The European Regulation on the making available on the Union market and the expo…
Climate protection, economy, research, development, and now defence: the European Union (EU) is supposed to accomplish many tasks and at the same time does not overshadow the governments of the 27 Member States. This requires squaring the circle in many rounds of negotiations.
The financing of the EU's tasks must be secured in the long term and requires comprehensive budget planning. The basis of this budget planning is the so-called "Multiannual Financial Framework“, and the next one must be adopted unanimously by the Member States for the years 2028 to 2034 on a proposal from the European Commission with the consent of the European Parliament. The Commission presented its draft on July 16, 2025, and it is quite ambitious. But what exactly is the "Multiannual Financial Framework"? Which changes does it make compared to the previous funding period? What happens next?
Based on Art. 312 of the Treaty on the Functioning of the European Union (TFEU), the "Multiannual Financial Framework" (MFF), which is the responsibility of the European Commission, covers the EU's budget planning for at least five – usually seven – years. It determines the financial scope of the annual EU budget by setting binding ceilings. The focus is always on promoting European cooperation, particularly in terms of growth and competitiveness. Long-term budget planning enables investment projects to be aligned over several years and thus designed more efficiently. Variable elements of the MFF allow a flexible response to crises and emergencies such as natural disasters. Moreover, it enables financial resources to be deployed quickly and precisely.
In addition to the MFF, the EU also has subsidiary budgets. The most prominent example of this is NextGenerationEU (NGEU). This is a temporary recovery program that was launched in 2020 to deal with the economic and social impact of the COVID-19 pandemic. With a volume of more than EUR 800 billion, NGEU aims to finance economic recovery in the EU and promote investment.
There are also other budgets outside the traditional financial framework, such as the European Peace Facility (EFF). The facility was set up for the period 2021-2027 with a volume of EUR 5.69 billion and serves to support countries affected by military conflicts.
The Commission wants to significantly increase the budget. The current MFF 2021-2027 has a total volume of around EUR 1,211 billion, which corresponds to around 1.11% of the gross national income (GNI) of the EU-27. In addition, there are funds from the "Next Generation EU" reconstruction program amounting to around EUR 800 billion.
The current EU budget, including NGEU funds, therefore amounts to around EUR 285 billion per year. In comparison, the German federal budget alone is already around EUR 450 billion, i. e. almost twice as much.
The European Commission considers the current budget volume for the future MFF 2028-2034 to be insufficient, particularly regarding the need to overcome global instabilities and to finance climate protection and biodiversity. The European Commission wants to invest EUR 2,000 billion to future-proof the EU. "The next Multiannual Financial Framework is the most ambitious we have ever proposed. It is more strategic, more flexible, more transparent", says European Commission President Ursula von der Leyen. But where will this funding come from?
To keep the Member States' national contributions stable, the European Commission is trying to tap into new own resources. At present, the fulfilment of EU tasks is largely financed by contributions from the Member States, and they would rather "transfer less to Brussels" than more. On the one hand, ecological levies are proposed, i. e. revenues from the EU Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM) are to be used permanently as own resources, with 30 % of ETS revenues flowing into the EU budget in addition to the proceeds from the CBAM. On the other hand, revenue is to be generated from the taxation of multinational corporations: With the planned taxation of corporate profits in the EU through the BEFIT (Business in Europe: Framework for Income Taxation) instrument as well as revenue from the OECD-driven Pillar One of the global minimum tax system.
The heart of the new MFF are the national and regional partnership plans, which shall form the basis for investments and reforms. The European Commission would like to invest EUR 865 billion just for this.
In addition, the European Commission intends to modernize the Common Agricultural Policy (CAP) and adapt it to new ecological and social requirements. A further EUR 300 billion has been earmarked as income support for farmers, which corresponds to double the amount of the agricultural reserve compared to the previous MFF.
In addition, programmes to reduce economic and territorial disparities between regions should be more efficient and customs and excise duties should be optimized.
Another important proposal is the establishment of a European Competitiveness Fund with almost EUR 410 billion. This fund bundles up to 14 previously separate programmes, including innovation, digitalization, climate protection, health and defence, into a single, thematically focused fund. The aim is to promote strategic investments in key technologies, drive forward industrial decarbonization and strengthen Europe's global competitiveness.
The European Commission's draft has not met with a positive response everywhere. The European Parliament has already rejected the European Competitiveness Fund proposed by the European Commission as inadequate. Large funds are considered unsuitable for guaranteeing parliamentary control. It also criticizes the model of a national plan per member state ("single plan"), as is practiced with the Recovery and Resilience Facility. The European Parliament will not accept any restriction of its duty of oversight and democratic control over EU funds. Instead, it is calling for a differentiated structure with strong parliamentary control and the involvement of regional and local authorities.
Several member states also reject a significant increase in the EU budget. If this were to be accompanied by an increase in the expenditure ceiling above the current level of 1 % of GNI, which in turn is criticized by the European Parliament and the European Commission. "Frugal" states such as Germany have already spoken out against an increase in the EU budget. France has even announced its intention to cut payments to the EU budget in 2026.
Many member states are sceptical about new, mandatory own resources and additional financial burdens that go beyond management or structural reforms. Regardless of the Commission's proposals for new financing instruments, differences remain, for example regarding the integration of new thematic areas or centralized control.
There is overwhelming consensus on increasing the defence budget. The financing of defence is based on the European Defence Fund (EDF). This is the central EU instrument for promoting research, development and joint procurement of modern defence technologies. For the current period 2021-2027, the fund has a budget of EUR 7.3 billion at its disposal. Given the current geopolitical situation, the European Commission has invested EUR 910 million in strengthening the innovative and interoperable defence industry in Europe this year. The European Commission's proposal provides for a special mechanism with a financial impact of almost EUR 400 billion to deal with serious crises. EUR 131 billion is to be invested from the Competitiveness Fund in the areas of defence and space. A further EUR 100 billion is earmarked for Ukraine's recovery and resilience.
In addition to the EDF, the European Commission is planning a comprehensive rearmament as part of its "ReArm Europe" initiative. To this end, it plans to borrow EUR 150 billion through capital market bonds. This should enable rapid and targeted investments without placing an undue burden on national budgets. Over the next four years, around EUR 800 billion will be mobilized, a large part of which is to be covered by an increase in national defence spending by the member states of 1.5 % of GDP.
Further considerations concern the establishment of a so-called "rearmament bank", which is supported by EU member states as well as foreign partners such as the USA and the UK, to simplify and bundle financing for defence technologies. This bank would issue triple-A bonds backed by the shareholder states and thus mobilize additional funds without increasing the debt levels of the member states.
The proposal for the 2028-2034 MFF submitted by the European Commission on 16 July 2025 will be discussed over the next two years. The new MFF must be adopted unanimously in the Council and by simple majority in the European Parliament.
How the European Commission will manage the balancing act between future-orientated policy with new tasks and expenditure desired by the European Parliament and the savings wishes of the Member States cannot be predicted. So far, negotiations have been characterised by the paradox that every Member State wants to get more out than it pays in. Furthermore, in the EU as elsewhere, regrettably, different points are being linked together: For example, the approval of EU sanctions with commitments in favour of individual EU Member States, as in the recent case of Slovakia's delayed approval of the 18th sanctions package against Russia. In the next two years, there will certainly be tough disputes over the proposal. Besides, the MFF 2028-2034 will certainly look different from what was proposed.
Gábor Báthory
Prof. Dr. Rainer Bierwagen
Christian Hipp
Dr. Dietmar O. Reich
Proposal of the European Commission
Budget proposal "simply not enough", say MEPs | News | European Parliament
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