This week, the European Commission signaled an upcoming review of the European Union’s long-term budget in July, aimed at adding more flexibility to shift resources between programs. The goal is to better address priorities that were unforeseen five years ago, such as the effects of the pandemic and the ongoing consequences of the war in Ukraine. (European Commission)
Budget Commissioner Johannes Hahn outlined, in discussions with a group of reporters, that the EU operates under a Multi-Annual Financial Framework (MFF) for 2021-2027. He described the situation as complex for a variety of reasons, noting that a large portion of the budget is already pre-allocated. In fact, about 99.05% of the funds are tied to specific items, leaving limited room to maneuver in order to cover unexpected expenses, including inflationary pressures. (European Commission)
Hahn stressed that flexibility remains constrained. He explained that reallocating funds requires substantial effort and political negotiation, since resources must be moved from one area to another to respond to new needs. This dynamic illustrates the persistent tension between long-term planning and the need for adaptive financing. (European Commission)
Consequently, Hahn indicated that the Community Budget Manager will submit a proposal to review the EU budget in July, a year ahead of the planned update of European accounts. The aim is to restore some breathing space for member states, a move that several capitals have historically resisted but which the commissioner now views as more sensible. (European Commission)
However, Hahn cautioned that the forthcoming review should focus on enhancing resilience rather than expanding the MFF’s spending ceiling in a way that would require lengthy approval processes in each member state. He suggested that a meaningful increase in the budget would not occur quickly, given the need for comprehensive consensus. (European Commission)
“This is not a matter of days, but of one to two years”, Hahn argued, underscoring the careful, phased approach required for any budget adjustment. (European Commission)
The second major challenge identified is ensuring the repayment of debts incurred to support the bailout fund, along with the macro-financial assistance program for Ukraine and related interest obligations. As conditions shift with market rates and financial pressures, sustaining the repayment trajectory remains a priority. (European Commission)
On the revenue side, Hahn noted substantial progress toward two new streams of income: the emissions trading system and the carbon border adjustment mechanism (CBAM), both approved by member states and the European Parliament. He characterized these instruments as critical to diversifying the budget and cementing a more stable revenue base. (European Commission)
Yet, he added that additional proposals would likely be launched in September. Discussions may include potential charges on food waste or electricity waste, measures that could carry significant environmental implications and further broaden the range of income options. (European Commission)
Hahn emphasized that the budget work continues at a technical level, in collaboration with the Economic Commissioner Paolo Gentiloni and a broad list of options. The aim is to identify the most appropriate priorities and shape a pragmatic path forward that aligns with the EU’s fiscal realities. (European Commission)