Budgets rarely seize the public imagination, but this one raises temperatures from the get-go. The 2028-2034 spending plan will decide how much the Union can invest in its own survival: in defence, enlargement and industrial reboot.
Europe’s long-term budget grinds forward again. The next Multiannual Financial Framework, or MFF, will set spending limits for 2028-2034. The process began in February 2025, when the European Commission published a strategy paper called Road to the next MFF.
It asked broad questions: how to fund Ukraine, how to meet climate targets and how to compete with America’s subsidies. Every department—general directorates, in Brussels parlance—staked its claim on the future cash pile.
The sausage machine is on
On 16 July, the Commission followed with a hefty package: a draft MFF regulation, a new inter-institutional agreement, sectoral tweaks and a proposed Own-Resources Decision (ORD) that would raise fresh revenue. From that moment the budget left the Berlaymont and entered the Union’s political sausage machine.
Technical talks started the same month. Council working parties sifted through figures. The European Parliament’s budget committee wrote opinions while specialist committees—regional policy, agriculture, environment, industry—defended their slices. Civil servants framed the debate; politicians watched from a safe distance. By December 2025 leaders had to pick up the file.
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The first high-level discussion took place at the year-end European Council. Heads of government voiced predictable lines. ‘Frugals 2.0‘—the Netherlands, Denmark, Sweden, Austria and Finland—called for restraint. Friends of cohesion—Poland, Hungary, Portugal, Spain, Greece, Romania and Bulgaria—warned against cuts to regional aid. France, Germany and Italy pushed for more money on defence and competitiveness. Each of the position, however, comes with caveats.
Summit mathematics
If all goes well, the European Council will strike a grand bargain in late 2026 or by its March 2027 meeting at the latest. Unanimity is required, so one hold-out can blow up the deal. The European Parliament then has a single yes-or-no vote. A simple majority of MEPs suffices, yet their consent is never automatic. In 2020 they delayed final approval until fresh research money was bolted on.
Once Parliament signs off, Council and Parliament presidents add their signatures. Publication should follow in spring 2027, allowing the new budget to enter force on 1st January 2028. That would match the Commission’s optimistic calendar. The last MFF slipped by only a few weeks despite the covid-19 shock; officials claim the machinery is now smoother.
One more hurdle remains. The ORD—which changes how the Union raises cash—needs unanimity in the Council and ratification by all 27 national parliaments. The previous ORD, adopted in 2020, crawled through domestic chambers for two full years and was briefly frozen by Germany’s constitutional court. A repeat would delay new revenue streams and could even reduce planned spending. At a time when everybody in the EU repeats the mantra of time being of the essence, this would be disastrous.
Money in motion
The MFF talks connect to many companion files, of which EU Perspectives have chosen four crucial ones to delve into in greater detail. First comes the Mid-term Cohesion Policy Package. This set of amending regulations would let governments redirect spare cash from the 2021-2027 programmes. Targets include STEP, a new industrial platform, the defence supply chain and water resilience. Adoption requires a qualified majority in the Council plus Parliament’s backing. Officials hope to seal the deal ASAP so regions can rewrite spending plans in 2026.
Controversy swirls already. Net-beneficiary regions fear raids on their funds. They find allies in Parliament’s regional-policy committee and the ‘friends of cohesion’ informal grouping. Frugal states favour flexibility but demand strict performance checks. Business lobbies want bigger firms to qualify; green groups ask for stronger climate earmarks. Even so, diplomats give the package an 80 per cent chance of passing this year, though expect limits on how much money can shift to defence.
Second, the new ORD—labelled COM/2025/574—is the political lightning rod. It proposes that 30 per cent of emissions-trading revenue and three-quarters of receipts from the carbon border levy (CBAM) flow into the EU pot. It adds an e-waste charge, a tobacco duty and a corporate levy dubbed CORE, aimed at the biggest multinationals. The cocktail, however, brings old tensions to the boil.
Revenue wrangles
Sovereignty hawks in the Netherlands, Sweden, Denmark and Germany blanch at EU-level taxes, especially CORE. Countries in central and eastern Europe resent surrendering CBAM revenue that would otherwise cushion their heavy industries. Business Europe, a trade federation, loathes the corporate charge. Green activists worry that green taxes could be watered down in future deals. Odds of overall success stand near 60 per cent. Observers expect CORE and the tobacco duty to shrink or slip to a later date, leaving emissions and border-carbon revenue to carry the load.
Third comes the Temporary Decarbonisation Fund, tabled on 17 December 2025. It would channel €15bn into heavy industry between 2028 and 2030, financed by 75 per cent of CBAM receipts until the ORD kicks in. The legal base combines environment and budget articles, meaning the ordinary legislative process applies. Parliament and Council aim to wrap up talks by late 2026 so calls for projects can open on day one of the new MFF.
Industry wants the fund to mimic the old free allowances under the emissions-trading scheme. Green groups call that a fossil subsidy. Poland, Bulgaria and Romania would prefer national envelopes to a Brussels-run competition. Parliament is likely to insist on social safeguards and windows for small firms. The risk is, if ORD revenue falters, the purse could shrink ominously.
The quiet file
The fourth file looks dull but matters. Implementing acts from the 2024 mid-term revision of the current MFF include detailed rules for STEP, triggers for a flexibility instrument and spending decisions for the €50bn Ukraine Facility. Parliament keeps a two-month scrutiny right, yet rarely blocks such measures. Most analysts expect smooth sailing; the political storm passed during the 2023-24 fight over the revision itself. If the guess is correct, the Commission can launch new calls for Ukrainian reconstruction and industrial investment without legal doubt.
While the files move, wider forces shape the weather. First, the stability pact that limits public borrowing has re-started, putting net contributors under pressure. They will try to cap the overall ceiling near one per cent of EU gross national income. That frugal instinct hardens resistance to an ambitious ORD.
Second, geopolitics weighs heavy. War still rumbles in Ukraine while America’s electoral future looks uncertain. Hard power and resilience top many agendas, giving the Commission leverage to raise defence spending and argue for the Temporary Decarbonisation Fund.
Third, the European Parliament itself changed character after the 2024 elections. Right-wing Eurosceptics gained about 15 per cent of the chamber. That does not block a pro-EU majority, yet it complicates any deal that smells of new taxes. Parliament may demand offsets, such as more money for research or border control, before granting consent.
Industrial dilemmas
Fourth, the Green Deal faces fatigue. Voters worry about energy bills and industry about cheap Chinese kit. Many governments now sell decarbonisation as an industrial policy rather than a moral crusade. That helps the decarbonisation fund but not necessarily the ORD’s green levies. The danger is that leaders promise climate cash today then choke off the very revenues meant to finance it.
Finally, enlargement looms. Ukraine, Moldova and countries in the western Balkans queue at the door. Integrating poorer newcomers will raise cohesion costs in the 2030s. Friends of cohesion therefore bargain hard: they may back the ORD only if regional funding stays robust. Linkage politics will dominate corridors in 2026.
Taken together, the MFF sketches a mixed picture. The Mid-term Cohesion Package has a good chance of passing, albeit with substantial amendments. The ORD faces a tougher path: close to no chance of sailing through intact, a coin-flip chance of serious rewrites and a non-trivial risk of long delay or rejection. The Decarbonisation Fund looks sturdier, with only minimal danger of collapse. Implementation acts from the 2024 revision sit pretty much in the bag.
Time and trust
Businesses draw practical lessons. Carbon-tax and border-carbon revenues will likely survive, so firms should plan for higher costs. The corporate levy may come later or in diluted form, so CFOs can breathe—though not relax. Non-governmental organisations have a narrow window, to spring 2026, to insert stronger climate and social conditions. Finance ministries must prepare ratification strategies now; surprises in national chambers can derail everything.
If negotiators stick to the calendar, the EU will start 2028 with a seven-year budget in place and a partial new revenue toolkit. That would mark a victory for methodical incrementalism, Brussels’s preferred art form. Yet the revenue debate could still splinter. Without a credible ORD, leaders may resort to stop-gap fixes like the decarbonisation fund, financed by temporary levies and creative accounting. Such patches keep the show on the road but store trouble for the next cycle.
The Commission insists the track is tight yet realistic. Its timeline leaves nine months between final Council deal and entry into force, enough for Parliament’s consent and legal tidying. The larger risk lies not in Brussels but in domestic politics. A single parliament—Germany’s or anyone else’s—can block the ORD and upend the spending plan. Citizens seldom notice these votes until a court case or a budget freeze explodes on the front page.
Europe still needs to decide what sort of power it wants to be: a cautious club that doles out pennies or a geopolitical actor that bankrolls big ambitions. The MFF offers one answer. The numbers are small—barely more than one percent of the Union’s income—but the symbolism is large. Over the next two years leaders must prove they can match cheque books to rhetoric. The roadmap is on paper. Whether leaders keep pace is another matter.
