The European Union’s new budget period, which will begin in 2028 and run until 2034, will set the financial priorities of the Union for the next seven years. Known officially as the Multiannual Financial Framework, this budget determines how much money the EU can spend and where that money will go, from agriculture and regional development to climate policy, migration, defence and support for Ukraine.
The budget proposal is therefore not simply an accounting exercise, but a political statement about what kind of Europe the Commission wants to build in the coming decade. At a time of geopolitical instability, economic pressure and growing debate over the future of European integration, the 2028–2034 budget could become one of the most important tests of the EU’s ability to act as a single entity.
Innovations
One of the innovations of the MFF is without doubt the introduction of five new sources of EU income, called own resources. These new sources of income go from an EU emissions trading scheme, a system that will allow a gradual reduction on total pollution, to a tobacco excise duty to be applied in all EU countries, announced last year by the commissioner for climate and taxation, Wopke Hoekstra.
These measures, while not directly impacting on each individual country’s contribution to the EU budget, will allow a greater level of flexibility for the Commission, expanding its budget to an average of 1.26% of Europe’s gross national income. Taken together, these five new own resources are expected to generate around €44 billion a year, or approximately €308 billion over the full 2028–2034 period.
The new budget would also reform two of the EU’s most politically sensitive spending areas: agricultural subsidies and cohesion funding. The commission’s plan that has been proposed amounts to an over €2 trillion seven-year budget, including major allocations for agriculture, less-developed regions, competitiveness, defence as well as the European space programme.
The breaking of taboos
This new budget undeniably represents a step in the direction towards greater integration, all while still maintaining the usual EU compromises. This proposal will seek to eliminate the discounts and reductions that for many years – since Margaret Thatcher’s complaints in the 1980s – the richest countries of the union have benefitted from, after having complained about disproportionally large payments made to the bloc.
A budget for new priorities
The commission’s proposals also reflect that the EU is facing a very different political as well as social environment from the ones that have shaped previous budgets. The previous budget, drafted between 2019 and 2020, and in place from 2021, was mainly concerned with the Covid-19 pandemic, as well as the significant loss of one the EU’s major powers, the UK. However, since then, climate change, the war in Ukraine, energy insecurity, migration pressures and competition with the United States and China have all increased demands for common European action. This uncertainty has pushed for authoritative interventions from figures such as Mario Draghi, former governor of the European Central Bank and former prime minister of Italy, in favour of a greater integration of the union.
A larger and more flexible budget would allow the EU to respond more quickly to crises and invest in long-term priorities such as defence, green industry and digital innovation. However, this also raises a difficult question: should these priorities be funded by national governments, or should the EU itself have a stronger role in the decision of fiscal policy? The answer to this question will shape not only the 2028–2034 budget, but also the future character of the European continent.
Who wins and who loses?
As with every EU budget, the main controversy will not simply be the total amount of money available, but how it is distributed between member states and policy areas. Countries in Central and Eastern Europe, which have traditionally benefitted from Cohesion funding, may be concerned by reforms that reduce or redirect this support.Countries with a particularly strong agricultural sector such as France, Spain, Italy and Poland may also resist any weakening of the Common Agricultural Policy, which has long been one of the largest areas of EU spending. Both, in the financial framework proposal, will be at least partially reformed.
The European parliament has debated the proposal and adopted a position, with which it will enter into negotiations with the commission in order to come to an agreement on the final position. The likely winners of the proposal would be those who want a more flexible and autonomous EU, capable of financing common priorities without relying entirely on national contributions. The losers, or at least the most sceptical actors, are likely to be governments that fear higher costs, reduced rebates, or weaker control over traditional areas of spending such as agriculture and cohesion.
The 2028–2034 budget will be more than a financial negotiation. It will be a test of whether member states are willing to give the EU the resources needed to act as a geopolitical and economic power, as requested by some of the EU’s leading figures. If approved, the proposal could mark an important step towards a more integrated Union. If blocked or heavily watered down, it will confirm that national interests still set the limits of European ambition.
