Government Budget Challenges

My latest for EUobserver: 𝗘𝘂𝗿𝗼𝗽𝗲'𝘀 𝗻𝗲𝘄 𝗠𝗙𝗙 — 𝗶𝘁'𝘀 𝗻𝗼𝘁 𝗮𝗯𝗼𝘂𝘁 𝘁𝗵𝗲 𝘀𝗶𝘇𝗲, 𝗶𝘁'𝘀 𝗮𝗯𝗼𝘂𝘁 𝘁𝗵𝗲 𝘀𝘁𝗿𝗮𝘁𝗲𝗴𝘆 🎯 𝗙𝗼𝗰𝘂𝘀 The 2028–34 EU budget debate is fixated on size when design matters more. The “~€2trn” headline masks a real increase of only ~0.02pp of EU GNI versus today—and, as in 2021–27 (-0.06pp), the Council has in the past reduced the Commission’s proposal. 🧭𝗔𝗿𝗰𝗵𝗶𝘁𝗲𝗰𝘁𝘂𝗿𝗲 Streamlined from seven to four headings. Over half of the envelope (53.7%) is “economic, territorial, social, agricultural & fisheries cohesion”. 🧩𝗡𝗮𝘁𝗶𝗼𝗻𝗮𝗹 & 𝗥𝗲𝗴𝗶𝗼𝗻𝗮𝗹 𝗣𝗮𝗿𝘁𝗻𝗲𝗿𝘀𝗵𝗶𝗽 𝗣𝗹𝗮𝗻𝘀 ~€771bn (around 44% of the total) merging CAP and cohesion lines with performance-based disbursements. Lessons from the RRF warn that weak outcome indicators and limited multi-level governance can undermine results—creating a risk of de-facto renationalisation. The Plans merge instruments under a single framework to align incentives, but without clear, measurable outcomes and genuine multi-level ownership the performance approach may not deliver. 🌍 𝗚𝗹𝗼𝗯𝗮𝗹 𝗘𝘂𝗿𝗼𝗽𝗲 ~11% largely preserves the EU’s external profile. Sub-Saharan Africa (€60.5bn) and MENA (€42.9bn) exceed resources for enlargement & neighbourhood (€43.1bn)—meaning more is allocated than to enlargement, potentially clashing with enlargement narratives. 💶 𝗙𝗶𝗻𝗮𝗻𝗰𝗶𝗻𝗴 (𝗼𝘄𝗻 𝗿𝗲𝘀𝗼𝘂𝗿𝗰𝗲𝘀) ETS and CBAM proceeds plus an e-waste levy, a tobacco excise (TEDOR) and a Corporate Resource for Europe (CORE). CORE would charge firms with turnover above €100m, raising competitiveness concerns. Advancing BEFIT to harmonise the tax base would better support the single market. Before seeking new money, the EU should use under-deployed tools such as the ESM’s €420bn lending capacity. 📝 𝗣𝗼𝗹𝗶𝗰𝘆 𝗥𝗲𝗰𝗼𝗺𝗺𝗲𝗻𝗱𝗮𝘁𝗶𝗼𝗻𝘀 1. Do not export performance-based disbursements to the new framework until the RRF’s problems have been properly addressed. 2. Do not waste effort or political capital on the MFF size debate. 3. Centre the strategy on mobilising private finance and on well-designed MFF instruments that de-risk and crowd in investment. 4. Avoid CORE; it affects competitiveness. 5. Do not forget the ESM - European Stability Mechanism and its €420bn capacity. Real Instituto Elcano CEPS (Centre for European Policy Studies) https://lnkd.in/d7AmJsUG

𝗘𝘂𝗿𝗼𝗽𝗲’𝘀 𝗰𝗼𝗵𝗲𝘀𝗶𝗼𝗻 𝗮𝘁 𝗶𝘀 𝗱𝗲𝗳𝗶𝗻𝗶𝗻𝗴 𝗵𝗼𝘂𝗿 Gianfranco Viesti has sounded a stark warning in his new 𝘌𝘵𝘪𝘤𝘢 𝘌𝘤𝘰𝘯𝘰𝘮𝘪𝘢 article. The European #Commission’s proposal for the 2028–2034 EU budget risks unpicking one of the Union’s defining threads: its Cohesion Policy. What once symbolised Europe’s promise of shared prosperity may soon become a nationalised patchwork, modelled on the Next Generation EU approach. For four decades, cohesion policy has stood as the Union’s moral and economic ballast, rooted in Article 174 of the Treaties: to reduce disparities between regions and ensure that integration did not mean concentration. The new #budget proposal, unveiled on 15 July, dissolves this architecture. The very idea of cohesion is subsumed into a single national and regional fund, likely to decided in reality by national governments with minimal subnational or civic involvement. It is, in Viesti’s reading, a quiet renationalisation of what made #Europe European. The risks are stark: shrinking resources for vulnerable regions of all ilk, political discretion in distribution, and the erosion of the local partnerships that once tethered Brussels to citizens’ everyday lives. The shift of power from territories to capitals will nurture precisely the estrangement that #euroscepticism feeds on. Viesti does not romanticise the past. He is acutely aware #Italy’s implementation of cohesion funds has been uneven, sometimes slow, often bureaucratic. Yet to replace a shared, place-based policy with fragmented national plans is to trade imperfection for incoherence. For him, this reform would loosen the Union’s connective tissue, turning a shared European project into a mosaic of national schemes. Yet resistance is already forming. On 30 October, the leaders of the main political groups in the European #Parliament —the People’s Party, the Socialists, Renew and the Greens— issued a joint letter to President von der Leyen rejecting the very principle of a “single national fund”. Their language was unusually direct, signalling that the Parliament senses the danger of dissolving a common European good for administrative convenience. It is rare for Europe’s often fragmented legislature to speak with such unanimity. The fact that it does so here suggests that the stakes are being understood. The groups in the Parliament —like Viesti himself— are arguing that Cohesion Policy should be reformed, not erased. Cohesion, like democracy, may be slow because it listens. To discard it in the name of efficiency is to mistake the means for the end. Full article by Gianfranco Viesti in Etica Economica (for those who read italian): https://lnkd.in/duni5r-s For those who want to read further on the topic: https://lnkd.in/dusYJ8Ep (short read) https://lnkd.in/div-iWpi (long read)

🌍 Major Changes Ahead for EU Health Funding: From EU4Health to the Next MFF (2028–2034) 🌍 The European Commission has proposed a significant structural shift in how health policies and public health initiatives will be financed in the upcoming 2028–2034 MFF. Here are the key changes: 🔹 The End of a Standalone Health Programme Unlike the current 2021–2027 period, which is defined by the dedicated €4.6 billion EU4Health programme, the next MFF does not include a standalone health programme. Instead, EU4Health will be merged alongside 13 other programmes into the newly created European Competitiveness Fund (ECF), a single investment capacity worth €451 billion. 🔹 Where is the Public Health Budget? Health initiatives will be grouped under the ECF’s "Health, biotech, agriculture and bioeconomy" policy window, which has an indicative allocation of €20 billion. Crucially, the exact share of the budget dedicated specifically to health is not specified. This design aims to provide maximum flexibility to reallocate funds for unforeseen priorities during the MFF cycle. 🔹 Shift from Public Health Protection to Industrial Competitiveness The new framework represents a strategic change. While EU4Health focused heavily on disease prevention, reducing health inequalities, and crisis preparedness, the ECF integrates health into a cross-sectoral framework focused on competitiveness, biotechnology, artificial intelligence, and robotics. 🔹 New Public Health Focus Areas Despite the broader focus, the ECF does introduce new emphasis on areas that were not explicitly covered under EU4Health, including autism, degenerative diseases, and diseases related to pollution. 🔹 Risk of Fragmentation A major concern raised is that the ECF’s provisions are framed in general terms, blurring the lines between specific objectives and activities. This lack of precision creates a risk of fragmentation for public health priorities, which could weaken the coherence of EU actions, reduce predictability for applicants, and potentially cause crucial initiatives—like Europe’s Beating Cancer Plan and Safe Hearts Plan—to lose visibility without a dedicated financial envelope . 🔹 Other Key Funding Streams for Health Beyond the ECF, public health and health security will draw from: * Horizon Europe: Receiving a massive boost to €175 billion (nearly double its current budget) to drive health research and innovation. * Union Civil Protection Mechanism (UCPM+): An indicative €10.5 billion to integrate financing for health emergency preparedness and response. * National and Regional Partnership Plans: To support healthcare services, long-term care, and infrastructure. The Bottom Line: The COVID-19 crisis proved the importance of a strong, unified EU health policy. As negotiations for the 2028-2034 MFF continue, the key challenge ahead will be ensuring that public health policy retains its prominence and isn't diluted within broader economic and industrial goals.

A recent study by Prof. Andres Pose and Frederico Bartalucci claims "that the proposed architecture for the next MFF will, in all likelihood, steer investment towards places that are already advantaged while hollowing out Cohesion Policy, the one instrument that has historically reached Europe’s most vulnerable territories and tempered the growing geography of discontent. A budget designed to make Europe more competitive, more secure and more strategically autonomous may instead make it less inclusive, more polarised and more fragile. Europe does not face a choice between competitiveness and cohesion. It faces a choice between mobilising its full territorial potential and gambling with the Union’s legitimacy and survival." Only focussing both on supporting particularly industrial regions to successfully master their transition and at the same time support regions lagging behind will work in the end. https://lnkd.in/eZRRiW5y

𝗧𝗵𝗲 𝗳𝗶𝗴𝗵𝘁 𝗼𝘃𝗲𝗿 𝘁𝗵𝗲 𝗻𝗲𝘄 𝗘𝗨 𝗯𝘂𝗱𝗴𝗲𝘁 𝗶𝘀 𝗮𝗯𝗼𝘂𝘁 𝗺𝗼𝗻𝗲𝘆. 𝗜𝘁 𝘀𝗵𝗼𝘂𝗹𝗱 𝗯𝗲 𝗮𝗯𝗼𝘂𝘁 𝗴𝗲𝗼𝗴𝗿𝗮𝗽𝗵𝘆. Most of the debate on the 2028-2034 EU budget has focused on the headline number: whether the envelope should be smaller, larger, closer to the Commission’s original proposal, or closer to Parliament’s demands. Those questions matter. But they miss the harder one: where will this money actually land? And what will be its consequences? Andrés Rodríguez-Pose and I have just published a paper in 𝘎𝘭𝘰𝘣𝘢𝘭 𝘊𝘩𝘢𝘭𝘭𝘦𝘯𝘨𝘦𝘴 & 𝘙𝘦𝘨𝘪𝘰𝘯𝘢𝘭 𝘚𝘤𝘪𝘦𝘯𝘤𝘦 that tries to answer this question. We map the geography of the new budget’s core priorities across European NUTS2 regions: industrial transformation, AI exposure, defence-industrial capacity, and Chinese import competition. Four different lenses point to the same pattern. The regions best placed to benefit from one priority are often best placed to benefit from the others too: capital regions, innovation hubs, defence clusters and established industrial corridors. The regions least likely to benefit are also familiar: provincial cities, former industrial heartlands and rural hinterlands already facing weak innovation capacity, industrial anxiety or long-term decline. A potential issue emerges. The proposed budget does not simply invest in competitiveness, defence and strategic autonomy. It risks concentrating those investments in the places already most able to absorb them. At the same time, Cohesion Policy, the one EU instrument that has historically reached weaker and more vulnerable regions directly, is being folded into National and Regional Partnership Plans. In practice, that means regional development funds competing inside national envelopes, often controlled by finance ministries, against priorities that will naturally favour the strongest regions. Changing the total budget number does not fix that. A budget can be larger and still more spatially unequal. A budget can be smaller and still protect territorial cohesion. The real test is not whether the EU budget sounds strategic on paper. It is whether it changes the economic map of Europe, or simply adds another layer of investment to the regions already best placed to win public funding, private capital and skilled labour. If the new budget weakens the territorial anchor of Cohesion Policy, many vulnerable regions will not just receive less money. They will lose one of the few direct links between their local development needs and the European project. That is where the budget debate becomes political. Full paper, open access: https://lnkd.in/dquJ5zuf #EU #CohesionPolicy #RegionalDevelopment #Competitiveness #EconomicGeography #RegionalScience