News and Insights

The next EU Budget is for a stronger Europe

September 4, 2025

What is in it and what does it mean?

The EU Commission faces an exceptionally messy two-year negotiation period with the new €2 trillion EU Budget, now dubbed the ‘Multiannual Financial Framework’ (MFF), proposed for the next EU 2028-2034 budgetary cycle.

The framework possesses a transformative vision and a multitude of key proposals that would significantly impact the agricultural, defence, pharmaceuticals, education and technology sectors. Buy-in from Member States and Parliament remains to be seen, not least because European Commission officials could only explain where half of the MFF would actually be spent when presenting the plan on 17 July.

Furthermore, the pie chart breakdown of spending, presented to an agitated Brussels press corps four hours after the budgetary conference was scheduled, added up to an impossible total expenditure of 101%.

A Troubled Launch and Early Missteps

Many officials privately expressed exasperation at the lack of internal Commission briefings and consultations in shaping the framework.

The ‘failure to launch’ in strategically communicating the budget in a comprehensive and decisive manner may also have shaped the media disposition to the proposal in a decidedly more hostile and unsteady direction.

The lack of clarity was more than cosmetic – it signalled to Member States and MEPs that von der Leyen may be attempting to centralise budgetary control within the Commission without full transparency, thereby eroding early trust. Within 24 hours of unveiling the MFF proposal, Europe’s biggest player, the German Government, explicitly objected to the outline.

Mathematical implausibility and journalistic impatience aside, there still remains a question which has yet to be answered comprehensively by the EU in a centralised format: what is in it?

Multiannual Financial Framework: the detail

Pillar 1: The Fund – €894.2 billion

Perhaps the most controversial heading within the proposed budget, the Common Agricultural Policy (CAP), which provides substantial subsidies to farmers across Europe, has been absorbed under National and Regional Partnership Plans. The actual value of ring-fenced CAP payments, destined for farmers and fishers, has also been slashed by 30% from €387 billion to €302 billion.

For major agricultural players like France, Spain, Germany, Italy, Poland and Ireland, this will undoubtedly lead to major lobbying campaigns targeting national governments to maintain or exceed current levels of funding. The European farming lobby is exceptionally well organised and has repeatedly mobilised for mass protests in Brussels and national capitals.

For supermarkets and governments alike, the prospect of higher food prices and an agitated agricultural lobby is an unpleasant possibility, particularly in France where the line of succession to President Macron remains unclear leading up to the 2027 Presidential elections.

The fallout of the pandemic and war in Ukraine on the sustainability of the financial models that underpin modern food systems remain critical issues for food producers and suppliers.The pillar does however contain a doubled agricultural reserve of €900 million per year, aimed at supporting farmers in times of crisis.

On a symbolic level, the merging of Cohesion Funds (€218 billion) and CAP into a reduced budget sends an overarching message that agriculture is no longer a top EU priority, while funding for underdeveloped regions is being displaced by urbanisation as a political priority.

Among other key items, The Fund for the first time contains €100 billion for tracked social objectives and social investment.

The budget also contains €34 billion for migration and border management, tripling the current allocation; this reflects a European politics which has become increasingly hostile to inward migration. Pillar 1 also establishes a €63.2 billion Facility for Union Actions, this is designed for disaster and crisis response, financing actions directly at EU level for urgent needs.

€150 billion has been put aside in policy loans for Catalyst Europe, supporting researchers in identifying and meeting unmet medical needs.

Pillar 2: Competitiveness – €589.6 billion

The new MFF creates a €409 billion European Competitiveness Fund which will focus on the four strategic themes of:

• Horizon Europe
• Digital Leadership
• Defence and Space
• Clean Technologies

Many of the programmes outlined are amalgamations or adjustments to existing initiatives, or consist of substantial increases in funding for areas identified in the Draghi report. The report is the basis for this new policy instrument, a new imperative underlining a drive for competitiveness in EU economic policy, with a vision to boost growth and eradicate the non-tariff barriers which still exist in trade between Member States.

The allocation of €175 billion Horizon Europe represents almost a doubling of EU funds for the flagship programme which is at the core of EU funded research and innovation. €40.8 billion has been pledged by the Commission to the Erasmus+ programme which allows students to study all around the EU on a subsidised basis.

€131 billion has been dedicated to resilience and security, defence industry and space innovation – a further indication of a European Commission which is placing common defence policy at the core of their medium-term strategic priorities.

The proposal has also set aside €67.4 billion for clean transition and industrial decarbonisation technologies. This is in a policy context where Europe has downgraded the urgency of climate action in a hostile geopolitical environment.

€22.6 billion has been set aside for innovation in health, biotech, agriculture and bioeconomy, while €54.8 billion has been proposed for the theme of ‘digital leadership’. This calls for the development of an EU-wide digital infrastructure to enable cross-border data exchange and efficiencies across government institutions.

Pillar 3 – External Relations: €215.2 billion

As part of a reorientation towards sanctions enforcement and defence partnerships, the new MFF proposes a 75% increase in funding, “to strengthen global partnerships and advance EU priorities worldwide.”

The capability of the External Action Service (EAS) has come under increased scrutiny in recent years. Brussels undoubtedly feels pressure to conduct more assertive diplomacy and develop global trade relations faced with current disruptions to transatlantic trade and traditional alliances.

This pillar also allocates funding for potential EU enlargement, which is set to be at the core of several impending Council Presidencies.

Others: Administration and Repayment of Next Generation EU: €285.9 billion

Around €25 billion per year must be spent on servicing the €625 billion ‘NextGenerationEU’ pandemic recovery fund, which was financed through common EU debt in response to the outbreak of the Covid-19 pandemic. This is one of the few allocations that will not be contested as negotiations commence. Furthermore, €117.9 billion is required to actually run the European institutions and pay staff salaries.

What the MFF means for Member States and industry

The bottom line is this, in reality the final EU Budget proposal will be drastically different from the one proposed by the European Commission.

The style and substance of the initial MFF announcement will create an atmosphere of sustained distrust among Parliament and Member States, with growing concerns surrounding the centralisation of power in the Commission President’s office.

The final MFF is likely to be roughly equal in real terms to the previous budget, with slight reallocations and a notable increase in funding for competitiveness and defence initiatives.

The EU Commission has dramatically expanded its power in recent years in response to a series of crises from Brexit and Covid-19, to the war in Ukraine and geopolitical developments regarding the United States. The MFF will present an appealing opportunity for nations and MEPs to reassert their power in EU affairs.

For industries like defence, pharmaceuticals, education, energy and technology, the competitiveness instruments will be welcomed as key opportunities for reform and seeking subsidies, but the specifics of these initiatives remain largely unclear.

EU Agriculture will see the MFF as an overall loss to its strategic interests and will conduct an extensive lobbying campaign across Member States, and in Brussels itself, with the goal of restoring or increasing ring-fenced CAP payments to previous levels.

In many respects, the new MFF is ambitious and would prove to be transformational in bolstering the Commission’s role in promoting a more expansive vision of the European project at a time when Europe faces mounting geopolitical threats and economic stagnancy.

But, on an immediate basis, it appears the Commission does not have the support of most Member States or Parliament.

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