensify their efforts to achieve the 
EU recycling target. To account for this, it is proposed to increase the call rate to EUR 1/kg in 
2028  and,  from  that  point  on,  to  adjust  it  to  inflation.  This  would  mean  an  increase  to  on 
average  EUR  1.07/kg  over  the  period  2028-2034.  This  would  increase  revenue  from  the 
plastics-based own resource by on average EUR 2.2 billion over the period 2028-2034. 

To  ensure  a  transparent  own  resources  system,  there  will  be  no  own  resource-specific 
adjustments. Thus, the capping of the VAT base at 50% of the Member States’ GNI, as well 
as the lump sum reductions applied to the non-recycled plastic packaging waste own resource 
and  the  GNI  own  resource  will  be  discontinued113.  At  the  same  time,  the  Solidarity 
Adjustment Mechanism to the ETS own resource will not be proposed again.   

6.3 Other revenue 
Additional other revenue – to the extent that it is not earmarked for specific expenditure 
–  reduces  the  need  for  national  contributions  from  Member  States.  Other  revenue 
supplements  own  resources,  flows  directly  into  the  EU  budget  and  may  stem  from  a  wide 
range  of  sources.  It  is  established  as  an  integral  part  of  one  or  several  EU  policies  and 
supports the implementation of the basic act. It includes revenue such as the budgetary surplus 
(from  the  previous  year),  contributions  from  third  parties  for  the  participation  in  certain 
programmes or income stemming from interests and fines or penalties due to infringement of 
EU law. Additional other revenue could be generated, for example, by adjusting existing fees, 

112 Proposal for a Council Regulation amending Regulation (EEC) No 2658/87 as regards the introduction of a 
simplified  tariff  treatment  for  the  distance  sales  of  goods  and  Regulation  (EC)  No  1186/2009  as  regards  the 
elimination of the customs duty relief threshold (COM(2023)259 final). 
113 In 2025, 7 Member States are forecast to benefit from the capping of their VAT base. 17 Member States have 
been granted fixed annual lump-sum reductions to their own resource contribution based on non-recycled plastic 
packaging waste and 5 Member States to their GNI-based own resource contribution.  

67 

 
 
 
 
 
 
 
 
such as the European Travel Information and Authorisation System (ETIAS) fee, or introduce 
new ones related to Union policies. 

68 

 
 
 
 
 
Annex. Supporting tables 

Assessment of the 2021-2027 MFF 

A.1.1 Redeployments under the 2021-2027 MFF 

Flexibility-redeployment 

Total 

Proposal 

FAST-CARE - EU 
2022/2039 

SAFE 2023/435 

ASAP COM(2023) 237 
final 

Chips Act COM(2022) 46 
final. Political agreement 
reached on 18/04/2023 

Union Secure 
Connectivity (EU) 
2023/588 

REPowerEU 

Cohesion programmes increased pre-financing 

Amounts that can be programmed to address the migration 
challenges stemming from Russia's military aggression 

Amounts that could have been re-programmed to address the energy crisis 

Redeployments  from EDIRPA 

Redeployments  from European Defence Fund 

Redeployments and reallocations from Horizon Europe and Digital Europe 

Programme 

Redeployments  from ITER 

Margin 

Decommitments 

Redeployments and reallocations from Space Programme, CEF- Digital, 
Digital Europe Programme, NDICI, European Defence Fund 

Loans 

Grants 

BAR 

CPR transfers - existing transfer possibility from cohesion policy 

funds 

Decentralised agencies 

Redeployments from programmes for additional tasks in 

decentralised agencies 

29  cohesion  policy  programme  amendments  were  adopted  by  the end of 
December 2024 corresponding  to EUR 5.9 billion (ERDF, JTF, ESF+ ). 9 
programme  amendments were adopted by the end of  March 
2025 corresponding to EUR 0.4 billion. 
Innovation  Fund 

STEP 

RESTORE - 
COM/2024/496  final 

Cohesion mid-term 
review -  COM(2025) 
123 final 

European Defence Fund 

European Innovation Council 

Horizon Europe (excl. EiC) 

Digital Europe Programme 

EU4Health 

Frontloading 

Frontloading 

3.5 

15.7 

40.0 

0.2 

0.3 

2.9 

0.05 

0.35 

0.08 

2.40 

40.5** 

19.5 

2.1 

0.0 

1.1 

6.3 

7.4 

0.8 

0.6 

0.4 

0.3 

0.1 

10.0 

4.1 

Total includes redeployed, frontloaded or reprogrammed for a mix of commitment and payments. 
* Actual re-programming 
** From remaining RRF loans 
*** ETS resources (12bn from Innovation Fund and 8 bn from Member States allowances) 
**** Amount equivalent to decommitments established on an annual basis. 

69 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A.1.2 Sustainability of the ceilings of the 2021-2027 MFF 

Name 

2021 

2022 

2023 

2024 

2025 

2026 

2027 

In EUR million, in current prices, rounded to the nearest whole number 

1. Single Market, Innovation and Digital 

  101.7 

  32.9 

  280.9 

  105.8 

  115.9 

  155.6 

  178.7 

2a. Economic, social and territorial cohesion 

-  1.6 

  30.8 

  12.5 

  17.8 

-  4.7 

  0.5 

  0.6 

2b. Resilience and values 

-  432.3 

-  30.0 

-  527.2 

- 1 311.4 

- 2 278.4 

- 4 204.0 

  444.5 

3. Natural Resources and Environment 

  49.9 

  283.9 

  76.9 

  142.3 

  604.7 

  128.0 

4. Migration and Border Management 

  164.0 

-  52.2 

  86.7 

  126.5 

  79.9 

  93.0 

5. Security and Defence 

  97.7 

  83.0 

-  170.6 

-  319.3 

-  15.6 

  6.5 

  45.1 

  57.6 

  5.2 

6. Neighbourhood and the World 

-  784.0 

-  907.4 

- 1 462.2 

-  972.1 

-  355.2 

  109.0 

  112.7 

7. European Public Administration 

  192.2 

  274.8 

  73.3 

-  283.5 

-  721.0 

-  969.2 

-  962.9 

Total 

-  612.4 

-  284.2 

- 1 629.7 

- 2 493.9 

- 2 574.4 

- 4 680.6 

-  118.5 

Negative figures mean authorized appropriations (including special instruments) exceed the ceilings 

Positive figures mean authorized appropriations (including special instruments) are below the ceilings 
Years 2021, 2022, 2023 and 2024 correspond to the final approved budget, year 2025 corresponds to the latest draft amending budget, and years 2026-2027 correspond to the draft budget proposal for 2026. 

70 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
A.1.3 Different types of flexibilities and the ceiling for commitments in the 2021-2027 MFF 

Name 

Total 

Ceiling for commitments 

Article 5 MFFR 

Special instruments and margins 

Unallocated margins 

Flexibility Instrument 

Solidarity and Emergency Aid Reserve 

European Globalisation Adjustment Fund for Displaced Workers (EGF) 

Brexit Adjustment Reserve 

EURI Instrument 

Ukraine Reserve 

Other flexibilities 

Agricultural reserve 

Thematic facilities 

Emerging challenges and priorities cushion under NDICI-GE 

Totals 

Share of 
ceiling 

MFF  
2021-27 
(2020 
proposal) 

1 263 554 

1 263 554 

In EUR million, commitment appropriations, 2025 constant prices 

Share of 
ceiling 

MFF  
2021-27 
(adopted) 

1 246 696 

1 234 060 

12 636 

MFF  
2021-27 
(current) 

1 246 558 

1 234 889 

11 669 

Share of ceiling 

12 831 

8 041 

32 163 

3 104 

2 858 

8 547 

10 412 

1.01% 

0.63% 

2.53% 

0.24% 

0.22% 

0.67% 

0.82% 

5 619 

7 357 

9 701 

1 496 

5 743 

3 306 

5 884 

9 532 

0.45% 

0.59% 

0.78% 

0.12% 

0.46% 

0.27% 

0.47% 

0.76% 

5 619 

9 338 

11 138 

  779 

5 159 

16 863 

3 306 

5 884 

9 532 

0.45% 

0.75% 

0.89% 

0.06% 

0.41% 

0.00% 

1.35% 

0.27% 

0.47% 

0.76% 

Unallocated margins and Flexibility Instrument 

20 872 

1.64% 

12 976 

1.04% 

14 956 

1.20% 

Unallocated margins, special instruments (thematic and non-thematic), and 
other flexibilities (emergencies and priorities cushion, thematic facilities, 
agricultural reserve) (excl. Ukraine Reserve) 

77 956 

6.17% 

48 639 

3.90% 

50 755 

4.07% 

71