The Battle For The Next EU Budget Is About To Begin

Hello! Today is 27 October 2025, and here is the EU news you need this week. Feel free to share this newsletter with friends and colleagues, and follow us on LinkedIn.

Benoit Cormier is a Managing Director at Teneo in Brussels, specializing in EU and international affairs, defense, competition, and communications. He previously served as a French diplomat in Washington, Hong Kong, and Brussels, and worked for the World Bank and the European Commission.

On July 16, as most Europeans were leaving for a sunny place, the Commission released its proposal for the next EU budget, known as the Multiannual Financial Framework (MFF). It will cover 7 years between 2028 and 2034, with a €2 trillion price tag, about 1.25% of the block’s gross income.

A 2-year process

Commission President Ursula von der Leyen labelled it a plan “designed for a new era,” signaling a shift in how the EU funds defense, competitiveness, migration and external action.

The EU is currently spending about €200 billion a year, but the Commission plan would make that figure closer to €300 billion, a 50% hike that did not go unnoticed in European capitals. Member States are aware this budget proposal comes at a time of overlapping shocks. Yet, most capitals are unwilling to spend more, precisely because their economic situation is difficult.

European countries will need to agree by unanimity in the Council on the next MFF, with the current one ending at the end of 2027, and the Parliament will also need to consent to the deal. Two years is a long time, but not that long given the Commission’s ambitions and the long redrafting process that will take place throughout 2026 and beyond.

Spend the same, but differently?

The new architecture keeps pre allocated funds for cohesion and agriculture and adds pillars dedicated to competitiveness and external action.

Tech is the clear winner, with funds multiplied by five.

Defense goes from virtually nothing to about €130 billion out of the total €2000 billion overall for 2028-2034.

A tripling of funding for migration and border management, doubling on research efforts.

Aware of Member States’ skepticism regarding additional funding, the Commission proposes five “own resources” for the EU to keep national contributions broadly stable: a larger share of emissions trading revenues (about €10 billion/year) and carbon border levy proceeds (about €1.5 billion/year), but also novel streams with a charge on non collected e waste (about €15 billion/year), a tobacco tax (about €11 billion/year), and a Corporate Resource for Europe (a lump sum from companies with €100 million+ turnover, amounting to about €7 billion/year).

Together with adjustments to existing resources, it argues this modernized revenue mix can fund priorities and service debt without squeezing national budgets.

A hallmark of the proposal is the shift to National and Regional Partnership Plans that bundle agriculture, cohesion, social policies, migration management and more into one performance based framework per country.

The Commission says such a framework would boost synergies, cut red tape and tailor funds to local needs, while ensuring ring fenced farm income support and safeguards so less developed regions receive at least as much as today.

However, the idea to bundle agriculture and cohesion funds together has come under heavy fire from regions, farmers, agricultural ministers, and Members of the European Parliament (MEPs), where there now seems to be a majority against the reform.

Member States and Parliament agree: “this is not good”!

First reactions in the Parliament’s budgetary committee were frosty. Co rapporteurs signaled the proposal is “simply not enough” for Europe’s challenges and criticized the consolidation of many programs into national plans as a step that risks renationalizing EU policy. MEPs also challenged the claim that the package entails no real increase once debt repayments are netted out.

Legally, the Parliament cannot block the proposal outright, but it can reject the final budget once it has been approved by national capitals. If both the EPP and S&D groups were to reject the proposal, they would be close to a blocking majority in Parliament.

Member States are also skeptical. European Affairs ministers had a first discussion a few days ago, with Germany asking for the “global reduction of a proposal that is way too large”, leading the charge on behalf of net contributors to the budget.

France and Poland shared that they felt the agriculture and cohesion pillars taken together do not receive sufficient funding compared to competitiveness. Also, any new “own resource” requires unanimous adoption, making it even more difficult for the Commission to finance its ambitions.

What to watch next

Three moving parts will define the landing zone over the next couple of years. First, the size and scope of the competitiveness pillar, where industrial policy, technology scale up and supply chain security must be squared with fiscal constraints and sovereignty concerns. Second, the politics of new EU revenues, with several capitals opposing EU level taxes in principle. Third, governance: if national plans become the main spending vehicle, auditors and MEPs will push for tighter control.

OMNIBUS • On 22 October, the Parliament rejected the negotiating mandate on the Omnibus I legislative package, which aims to simplify the directives on sustainability reporting (CSRD) and due diligence obligations (CS3D).

The Commission’s proposal includes, on one hand, a significant increase in the thresholds for CS3D: only companies with more than 5,000 employees and annual turnover exceeding 1.5 billion euros would be subject to these due diligence requirements.

On the other hand, the CSRD component mainly involves postponing deadlines and limiting the volume of information to be provided, in order to reduce the burden of sustainability reporting.

During the plenary session, the compromise supported by the centrist coalition (PPE, S&D, Renew) failed, despite an agreement reached in committee two weeks earlier.

The vote was close: 318 votes against, 309 in favour, and 34 abstentions, illustrating the fragmentation of positions both between and within political groups. By just nine votes, the negotiating mandate could have been adopted. The rejection is a setback for the PPE, which led the negotiations in committee.

It is difficult to know exactly what happened: the vote was conducted by secret ballot, a request from groups to the right of the PPE (PfE, ECR, ESN) intended to allow coalition members to vote freely.

Some centrist and socialist group members likely joined the opposition, judging that the simplifications excessively weakened the directives.

The text will be brought back to the plenary session on 13 November. This time, MEPs will vote on amendments in plenary (not in committee).

The aim is to reach adoption of the Omnibus I package by the end of the year, while many EU trading partners, including the United States and Qatar, are pressuring the EU to simplify its due diligence rules.

FROZEN ASSETS • At the European Council meeting on 23 October, Belgium blocked the Commission’s proposal to use up to 140 billion euros of frozen Russian assets to grant a loan to Ukraine.

This loan would be repaid by Ukraine once reparations are paid by Russia as part of a peace agreement. The proposal had already been discussed at an informal European Council meeting on 1 October. Belgian Prime Minister Bart De Wever had expressed many reservations at that time.

The frozen Russian assets are held predominantly by Euroclear in Brussels. Belgium would therefore be the main target of any potential legal action by Russia.

Bart De Wever argues that there is no solid legal basis allowing the EU to use these frozen assets for a loan, and that risk would need to be fully mutualized in case Belgium had to repay Russia.

By the next European Council meeting in December, the Commission has been tasked with exploring avenues to facilitate an agreement among member states on this issue.

28TH REGIME • On 21 October, the Commission presented its work programme for 2026, which includes a proposal for a “28th regime” to create a common European legal entity in the first quarter of 2026.

The Commission’s proposal is based on Articles 50 and 114 TFEU, suggesting that a directive (not a regulation) will be proposed. A regulation would have established a single legal framework directly applicable across the EU, while a directive leaves member states some margin for interpretation, risking the persistence of certain divergences between national markets.

This choice has angered startups, which demand a regulation guaranteeing genuine cross-border harmonization. They denounce a betrayal of the spirit of a unified framework promised by the Commission. The text could still evolve before its official presentation.

CHINA • The EU and China will hold negotiations on critical raw materials this week. Beijing has recently tightened export restrictions, mainly on rare earths, causing tensions and disruptions for European industries dependent on these resources.

Meanwhile, Ursula von der Leyen unveiled on 25 October a future “RESourceEU” plan aimed at diversifying supply partners (Australia, Canada, Chile…), encouraging recycling, and strengthening the resilience of strategic value chains.

• For Le Grand Continent, Mario Draghi proposes his vision of “pragmatic federalism” for Europe.