Securing Europe’s Competitiveness
The next multiannual financial framework must prioritise investment
10 October 2025
▪ The need to step up private and public investment in the EU has drastically increased on account of the war in Ukraine and the realignment of US policy. Although investment volumes in defence and, in part, infrastructure have increased considerably, investment in the fields of technology, climate protection and resilience remains far too low
▪ The scaling up of investment remains insufficient to meet requirements As presented in the European Commission’s Competitiveness Compass, Member States need to considerably strengthen their national public investment, conditions for private investment, joint initiatives through IPCEIs and national and European promotional banks to bring the targets of the EU within reach. The multiannual financial framework must make a tangible contribution to closing this gap from 2028 onwards at the latest
▪ The European Union needs to make investment in competitiveness, resilience and decarbonisation a clear priority in its multiannual financial framework starting 2028. The European Commission’s proposal sets the correct course in many key aspects but does not go far enough to meet the new requirements.
▪ The proposal continues structural realignment but falls short of the mark Forwardlooking investment in competitiveness, defence, research and infrastructure are bolstered in the proposal, but a considerable part of the budget remains allocated to conventional areas of expenditure. The proportion of the financial framework earmarked to scale up investment is still too small. Setting competitiveness as an overarching objective and pooling central programmes in a new European Competitiveness Fund is designed to achieve the necessary streamlining and facilitate the implementation of measures.
▪ Does the draft MFF align with the Draghi Report? Not entirely. The budget proposal does follow the central recommendations of the Draghi Report, contributing to closing the investment gap by significantly increasing funds for competitiveness, resilience, defence and investment in strategic technologies. The proposal also supports governance, the reduction of bureaucracy and the increase of cross-border investment. Some challenges are not addressed with security for investment not guaranteed in all areas, particularly not in energy and infrastructure, leaving the balance between flexibility and predictability open
1. Overall Evaluation of the Commission Proposal
Commission Proposal
The European Commission has presented a proposal for the Multiannual Financial Framework (MFF) that is moderate in scope and ambitious in structure. The proposal keeps the total budget constant in comparison to the current period in real terms, but with steep increases for several Union priorities The budget is generally weighted more towards defence, security, competitiveness, innovation and infrastructure and less to traditional budget priorities such as agriculture and cohesion. The budget for the new MFF is higher in volume to account for the repayment of the NextGenerationEU (NGEU) programme, which amounts to 0.12 percent of gross national income, up to 1.76 trillion euros in constant prices which corresponds to 1.98 trillion euros when adjusted for inflation, which amounts to 1.26 percent of gross national income in both cases (compared to 1.14 percent in the current MFF). The disbursement of funds for agriculture, cohesion, migration and border security will be linked to the National and Regional Partnership Plans of the Member States.
As much as 30 percent of the budget is earmarked for competitiveness and defence, almost one quarter of the total budget for the Competitiveness Fund and four percent in pan-European infrastructure. Funds for agriculture and cohesion policy are down to 38 percent (665 billion euros), and 43 percent including border security and social cohesion (771 billion euros). For comparison, in the current MFF 62 percent of the budget is allocated to agricultural and cohesion policy. Eleven percent is allocated to foreign policy (currently nine percent) and six percent for administration
There are also several important financial instruments off-budget and outside of the MFF. These include assistance for Ukraine with 89 billion euros and the Flexibility Instrument with 14 billion euros and the European Peace Facility, which covers the shared costs for military missions and military assistance, with 27 billion euros. Furthermore, there are potential loans to Member States for crossborder projects under Catalyst Europe amounting to 150 billion euros. Finally, the Crisis Mechanism with 0.25 percent of the gross national income, which amounts to 350 billion euros. The last two items, in particular, will undoubtedly be regarded as very controversial by the Council
The proposal also contains a large number of old and new own resources which are planned to amount to more than 400 billion euros which corresponds to a fifth of the budget. Only around 170 billion euros are earmarked for debt servicing
Evaluation
In view of the difficult budgetary situation in most Member States, the proposal only keeps the total volume of the EU budget at its current level despite the impending repayment of the NGEU. It contains a moderate increase in the funding of European public goods in combination with a clear shift away from agriculture and cohesion and towards security and competitiveness. On the other hand, the proposal only contains tentative beginnings for the Europeanisation of funding for pan-European public goods, above all in defence, research and infrastructure. Funding for the policy areas of energy and climate policy and strategic resilience, which have so far not received sufficient funding, fall well short of the mark. Compared to the current Multiannual Financial Framework, which was significantly expanded with the NextGenerationEU Programme, the total funding volume is almost back down to its pre-crisis level.
In view of the substantial competitive challenges facing European industry, not just in keeping Europe competitive as a business location as extensively documented in the Mario Draghi and Enrico Letta
reports, but also in global industrial and technology policy, some components of the proposal are still far lower than the budget for comparable components in the United States and China Furthermore, Mario Draghi has only recently reiterated once again that the overall additional investment required by the EU to meet the objectives set in defence, technological competitiveness, decarbonisation and resilience have increased as a result of the escalated security situation and the dynamic development in artificial intelligence from the 800 billion euros by 2031 originally estimated in his report up to 1.2 trillion euros. The public sector needs to shoulder a higher proportion of this amount (over 40 percent instead of one quarter), as defence spending inherently needs to be financed primarily by public funds. This will obviously be difficult to implement given the decreasing fiscal policy space available to most Member States.
The main political risk of the proposal is that adjusting the balance of the budget to anchor new priorities and measures in the MFF is much more difficult than sticking to accustomed distribution ratios Decisive for the acceptance of the proposal will therefore be reaching agreement to finance European goods. Shifting responsibility back to the national level in the new adjustments of funding for agriculture, regional and social policy is also likely to result in complicated negotiations at the relevant political levels
2. Governance, Simplification and Steering
Commission proposal
The European Commission’s proposal for the MFF 2028-2034 pursues the objective of making the EU budget simpler, more flexible and more strategic
Simplification
A central component to achieve better governance and greater simplification is the introduction of National and Regional Partnership Plans that combine investment and reforms in a coherent and tailored planning process These Plans will be aligned with the Union’s common priorities while also adapted to national and regional needs, responding to the main priorities and challenges identified, including through the European Semester.
The Partnership Plans will be developed in close cooperation with national and regional authorities and can include sectoral, territorial or thematic chapters, depending on the administrative structure of the Member States. The Plans will not replace the entire EU expenditure architecture but combine 14 existing funds, including central components of agricultural and cohesion policy, with the objective of strengthening synergies between policy areas, simplifying administrative procedures and increasing the impact of EU spending
In parallel, the financing architecture at programme level will be extensively restructured. The total number of EU programmes will be reduced from 52 to 16. These programmes will, in future, be based on uniform and harmonised rules to reduce complexity, lower access barriers and cut down the administrative burden for applicants and authorities.
To support implementation, a new central portal will consolidate information on all EU funding opportunities and provide a single gateway for project promoters thus greatly simplifying access to information, procedures and application processes.
Flexibility
The European Commission proposes several adjustments to increase the flexibility of the budget framework. The number of budget headings will be reduced from seven (plus one sub-heading) to four to facilitate redeployment across policy areas. At the same time, the proportion of funds that are not preprogrammed will be increased to make reallocations within programmes easier. In addition, unprogrammed reserves, or cushions, will be included in the larger programmes, such as the Partnership Plans, the European Competitiveness Fund and the Global Europe pillar, to further increase flexibility.
The architecture of the special instruments will be streamlined as the European Commission believes that the large number of thematic instruments restricts the flexibility of the budget framework. Instead of currently eight there will only be three in future, two non-thematic ones (the Flexibility Instrument and the Single Margin Instrument) and the thematic instrument, the Ukraine Reserve. The Flexibility Instrument will be boosted to a volume of two billion euros per year (in 2025 prices) compared to 1.33 billion euros on average in the current framework. Its volume can increase additionally through decommitments and net fines. The transfer of unused funds is also possible over the entire term of the MFF. The Single Margin Instrument would allow the use of past unused margins to finance additional spending over and above the ceilings of other headings to increase the structural adaptability of the budget. The European Commission also proposes the introduction of a new exceptional and temporary crisis mechanism to enable additional loans to Member States in the event of severe crises
The European Commission also emphasises the need to achieve a better balance between flexibility and predictability. Particularly for areas with long investment horizons, such as energy, transport and research projects, the requisite predictability should be ensured as much as possible for both project promoters and authorities.
In addition to additional financial flexibility, the European Commission also wants to strengthen the degree of political steering in the framework of the annual budgetary procedure. A newly introduced political steering mechanism will enable structured coordination between the Commission, the Council and the European Parliament on major policy areas with the objective of aligning budget flexibility to key priorities and strategic projects at an early stage. The mechanism will be supported with an integrated strategy report which builds on existing processes and reports, such as the European Semester, the new Competitiveness Coordination Tool and the Single Market and Competitiveness Report to create a coherent basis for identifying priorities
Performance
Another key point of the proposal is increasing the focus on performance with a shift to results-based funding. Payments under the Partnership Plans will be conditional and tied to the fulfilment of investment and reform milestones and targets linked to agreed priorities. A simplified and coherent performance monitoring framework will be introduced with a streamlined set of around 900 output and performance indicators to replace the over 5,000 indicators used so far. This will increase transparency and lead to a clear improvement in monitoring the impact of the EU budget. To further simplify and accelerate the use of funds, the European Commission will widen the use of financing that is not linked to costs and simplified cost options such as lump sums and unit costs. Both approaches are aimed at reducing the administrative burden for beneficiaries by focusing checks and controls on the deliverables rather than on the costs of the projects
Evaluation
Simplification
The proposed simplification of the funding architecture is a useful step towards reducing complexity and the administrative burden. Reducing the number of programmes to 16 and introducing uniform rules can help lower barriers to access and make implementation more efficient for both applicants and public authorities. The Single Gateway as an independent platform is an important improvement towards greater transparency and user-friendliness. It will pool information and significantly facilitate access to EU funding information. For this to work out as intended, the design of the portal will have to be functional, user-friendly and complete.
A real simplification will need more than just structural adjustment. It would entail clear, efficient and digitally supported procedures for applications, monitoring and implementation Despite repeated reforms, particularly in cohesion policy, implementation remains complex. Documentation duties, check mechanisms and divergent regulations make participation more difficult particularly for smaller entities. The European Commission addresses some of these points, with simplified cost options, the harmonisation of technical regulations and the reduction of indicators. Although this should lead to tangible improvements much will depend on the implementation in practice.
Flexibility
The proposed measures to increase the flexibility of the MFF address the key weaknesses of the current MFF. The reduction of headings, the introduction of unprogrammed reserves and the simplification of special instruments can contribute to making the budget more flexible and better able to respond to new challenges. The option of redeployment within programmes is also basically a good idea.
The European Commission emphasises that the seven-year financial framework is intended to ensure predictability for long-term investment. It still remains open how the balance between flexibility and predictability will be achieved in practice. There are currently no provisions in place to reliably rule out redeployment or reallocation of funding in key investment areas.
The proposed political steering mechanism is intended to better align the budget to priority projects. This mechanism can help make targeted use of the flexibility in the budget for better alignment of the budget to policy priorities. For this to be achieved, it will be decisive that the mechanism does not merely become an interinstitutional procedure but really takes better account of the perspective of economic stakeholders and contributes to the strategic setting of priorities.
Performance
The stronger orientation of the MFF on impact and results is definitely a welcome development. Plans to make payments under the Partnership Plans conditional to performance can make for a more targeted alignment of investments and reforms to the defined strategic priorities. The decisive factor will be that the procedures are realistic, proportionate and practicable, particularly given the administrative requirements and diversity of the parties involved
The new simplified performance framework of around 900 indicators is intended to improve monitoring and reduce the burden involved. Whether this actually turns out to be the case will depend on the implementation in practice. An important factor will be that impact is not just measured but also
evaluated systematically. Stronger use of evaluations, impact analyses and best practice approaches should become an integral component of budgetary control
The planned more widespread use of simplified cost options and results-based funding instruments is also a good idea. It can help to reduce the burden for recipients and accelerate the implementation of projects provided that the targets are realistically defined and controllable
3. Financing and Own Resources
Commission proposal
The proposal includes a multitude of old and new resources with plans of raising more than 400 billion euros, which is one fifth of the budget. Only just under 170 billion euros is earmarked for debt servicing. The EU institutions have postponed an Own Resources Decision for years. This was basically politically agreed with the adoption of the NGEU programme. Several European Commission proposals from 2021 and 2023 were not approved by the Council, however. The European Commission has now presented new ideas. European companies would only be directly affected by the proposal for a Corporate Resource for Europe (CORE) (see below). The other proposals for own resources are based on very different sources of redistributing national tax revenue to the EU. The termination of various contribution discounts is also up for discussion, ones that Germany has also benefited from until now. A higher retention of customs duties for the EU budget is also being discussed (currently 75 percent with 25 percent remaining with the Member States).
The proposal contains the following additional own reserves1, per year:
▪ 15 billion euros: Non-collected e-waste
▪ 11 2 billion euros: A tobacco excise duty based on production and consumption in combined with a planned directive regulating a minimum duty for tobacco
▪ 9 6 billion euros: EU Emissions Trading Scheme (ETS) 1 (30 percent share instead of 25 percent)
▪ 6 8 billion euros: Corporate Resource for Europe, duty on companies with revenues of more than 100 million euros of 0.1 percent of revenue, in a phased contribution system divided into revenue categories
▪ 1 4 billion euros: Carbon Border Adjustment Mechanism (CBAM)
Evaluation
The next MFF is set to also be financed mainly by national contributions of Member States. Nominally higher national contributions will be necessary to secure the financial firepower of the budget. In relation to economic output, this will only correspond to a moderate increase compared to the current financing. Most of the proposals for new own resources are not likely to have any realistic chance of
1 Tax revenue flows into the EU budget and to the Member States divided on a basis of 75/25. There is also a value added tax-based revenue. A plastic duty was introduced in 2001. The rest is financed through national contributions.
reaching unanimous agreement. The most likely options are higher retentions of customs duties and CBAM revenue.
The introduction of a direct contribution from companies is completely unacceptable (CORE proposal). The introduction of this new tax would stand in contradiction to European and national measures for urgently needed investment and the objective of making Europe a more attractive business location. The tax policy parameters in Europe are currently under pressure on account of geopolitical and trade policy tensions and have suffered from rising regulation and an ever-increasing complexity of bureaucracy for some time now. The CORE contribution would make this trend even more pronounced. Uniform contributions based on revenue and irrespective of earnings misjudge the economic reality of many companies and would send a fatal message, particularly to investors outside of Europe. The European Commission’s proposal would increase the financial burden on all companies across the board rather than encouraging entrepreneurial momentum. It is conceptually the wrong approach and would set Europe back in the competition between business locations.
This backdrop makes the targeted use of existing sources of income to strengthen competitiveness and support the transition all the more important. A reduction of the financial burden in sectors that contribute to the transition and that are already negatively affected in their national competitiveness by the ETS is urgently necessary. The revenue from the auction of certificates (stationary sources and aircraft) should be used as much as possible to consolidate and accelerate the commenced transition in the relevant sectors. This also applies to air and maritime transport that require high investments for the decarbonisation (for example, in carbon-neutral fuels and fleet renewal) of carriers.
4. Competitiveness as the Guiding Principle
4.1 Anchoring Competitiveness in the MFF
Commission proposal
Competitiveness is anchored as an overarching central objective in the proposal for the MFF 20282034 and is financially and structurally reinforced in Heading 2: Competitiveness, Prosperity and Security A total budget of 522 2 billion euros (in 2025 prices) is planned for this heading. That corresponds to almost 30 percent of the new budget. This heading pools the central programmes to promote competitiveness, innovation, resilience and cross-border collaboration, including the new European Competitiveness Fund (ECF), Horizon Europe, the Connecting Europe Facility, Erasmus+ and the expanded crisis protection mechanism (UCPM+).
Evaluation
The new heading Competitiveness, Prosperity and Security adds more weight to the topic not just financially but also structurally. Pooling central programmes opens up potential for increasing coherence and efficiency. In view of the high strategic importance of this area, not least in view of the analyses in the Draghi report, a higher financial allocation to this heading would have been preferable. It is now all the more important that the defined priorities are specified in detail, designed logically and the funds earmarked for this heading reliably secured
4.2 European Competitiveness Fund (ECF)
Commission proposal
Financial scope, structure and objectives
The new European Competitiveness Fund (ECF) is the largest individual item in the heading Competitiveness, Prosperity and Security. Together with the continuing self-standing programme Horizon Europe and the Innovation Fund, the total volume of these three instruments amounts to around 397.7 billion euros (207 4 billion euros of which are earmarked for the ECF). The European Parliament Research Service (EPRS) calculates that compared to the corresponding programmes in the current MFF, this amounts to a nominal increase in funds of 160 percent.
The proposal suggests pooling 14 existing programmes in the European Competitiveness Fund. This new Fund is based, among other things, on the recommendations of the Draghi and Letta reports, the Competitiveness Compass and the Clean Industrial Deal of the European Commission. The objective of the ECF is to strengthen the competitiveness of the EU in strategic technologies and sectors, including artificial intelligence, biotechnology, defence, space, health, digitalisation and decarbonisation. At the same time, the ECF is designed to simplify the EU funding architecture with uniform rules and centralised steering, mobilise private investment in the EU using guarantees and financial instruments and contribute to reducing its strategic dependencies and enhancing its economic resilience.
The European Commission wants to keep as many funding options as possible open for the ECF. Plans include grants, equity investments, loans, guarantees and other funding formats. Furthermore, consulting services will be available to project promoters, and applications will be processed by a central point of contact. The ECF will also be able to cofinance individual projects that are part of an IPCEI where these contribute to the Union’s strategic objectives, such as enhancing resilience, encouraging SME participation and enabling more balanced geographical coverage
The ECF is structured into four policy windows, which each have a different thematic focus.
The four policy windows of the ECF
1) Policy Window Clean Transition and Industrial Decarbonisation
For the policy window Clean Transition and Industrial Decarbonisation, the European Commission pursues the objective of supporting the transition towards a sustainable, circular, energy-, water- and resource-efficient, climate-neutral and resilient economy. This involves providing support to companies, including SMEs and energy-intensive industries, in their technological transition towards decarbonisation. The European Competitiveness Fund is intended to provide targeted support to energy-intensive industries, also with carbon capture, storage and utilisation (CCS/CCU) technologies. Plans are to strengthen sustainability in SMEs as well, in which context the European Commission also specifies the construction industry and refers to other economic sectors.
Another focus of the policy window is the decarbonisation of the energy system. The European Commission’s proposal suggests focusing efforts in this field on energy efficiency, the further development of renewables, system flexibility and the integration and digitalisation of the energy infrastructure. The Commission’s proposal also specifies energy storage and heating and cooling solutions.
The European Commission also puts a focus on smart mobility and sustainable fuels, the development of innovative and nature-based business models, demand side solutions for the building sector and a general production ramp up in Europe with the aim of reaching strategic independence. To accelerate the decarbonisation of mobility, the Commission proposes targeted support for the sourcing, production, storage and distribution of sustainable fuels
The Commission also aims to support clean tech manufacturing, including through financial support to strategic projects under Regulation (EU) 2024/1735 for net-zero technologies, and by ramping up production lines.
The European Commission also plans to continuously support the relevant institutions, expand cooperation between national authorities and with relevant stakeholders, and foster the development and deployment of (IT) tools and infrastructures
2) Policy Window Digital Leadership
With the policy window Digital Leadership, the European Commission aims to strengthen the EU’s technological sovereignty, increase its competitiveness and ensure the resilience of digital infrastructures with comprehensive support for artificial intelligence, (including AI Factories and Gigafactories), high performance computing, quantum technologies, semiconductors and photonics, robotics, large data technologies, edge and cloud technologies, 6G, cybersecurity, software engineering, augmented reality and virtual worlds, digital twins, digital identity solutions and business wallets
The implementation of this support is planned to take place in several areas, with support to strengthening Europe’s leadership role in digital technologies through investment in research, applied innovation, technology transfer and industrial application. The focus is on developing sustainable core digital technologies that reflect EU values. Support will also be provided to building resilient digital ecosystems. This includes the targeted development of advanced digital skills, the promotion of disruptive innovative companies, particularly start-ups and SMEs, and measures to secure supply chains ranging from standardisation to scaling up manufacturing capacities.
Another focus is on the digitalisation of private and public sectors with interoperable digital public services to make public administration more efficient and more accessible to citizens. The policy window will also support the development, implementation and monitoring of relevant EU legislation for the digital sector. This includes the provision of IT infrastructure and digital tools for public authorities and supporting the cooperation between national authorities and with stakeholders.
A key component is cybersecurity with targeted support to expand advanced cybersecurity capacities to ensure the security of critical infrastructures and digital supply chains, to improve early threat detection capacities and incident response capabilities. Another objective is to support the competitiveness of the European cybersecurity industrial base and develop cybersecurity skills, particularly among small and medium-sized enterprises.
3) Policy Window Health
This area comprises investment in the health sector, the development of new technologies in biotechnology, and supporting sustainable agriculture and a bioeconomy. In 2021, the programme EU4Health was initiated in response to the Covid-19 pandemic to advance crisis preparedness. A new edition of EU4Health is not included in the new MFF. Instead, the draft proposal sets out the following
focuses in the framework of the ECF: improving the health of the population through health promotion and prevention; strengthening the efficiency and resilience of healthcare systems with digital solutions including the use of health data and AI and through digital products in healthcare; supporting the development and application of healthcare technologies and taking particular care to provide equal access to all Member States.
In addition, in the section Protecting People and Building Preparedness and Resilience, the MMF proposal suggests pooling crisis preparedness and health emergency preparedness under a revised Union Civil Protection Mechanism (UCPM+). The EU health emergency preparedness and response procedure, under the current EU4Health programme, will be funded with more than ten billion euros and is intended to improve cross-sector coordination and be targeted to close existing capacity gaps in the response to emergency situations.
4) Policy Window Resilience and Security, Defence Industry and Space
In the ECF, 115.6 billion euros will be allocated to Resilience and Security, Defence Industry and Space which corresponds to more than half of the fund (without counting Horizon Europe and the Innovation Fund). Defence spending is thus included for the first time as a systematic part of this investment focus
The European Peace Facility will remain an off-budget instrument and receive 27.1 billion euros. In addition, Heading 3 (Global Europe), also includes security-related expenditure, with three billion euros for Common Foreign and Security Policy (CFSP) and 0.9 billion euros for oversea territories. A separate reserve is proposed for Ukraine which provides grants and loans guaranteed by the EU budget, also over and above the MFF ceilings.
The objective of ECF funding in this area is to strengthen supply chains, support the competitiveness and innovation of the European defence industry (EDTIB), expand space systems and increase industrial security. The funding criteria are broad but will include an EU preference in future procurement
Simplification of programmes in the ECF
The proposal for the ECF aims to fundamentally simplify the EU funding landscape. The European Commission wants to reform the current funding system, which is regarded as fragmented, difficult to combine and with a high administrative burden. Instead of many parallel programmes with varying requirements, the ECF is intended to create a consolidated funding structure with a coherent strategy and streamlined procedures.
The core of the proposal is to merge the 14 existing programmes under a single framework. This will be supplemented by the introduction of a single rulebook for funding conditions, procedures and requirements for participation which will significantly reduce the complexity for applicants
A key instrument for the implementation is the establishment of a single portal for EU-wide funding which will build on existing portals including the Funding & Tenders portal, the InvestEU Portal, the Access to Finance Portal and the STEP Portal. The portal will pool information for all funding options and can be used to directly submit applications for funding.
Another objective of reform is to improve the combinability of funding. Different rules, timelines and responsibilities have so far made it difficult for a project to use more than one funding programme. The
ECF is designed to facilitate this by introducing a harmonised procedure, common funding logistics and integrated governance structures
Plans also include creating a new project advisory that accompanies projects over the entire investment journey, from conception to financing to implementation This advisory is also designed for SMEs, start-ups and highly innovative companies to improve their access to EU funding and foster cooperation with private investors.
Overall, the planned measures are aimed at making access to EU funding more transparent and faster and at reducing the associated administrative burden. This is a response to the current longwinded time-to-grant and high workload in applying for funding, particularly in the case of more complex programmes.
Flexibility within the ECF
A key element of the ECF is the stronger flexibilization of programme steering. Policy priorities will be set out in work programmes that the European Commission will approve in consultation procedures which will include consulting with Member States without requiring official approval. Member States will have a greater say in security-related areas such as defence and space. In urgent cases, the Commission can also adopt immediately applicable implementing acts, for example to secure critical infrastructure or to react immediately to crises. The distribution of funds between the four policy windows will also remain flexible. The regulation sets out that the distribution of funds can be adapted to new priorities in the framework of the annual budgetary procedure. The detailed structure will be defined in the budgetary procedure of the EU.
EU preference in the ECF
Made in Europe technologies, products and services will be supported by the ECF. Article 10 of the ECF Regulation enables the targeted preference of EU companies in the award of funding. Eligibility conditions can, for example, stipulate that projects are carried out in the EU, results not transferred to third countries or define a minimum proportion of EU components. Stipulations regarding ownership and control are also allowed in security and defence-related areas. The detailed structure will be defined in the respective work programmes and calls. The objective is to strengthen the economic and technological sovereignty of the EU without excessively distorting the Single Market.
Evaluation
Financial scope, structure and objectives of the ECF
With the European Competitiveness Fund, the European Commission has created a central instrument that provides the operational capacity to advance the priority of securing competitiveness with the MFF 2028-2034. The merging of 14 current programmes into a single fund represents an opportunity to reduce fragmentation and restructure the funding landscape to make it more efficient and strategic. Another positive factor is the option of the ECF cofinancing individual projects that are part of an IPCEI, for example, on account of SME participation or wider geographical coverage. The nominal growth in funds of around 160 percent calculated by the EPRS compared to the current financial framework should nonetheless be viewed with caution as a direct comparison is only possible to a limited extent on account of the fundamental change to the budget structure. It should also be taken into account that a considerable portion of the funds allocated for ‘competitiveness’ has so far been earmarked for not more closely defined (defence policy) purposes. This makes it all the more important that the more
detailed structuring of the ECF remains clearly focused on its economic impact, strategic coherence and the strengthening of core European technologies.
Four policy windows of the ECF
1) Clean Transition and Industrial Decarbonisation
The Commission’s proposals for the policy window Clean Transition and Industrial Decarbonisation are a step in the right direction but still need to be developed further and specified with concrete initiatives to ensure an efficient use of the proposed funds. Supporting industries in their transition to decarbonisation technologies sends out the right message and can help establish the required predictability for long-term investment.
It should nonetheless be taken on board that efficient industrial decarbonisation can only succeed if the more environmentally friendly alternatives are also economically viable. Energy costs are a particularly important aspect here and should therefore also be factored into considerations Higher energy efficiency and the further development of renewable energies is a good thing but requires investment in cost-optimised grid expansion at the same time to cater for the expected future electricity demand. At the same time, the EU should support targeted investment in the cross-border energy infrastructure in order to strengthen supply security and system integration. The MFF should therefore include funds for strategic grid expansion projects that take account of the industrial demand for renewable electricity and hydrogen.
A stronger institutional interconnection between the EU and the federal government would also be necessary to make the structure of approval procedures and funding applications more efficient. The aim should be to reduce regulatory uncertainties and accelerate the implementation of decarbonisation projects. The approval and financing of infrastructure projects, in particular, need clear, coordinated and, above all, swifter procedures.
2) Policy Window Digital Leadership
The proposal for the MFF 2028-2034 to strengthen the digital leadership role of Europe sends a strong message. The development of a modern and resilient digital infrastructure with targeted support of core technologies is crucial for securing and strengthening the industrial sector and the global competitiveness of Europe
A key building block for the successful establishment of core technologies is coordinated cooperation on national and European level. Improving the coordination of investments between Member States will serve to maximise the results. Hardware, software and algorithms should be developed in the framework of European partnerships. The proposed coordination of EU programmes, between Horizon Europe and Digital Leadership, for example, underlines the objective of the European Commission to ensure coherence between the individual funding instruments. This will avoid duplicate structures and increase efficiency.
The targeted support of core technologies will only succeed if central framework conditions such as legal certainty, a powerful infrastructure, trustworthy data rooms and targeted skill development and transfer measures are in place. Core technologies can only be developed and brought to market maturity in Europe within an innovative, clear and harmonised legal framework. Industry calls for the creation of scalable AI infrastructure (computing centres, cloud, edge and data rooms) and access to high-quality data and computing capacities to be made a priority in industrial policy. Furthermore, the
development of resilient structures needs to be considered in further key areas. The entire value chain of microelectronics, for example, should be regarded as a strategic component of economic security in Europe and anchored as such in the European Economic Security Strategy It is also important to encourage the sharing of expertise in quantum technologies on a European level. Collaboration between leading research centres and companies across Europe should be intensified to this end
Supporting core technologies also involves establishing standards and strengthening the protection of intellectual property. Those who set standards can widely anchor own technologies and secure economic advantages through patents. Europe must therefore continue to set standards and should not become a region that merely accepts standards. Standard-setting contributes significantly to disseminating technological expertise and to sustainable economic growth within Europe. At the same time, intellectual property needs to be protected. Companies must be able to protect the ideas of its employees and be able to transfer their research and development investment rapidly and effectively into marketable products to secure their competitive advantage.
The European Commission has recognised the need to improve administrative IT among Member States that has so far not been harmonised, and thus to contribute to modernising administration across Europe. On this point, its MMF proposal fails to clarify exactly how this endeavour is going to be implemented in practice.
The step to strengthen cybersecurity on European level is a welcome one. Securing the coherence of legal requirements is decisive to increase the cyber resilience of Europe while at the same time preventing competitive disadvantages for European companies. Solutions on a national level should be avoided so as not to jeopardise a smooth operation of the European Single Market. It would also be preferable to expand existing cybersecurity hubs rather than constructing new structures. This would enable the sustainable and efficient use of infrastructure that is already in place.
3) Policy Window Health
The proposed MFF 2028-2034 sends a strong message that health is not only a social good but also a strategic success factor for the autonomy and sovereignty of the EU. The planned UCPM+ underlines the strategic role of the health industry for Europe’s resilience and harbours new opportunities for the health industry to participate in the development of European crisis preparedness and response structures. A strong healthcare industry reduces dependencies, ensures supply security and strengthens the region’s capacity to respond to crises. At the same time, it is also a driver of innovation and competitiveness in the global market. The termination of the self-standing EU healthcare programme EU4Health may nonetheless raise concerns of whether, alongside supporting competition, the needs of patients will remain in the foreground and forward-looking preparations will continue to be made for upcoming crises.
A decisive factor in achieving the set objectives will be how accessible, efficient and industry-oriented the implementation is and that fragmentation of the individual programmes and funding lines is avoided. New burdens on companies in the health sector, such as through the Corporate Resource for Europe (CORE), would stand counter to the intentions of the MFF and must be avoided. This is also true of more stringent regulation, new obligations, price pressure and more complex decision-making procedures. Furthermore, small and medium-sized companies in the health industry also need targeted support.
4) Policy Window Resilience and Security, Defence Industry and Space
A robust, resilient and competitive EU Defence Technological and Industrial Base (EDTIB) is an important (military) capability in itself and an essential condition for defence preparedness and credible deterrence. The defence industry develops, produces and maintains products and services that armed forces need to perform their tasks. This is particularly important in highly intensive disputes and wars of attrition during which equipment needs to be swiftly repaired, replaced and improved. A robust defence industry does not just enable armed forces to fend off an attack but also signalises alone through its existence the capability to do so and can, in this way, deter an opponent of attacking in the first place. To fulfil its role as an insurance policy for the security of Europe, the EDTIB must be supported in its growth and this growth accelerated in order to reach a critical mass and remain at the leading edge of technology.
The EU budget plays an important role in supporting a strong and innovative EDTIB. National governments are and remain the decision-makers and customers of defence systems and equipment, which makes them by far the most important defence spenders and, ultimately, decision-makers regarding R&D, investment and procurement priorities, but the EU can nonetheless propose, foster, support and cofinance (supporting) measures of the Member States in this area. To take on this role, the EU needs to have an adequate budget for defence purposes The EU must shoulder a significant proportion of overall defence investment in Europe if it is to support the instruments of the EU defence industry with funds that can make a difference and have a structural impact. At the same time, the EU budget for defence must be aligned to the EU defence industry for it to strengthen the EDTIB and, with it, European sovereignty (also using European preference rules). An in-depth and comparative analysis on the different individual measures and items is needed here
Harmonisation of the programmes in the ECF
The simplification of the EU funding landscape set out in the proposal for the ECF is a welcome suggestion overall. The pooling of existing programmes, single rulebook and central digital portal proposed by the Commission, can help make EU funding more transparent, efficient and user-friendly. Another positive aspect is that the ECF will improve the combinability of funding instruments and provide targeted support along the whole investment journey, particularly for SMEs and innovative companies. These steps follow the calls that have been made for many years to reduce bureaucracy and improve coordination and scalability. Decisive in this process will be that the announced simplifications actually lead to tangible improvements in practice. The ECF will only be able to unfold its potential to strengthen competitiveness if the procedures involved really are streamlined and accelerated.
Flexibility within the ECF
The flexibilization in the ECF, including through work programmes of the European Commission and the option to redeploy funds, can help enable a swifter response to new challenges and a more targeted deployment of funds. This is basically good news for companies as long as the deployment of funds is strategic and transparent A risk is, however, that funds are diverted from areas that are important in the long term such as research and digitalisation to short-term political projects. To prevent flexibility from becoming arbitrary, clear priorities need to be defined, along with transparency and a dependable involvement of the European Parliament and the European Council.
EU Preference in ECF
It is welcome that the ECF is intended to provide targeted assistance to strengthen the technological and economic sovereignty of the EU. The funding conditions set out in Article 10 could be a suitable instrument with targeted and proportionate use that is limited to cases justified on account of security policy or strategy. In contrast, an excessive localisation of requirements would be less positive as, when related to production locations, supply chains or ownership structures, they can result in distorting competition in the Single Market and could put companies with globally integrated value chains or from structurally weaker Member States at a disadvantage. The detailed structure should therefore be laid down in work programmes and be economically realistic, transparent and balanced in terms of Single Market freedoms and international obligations.
4.3 InvestEU and Promotional Banks
Commission proposal
The proposal suggests continuing the investment programme InvestEU, which is due to terminate at the end of the current multiannual financial framework (2021-2027), within the framework of the European Competitiveness Fund It would remain a central instrument to leverage private investment and should continue to operate in close cooperation with the implementing partners, particularly the European Investment Bank (EIB) and national promotional banks.
The European Commission suggests that InvestEU can, in future, work with a single budgetary guarantee of up to a maximum of 70 billion euros. Half of this guarantee would have to be secured with budget funds, which means with up to 35 billion euros (provisioning rate). A minimum amount of the Union support from the ECF delivered through InvestEU is set at 17 billion euros which can either be used for budgetary guarantees or directly for financing financial instruments. Compared to the current programme (2021-2027), which has a maximum guarantee volume of 26.2 billion euros and around 10.5 billion euros in reserves, the new InvestEU would have a considerably higher financial firepower. However, the draft budget, as yet, only earmarks eleven billion euros for InvestEU, so the implementation in full of the minimum amount is still not secured.
The InvestEU instrument is planned to serve as a central platform for budgetary guarantees and financing instruments related to internal policy. The Commission plans to develop guidelines with technical requirements and conditions to improve coherence in the implementation of these instruments. The objective is to make implementation more efficient and increase the impact of funds used, using and further developing the existing structures and experiences from the previous InvestEU programme.
Evaluation
According to the European Commission, halfway through the term of the current financial framework, InvestEU had triggered investment to the sum of around 218 billion euros, including around 65 percent from private sources. While these figures show that the instrument can work, it will not be sufficient to trigger the estimated annual investment needed of 1.2 trillion euros (sum calculated by Draghi exactly one year after his report was published).
The proposed financial strengthening of InvestEU in the framework of the ECF can contribute to closing investment gaps in strategic areas. The maximum guarantee volume of 70 billion euros is considerably more than under the current MFF (26 2 billion euros). To use the maximum volume, 35 billion euros of
budget funds would be necessary (assuming a provisioning rate of 50 percent throughout). A minimum of 17 billion euros is currently planned, of which only eleven billion is included in the draft budget. This gap should be closed in a transparent way in the further negotiations.
A positive aspect is that InvestEU is intended to become a central platform for budgetary guarantees and financial instruments relating to internal policy. The proposed development of technical guidelines can contribute to simplification here. It is also important that coordination between the EIB, national promotional banks and other financial institutions is improved. The limited risk appetite displayed so far by implementing partners has also been identified as a weakness in the past, but the European Commission has not yet presented any specific proposals to increase the willingness to take risks, such as through targeted incentives or differentiated risk-sharing
In this context, it should additionally be noted that, in 2025, the EIB group launched the TechEU programme for high-growth technology companies in Europe Up to 2027, this programme is intended to provide around 70 billion euros in EIB and EIF funds and mobilise up to 250 billion euros. The programme’s objective is to promote young companies in key areas including artificial intelligence, clean technologies, health and security technologies and the digital infrastructure, and support their development in Europe. The newly created TechEU Platform pools financial and advisory instruments that supplement InvestEU but are not based on EU budget funds. In the proposal for the next MFF, TechEU has so far not been mentioned explicitly, it therefore remains open whether and in what form the programme is set to continue beyond 2027 or be connected to budget-funded instruments.
4.4 Research & Innovation (Horizon Europe / FP10)
Commission proposal
Horizon Europe will continue as a self-standing programme for research and innovation with a clearly ring-fenced separate budget of 175 billion euros and will be tightly connected with the European Competitiveness Fund through integrated work programmes for collaborative research and a single rulebook (154.9 billion euros have been earmarked, almost 80 percent more than in the current MFF).
The three current pillars of Horizon Europe will be restructured into four pillars, and the topics newly distributed with a stronger strategic orientation and closely connected to the European Competitiveness Fund. The four pillars are: Excellent Science, Competitiveness and Society, Innovation and European Research Area. European Research Area, the fourth pillar, already existed under FP9 but was so far regarded as an overarching strategy rather than an independent pillar. Competitiveness and Society, pillar two, will continue as a separate pillar and not, as originally planned, anchored in the European Competitiveness Fund. As an industry pillar, it will receive 75 billion euros and thus continue to have the highest budget, and considerably higher than in FP9, and be aligned to the ECF’s four policy windows.
The Commission proposal for Horizon Europe makes the programme’s structure significantly less bureaucratic and more transparent. Application procedures are planned to be swifter with open-topic calls by default and uniform funding rates. Furthermore, FP10 will, in future, not be used exclusively for civilian research. Another new feature is eleven moonshot missions, including quantum computing and data sovereignty. In addition, partnership forms will be reduced to two: based on specific legislation as currently in the joint undertakings and partnerships based on a memorandum-of-understanding (currently co-programmed).
Evaluation
The proposal is largely positive although many points do still raise questions. The clear increase or doubling of the budget compared to FP9 is good, as is having a ring-fenced and independent budget for research and innovation. Another positive aspect is that the programme will entail considerably less red tape. That includes swifter application procedures and targets to shorten the time-to-grant. In addition, there will be less prescriptive requirements for project submission. SMEs will be given the option to make 100 percent of their costs eligible for funding
The budget for the industry pillar Competitiveness and Society, while it has increased considerably to 75 billion euros, only accounts for 43 percent of the overall budget of the new MFF (compared to 56 percent of the overall budget under FP9). Another negative aspect is that large companies will have to make financial contributions to partnerships. This stands in contradiction to the purpose of European partnerships and would reduce the participation of large companies. Furthermore, plans include making lump sums the standard for cost reimbursement, with no difference made between research and innovation actions on the one hand and innovation actions on the other. The large number of financial instruments under FP10 and ECF are bound to lead to confusion in the financing of collaborative research. Lump sums are not always the best instrument for research and innovation purposes (because of, for example, increased risk, advance financing, lower flexibility).
There are currently unresolved issues particularly in the announced ‘tight connection’ between FP10 and ECF. It is currently not clear how exactly this tight connection will work in practice, what impact this will have on the quality of the work programmes and to what extent this could make calls less specific. Furthermore, the connection between the pillars is still unclear and how industry can benefit from the activities carried out under the framework of the European Research Council (ERC) and the European Innovation Council (EIC) Concerning the ‘moonshot missions’, points that are particularly unclear are their exact structure, financing, governance and complexity as well as the delineation to European partnerships. With the opening up of FP10 to include military research the question also arises in what way exactly the intention is to support research in the defence sector – more clarity is needed here.
5. Further Strategic Sectors
5.1 Transport and Mobility
Commission proposal
The Commission proposes to increase the funds primarily earmarked to finance the completion of the Trans-European Transport Network (TEN-V) under the Connecting Europe Facility (CEF-T) from 25.8 billion euros to 51.5 billion euros, 17.6 billion euros of which for the strengthening of civilian infrastructure with military relevance The CEF will also support the objectives of an interoperable, safe and intelligent mobility in the TEN-V and the transition of the EU to sustainable, decarbonised mobility. This is planned to take place in close coordination above all with the European Competitiveness Fund (ECF).
Evaluation
The proposed continuation and increase in funds of the section of the CEF specifically for the transport sector sends an important message that a well-integrated and smooth-functioning transport network is
important for European industry, society and security. Despite the considerable increase in funds, financing of the transport sector on EU and national level overall is still well below the level of investment required. The Draghi Report estimates the amount of funds that need to be invested until 2040 alone at 845 billion euros, 210 billion euros of which for important cross-border connections. Even if CEF-T cannot cover these funds alone, the programme urgently needs to be bumped up if the TENV is to be duly completed in accordance with the timeline set (2030 for the core network, 2040 for the expanded core network and 2050 as the latest date for the completion of the entire network)
A positive factor is the separate consideration of military mobility. Military Mobility has been allocated a separate budget line within the CEF with 17.5 billion euros in addition to the funds for the conventional TEN-V infrastructure.
The close interconnection between CEF-T, (CEF-E) and ECF and prioritising a forward-looking and decarbonised mobility is basically the right approach. The ECF sets the right priorities for progressive and decarbonised mobility, particularly in relation to renewable fuels, by addressing sourcing, production, storage, distribution and uptake. A positive aspect is that clean, multimodal, digitalised and safe transport and mobility solutions are intended to be seen as a whole and moved to the forefront, including infrastructure and explicitly also charging infrastructure, ports and highspeed rail transport, systems and operation and mobile assets such as, above all, vehicles for all modes of transport. The proposal also correctly includes support for the development and introduction of intelligent mobility.
5.2 Supporting SMEs and SMCs
Commission proposal
The European Commission’s proposal includes support for micro, small and medium-sized enterprises (SMEs) and small mid-caps (SMCs) in several ways, identifying different approaches, programmes and support measures.
Evaluation
On account of the many different approaches included to support micro companies, SMEs and SMCs, it is difficult to gain a clear overview of the overall support and overall strategy planned for this part of the private sector A positive factor is that the Commission goes beyond the traditional classification of SMEs to also recognise the importance of SMCs for strong and resilient value chain networks and supply chains.
The upcoming MFF provides a good opportunity to pointedly include SMCs as a new category of enterprises in the EU support landscape To prevent support for SMEs from being detrimentally affected by this inclusion, separate policy windows for SMCs could be useful and funds allocated with progressive reduction or capped. Pilot projects in areas such as transition, climate, environment, R&D and internationalisation could demonstrate how and to what extent targeted support for SMCs could function and be used to close the current gap between support for SMEs and large companies and to what extent this would support the objectives of the EU.
6. Cohesion Policy
Commission proposal
The European Commission’s proposal significantly reduces the budget for EU cohesion policy. In the current MFF, around 35 percent of the regular overall budget is earmarked for cohesion policy (330 billion at 2018 prices and 392 billion euros at current prices), excluding the additional NGEU funds. According to the Commission proposal, the future proportion of the budget for cohesion policy including agricultural policy will only be 38 percent of the budget (665 billion euros at 2025 prices). In the current MFF, both pillars together are allocated 62 percent (667 billion euros at 2018 prices and 797 billion euros at current prices) In addition to the funds for migration and border policy, the European Commission proposes a pooled overall budget of 771 billion euros based on overarching National and Regional Partnership Plans (NRPPs).
Member States themselves will be able to decide in future how much of the funds are spent on cohesion and how much on agricultural policy. Budgeted and ring-fenced specifically for the whole EU are 217.8 billion euros (in nominal terms and around 197.3 billion at 2025 prices) for the weakest regions, which is slightly more than ten percent of the overall budget. In addition, 295.7 billion euros (in nominal terms and around 267.8 billion at 2025 prices) are ring-fenced for agricultural policy. Of the 665 billion euros (2025 prices), 465.1 billion euros or around 70 percent of the overall funds available for cohesion and agricultural policy, are therefore already budgeted. That leaves almost 200 billion euros that the 27 Member States can relatively freely allocate to the items defined in the framework of the Plans. However, under the Plans, at least 14 percent of all expenditure must be spent on social policy, defined in accordance with the European Pillar of Social rights. Jointly with the Member States, the European Commission also wants to define nationally individual minimum spending rates for climate and environmental objectives, overall, this target share is 43 percent for all Plans.
The pooling of current funds and their connection to National and Regional Partnership Plans represents a fundamental change in the governance of EU cohesion policy. So far, EU cohesion policy was marked by regional participation and shared management of diverse funds and rules of access. In the whole of the EU, there are currently 540 individual programmes for cohesion and agriculture with different application procedures and requirement profiles. The proposal envisages merging these into the 27 Plans and an interregional plan, with uniform requirements and a broader pool of recipients. The European Commission also hopes to achieve synergy effects through the centralised consideration of all programmes.
The European Commission’s proposal favours a significantly stronger nationalisation of governance in this area. Individual, fragmented programmes will be replaced by one Plan per member state which will be drawn up on a national level at the beginning of the budget cycle. This will be audited by the Commission and approved by the Council. The Plans will comprise different chapters based on individual decision-making at the national level. These can be divided into regions, economic sector or other national categories. The Plans should also respond to the macroeconomic recommendations of the Commission, including the country-specific recommendations of the European Semester. Halfway through the MFF, the Member States will be required to review the Plan and make any necessary adjustments.
A Monitoring Committee will be responsible for each chapter of a Plan to monitor the implementation and evaluation of the expenditures and approve any changes to the Plans. In accordance with the partnership principle, the Monitoring Committees will consist at least to one half of social and industry
partners, NGOs and environmental associations, research institutes and universities. These will each have one voice and can therefore at least exercise a veto right against the state representatives or authorities that make up the rest of the members. The European Commission will have an advisory role in the Monitoring Committees without a vote. A Coordinating Committee will give recommendations based on the overall Plan, have a coordinating role between the individual chapters and monitor the implementation of the measures defined in the Plans. In the case of conflicting views to the Monitoring Committee, the Monitoring Committee will take precedence.
The budget for the Plans will be made more flexible than so far with a portion of the funds remaining unallocated, to be used after the halfway mark of the MFF or in times of crisis. Funds can also be reallocated more easily within the Plans. Costs below 400,000 euros will generally be paid out in the form of lump sums. The disbursement of funds and the monitoring of funds will be more strongly tied to milestones and other performance-based criteria such as specific targets and milestones that are also defined in the Plans.
Evaluation
Generally, the proposals of the European Commission are largely positive. Aligning the National and Regional Partnership Plans to the objectives of increasing competitiveness and completion of the Single Market are a welcome change. The Plans should, among other things, strengthen the industrial base and make industry more sustainable and more competitive, firm up the resilience of supply chains, increase connectivity and energy independence, and advance the green and digital transition. The cohesion funds are to be made available to all regions, particularly to increase innovation and defence capabilities. Within the Plans even the weakest regions should cofinance at least 15 percent of the measures, apart from a few exceptions in the case of direct CAP payments to the agricultural sector. Overall, however, the objectives are so extensive and include so many other non-economic areas that it forfeits the potential to achieve focus.
Particularly the harmonisation of application procedures, the conversion to lump sums in the case of smaller measures and the performance-based disbursement of funds should make for a more efficient deployment of funds. In addition, the planned mechanism to suspend disbursement in the event that milestones and targets are not reached is welcomed. Connecting the Plans to macroeconomic recommendations such as the European Semester also corresponds to calls made by industry. The new centralised governance also has the potential to speed up the disbursement of funds. The increased flexibility in the allocation of funds harbours opportunities, particularly regarding the financing of infrastructure suitable for military use and other defence investments. However, it remains unclear whether the implementation will be feasible and business-friendly in practice. In general, the proposal has the potential to make calls, procedures and requirement profiles harmonised and low threshold, but the actual implementation is ultimately in the hands of the Member States.
The centralised programming on a national state level favours a weakening of the position of regions and probably also the social and economic partners. It remains unclear whether companies will actually be better integrated in the programming, implementation and evaluation of measures. Although business partners are allotted a role in the monitoring of the implementation of the Plans, the influence they can exert is likely to remain limited. This could have a negative effect on the efficiency of the funds deployed. The centralisation could have a detrimental impact on an approach that takes the local economic strengths and challenges as the starting point for a cohesion policy targeting an increase in competitiveness.
Particularly in view of the potential accession of more countries into the EU, making the budget for cohesion and agricultural policy proportionately smaller is a positive step given that all accession candidates are considerably poorer than the current Member States and many have a significantly sized agricultural sector. An enlargement of the EU would have huge consequences in the redistribution of these funds to new members.
7. Enlargement and Foreign Relations
7.1 Enlargement
Commission proposal
With nine candidate countries and one potential candidate, enlargement is high up on the agenda of the EU. The European Commission regards the enlargement of the EU as a political and geostrategic necessity and an investment in the long-term peace, stability and prosperity of Europe.
In the framework of the restructured foreign policy financing instrument, Global Europe, plans are to provide targeted financial and political support measures to accession candidates. The European Commission emphasises that enlargement will take place based on a meritocratic approach. The accession process will be based on the individual progress of the candidate countries in the fulfilment of accession criteria. Global Europe will make the whole foreign policy toolbox of the EU available for this purpose, including technical pre-accession support, policy-based support, investment in the framework of Global Gateway, macro-financial assistance and crisis response measures.
The support will have the general objective of fostering reforms and investment, strengthening the administrative capacities of candidate countries and preventing setbacks in the enlargement process. The EU itself also plans to prepare for a possible enlargement in the framework of the MFF. The sectoral policies are designed to make the EU “fit for an enlarged Union”. A revision of the MFF is included as a possibility as soon as the timeline for enlargement has been specified.
Within Global Europe, a specific expenditure item to the amount of 37.6 billion euros (in 2025 prices) is proposed for the time period 2028-2034 for “Enlargement, Eastern Neighbourhood and the rest of Europe”. It is part of an overall budget of 190 billion euros for Global Europe and is designed to ensure a predictable, multiannual financing under the geographical pillar of the instrument.
Evaluation
The Commission proposal for the MFF 2028-2034 sends out the right message in general by anchoring EU enlargement as a geostrategic priority and allocating the topic targeted financial support. The planned deployment of funds over the Global Europe instrument is oriented on the meritocratic accession principle and focuses on key areas of reform such as the rule of law, modernisation of administrative structures and economic stability (“fundamentals”). Another positive factor is that the institutional preparation of the EU for new members is also addressed. Also positive is the planned option of revising the MFF by allowing for a targeted adjustment of the deployment of funds in the event of concrete enlargement steps.
It remains unclear, on the other hand, how the financial impact of an enlargement will be mastered, particularly regarding the common agricultural policy and cohesion policy (see above). Questions of governance and decision-making in an enlarged European Union are also only mentioned superficially
In the further proceedings, a stronger inclusion of businesses and a clear strategy for maintaining competitiveness will be crucial to ensure the political and economic viability of enlargement.
7.2 Global Europe / External Action
Commission proposal
The Commission proposal allocates 176 8 billion euros (in 2025 prices) to the new Global Europe instrument This corresponds to 200 billion euros in nominal terms which amounts to an increase of 75 percent compared to the current MFF.
The objective is to ensure a more efficient financing of foreign policy measures between 2028 and 2034, advance Global Gateway, make EU support visible in partner countries and provide greater support to EU accession candidate countries.
A crisis reserve of 15 billion euros is designed to enable fast response. In the current MFF, the comparable flexible budget is only around 9.5 billion euros. The European Fund for Sustainable Development (EFSD+), which is the main financing instrument for Global Gateway, will be integrated into the Global Europe instrument. Furthermore, it will be easier to cover the risks of export credit agencies using guarantees and other financial instruments. Plans are to give companies more options for hedging risks and more attractive blended finance instruments for their international projects.
Evaluation
Increasing the funds of the Global Europe instrument sends out an important message in view of the necessary diversification of sales markets and supply chains. It is good that external measures of the EU will, in future, be more strongly aligned to the strategic foreign, security and economic policy objectives of the EU.
It is of central importance that European development cooperation is, in future, more closely aligned not just to the interests of the partner countries but also to the strategic interests of the EU From the perspective of industry, the areas of most relevance are economic security, trade and competitiveness, energy supply security, connectivity and access to critical raw materials.
Moving guarantees and blended finance instruments to the foreground is a central call of European industry to reduce the risks of the deployment of private capital. Regarding Global Gateway, it should provide EU companies with clearly set out opportunities to participate in the definition of new projects.
7.3 Support of Ukraine
Commission proposal
In its proposal for the new MFF, the European Commission has also announced a substantial expansion of its Ukraine Facility. With a planned volume of 100 billion euros, the Facility is planned to continue serving as a central instrument of support for Ukraine, both in view of reconstruction and economic recovery and a phased approximation to the European Union. The deployment of funds will be targeted to stabilise public services, accompany reform processes, mobilise investment and strengthen local self-government
The Facility is structured into three pillars: 1) The Ukraine Plan which ties financial support to concrete progress in rule of law, budget management and EU integration; 2) An investment framework with guarantees and blended financing to support small and medium-sized enterprises, in particular; and 3) Accession aid which provides technical support for alignment to EU law and strengthen administrative capacities. At least 20 percent of the funds should be deployed for green reconstruction and climate protection. The European Commission also underlines the flexibility of the Facility to enable response to the dynamic situation in Ukraine.
Evaluation
From an economic policy perspective, the planned expansion of the Ukraine Facility sends a strong signal for the long-term stabilisation and integration of Ukraine in the European monetary area. It provides predictability for companies, sets incentives for private investment and opens up new opportunities for German companies to participate in the reconstruction of the country. At the same time, it strengthens the EU’s geopolitical capacity to act. Regarding implementation, it will be important to ensure that the funds are deployed efficiently and transparently and that the facility is connected coherently to other EU instruments.
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Publishing Information
Federation of German Industries (BDI)
Breite Strasse 29, 10178 Berlin www.bdi.eu
T: +49 30 2028-0
Lobby register number: R000534
Editors
Dr Klaus Günter Deutsch
T: +49 30 2028-1591
K.Deutsch@bdi.eu
Felix Kreis
T: +49 30 2028-1614 F.Kreis@bdi.eu
Frederik Lange
T: +49 30 2028-1734 F Lange@bdi.eu
BDI document number: D2169