The new MFF: Time for Bold Choices?

By Lukas Sustala, Head of Think Tank, NEOS Lab 

European policy makers often have a soft spot for crafting ambitious visions but struggle to translate those into budgetary realities. Ursula von der Leyen’s European Commission recently unveiled its proposal for the EU’s next Multiannual Financial Framework (MFF), covering 2028–2034. This budget, pivotal to Europe’s global stance, will guide how the continent addresses major upheavals – ranging from climate and technological transformations to improvements in competitiveness and escalating geopolitical risks. Yet, beneath the headline-grabbing proposals lies a familiar story: cautious fiscal constraints and entrenched political interests limit Europe’s common budget and its potential.

Big talk, modest action

On paper, the €2 trillion budget (around 1.26% of Europe’s Gross National Income) looks strong: in terms of GNI, the European budget grows by 0,11 percentage points to its biggest size ever, and it is packed with promises of a competitive, cohesive, and strategically autonomous Europe. But after scratching the surface, some well-known budgetary jugglery emerges. The repayment schedule for NextGenerationEU, the EU’s landmark pandemic recovery scheme, rigidly demands €24 billion annually until 2034 and takes up roughly 85% of the headline growth in the MFF. This locked-in financial commitment further restricts the EU’s agility, leaving it struggling to respond to future crises or opportunities.

What about the Future Share in the budget?

The debate about the EU budget will drag on for years, but for a first analysis, it makes sense to look at ‘Future Share’, the concept I wrote about in my recent ELF publication, Future -proofing the European Budget. ‘Future Share’ evaluates spending based on its genuine contribution to Europe’s future – prioritising investment in human capital, innovation, and essential infrastructure. Unlike traditional politically driven budget allocation, the ‘Future Share’ approach emphasises measurable outcomes and transparent investment choices.

Evaluating the current budget proposal through this Future Share lens yields mixed results. On a preliminary estimate, about 23% of the EU budget aligns with genuine future-oriented priorities in 2028, notably competitiveness and innovation, as flagship programmes such as Horizon Europe and the European Competitiveness Fund have received substantial boosts. Yet, significant shares of the budget remain in traditionally less productive areas like agriculture. ELF also has ideas about how to reimagine agriculture towards innovation and competitiveness. Still, the major reform is merging agricultural and regional cohesion funding streams into national and regional plans.

While the 23% Future Share in the initial proposal clears a minimum threshold and rises over the term until 2034, it might prove to be inadequate for the transformative impact Europe requires.

The conservative trap

Perhaps most disappointing is the proposed fiscal capacity, set conservatively at just around 1.15% of GNI, after discounting for the NGEU repayment. The EU budget remains significantly smaller compared to the combined national budgets of its member states. In addition, the MFF proposal also has a clear downward trend from 2028-2034. You could say that whilst the EU has grown to be a regulatory giant over the years, it remains a fiscal dwarf.

Given the scale and urgency of Europe’s challenges, this cautious approach has its risks. Many critical investments that drive European prosperity, such as trans-European energy networks, are currently underfunded at the national level, highlighting the necessity of scaling up EU-level fiscal capacity. However, the high taxation burden overall also shows a limit to creating more own resources on the European level if there are no equivalent tax cuts on the national or regional level.

Competitiveness: Where promise meets reality

Despite its limitations, the Commission’s budget proposal rightly prioritises competitiveness. Initiatives like the European Competitiveness Fund and Horizon Europe are genuinely critical for Europe’s future growth. But good intentions alone won’t suffice—these programmes require sustained and robust funding to truly deliver. To fulfil these competitiveness commitments genuinely, Europe could be more imaginative when it comes to revenue streams – such as the Carbon Border Adjustment Mechanism (CBAM) and revenues from the Emissions Trading Scheme. Improving the outcomes of European climate efforts by also creating EU revenues is preferable to taxation on other means.

Europe’s fiscal reckoning: Time to act boldly

Europe stands at a pivotal crossroads. While acknowledging crucial strategic areas, the current MFF proposal remains rather conservative and might be cut back further. Entrenched political compromises and rigid fiscal ceilings hinder genuinely transformative investments. The proposal is still far off from future-proofing the European budget, even as the Future Share might rise due to the Competitiveness Fund. Institutionalising proposals such as a Future Share to safeguard future-oriented investments would ensure Europe’s strategic autonomy, global competitiveness, and long-term resilience. Otherwise, even ambitious visions might become lost in translation.