The EU’s pandemic recovery fund was meant to be a one-off. Yet as the next long-term EU budget takes shape, joint borrowing appears set to become a more permanent feature of the Union’s finances. Lukas Spielberger and David Howarth of the University of Luxembourg, authors of the paper The future of joint borrowing under the next Multiannual Financial Framework, look at what the Commission’s latest MFF proposal reveals about the future of EU debt, and the political choices still ahead.

By Lukas Spielberger and David Horwath

When the European Commission was empowered to borrow up to EUR 750 billion to fund the EU’s response to the COVID-19 pandemic, Member States made it clear that this authorisation was supposed to be temporary. By the end of 2026, the final loans and grants of the Recovery and Resilience Facility (RRF) are set to be disbursed. 

Still, NextGenerationEU (NGEU) has opened the door to further debt-funded facilities. Since 2022, the EU has borrowed over EUR 50 billion to provide financial assistance to Ukraine; and in May 2025, EU Member States agreed on the EUR 150 billion SAFE instrument, which will finance the joint procurement of military equipment. Both the Draghi and Letta Reports have called for additional EU borrowing to finance ‘European Public Goods’.

Against this backdrop, the Commission unveiled its proposal for the forthcoming 2028–2034 Multiannual Financial Framework (MFF) last summer. The proposal shows that the Commission is indeed planning further debt-funded facilities. It also reveals how the Commission is seeking to align the role of borrowing operations in the EU’s budgetary architecture, based on the experience of borrowing under the current MFF.

Specifically, the proposal includes four borrowing-related items. First, a new facility called ‘Catalyst Europe’ will offer loans to support strategic investments. Second, an as-yet unnamed crisis mechanism will be able to provide up to EUR 400 billion in emergency loans to EU Member States. Third, the Commission proposed to set aside EUR 100 billion for further loans to Ukraine until 2034. And finally, the EU will have to start repaying the debt-funded grants extended under NextGenerationEU in 2028, at a rate of EUR 24 billion each year.

The two new instruments indicate that the Commission is seeking to leverage its strengthened borrowing powers and embed them more firmly in the EU budget. 'Catalyst Europe' resembles some aspects of the RRF. The instrument will provide up to EUR 150 billion in debt-funded loans to Member States to fund strategic investments, based on National Partnership Plans — modelled on the Recovery and Resilience Plans.

The major innovation of the RRF — debt-funded grants — will, however, not be repeated. Instead, the EU will offer loans to Member States with attractive terms. Since 2023, the Commission has managed its debt under a new ‘unified funding approach’, which allows it to issue loans at highly concessional conditions. For its latest loans to Ukraine and under SAFE, the Commission has extended loan repayment periods to 45 years.

The proposed crisis mechanism, likewise, seeks to refashion existing EU practice into a new institutional guise. To date, the EU has relied on temporary instruments under Article 122 TFEU to provide financial assistance to Member States, not just for SAFE, but previously also for SURE and during the euro area crisis. The proposed crisis mechanism, by contrast, would create a structural borrowing facility that could be activated during future crises. Unlike Article 122 TFEU, which allows for instruments to be adopted by a qualified majority in the Council, the crisis mechanism is designed to give the European Parliament a say in approving assistance.

The Commission itself has admitted that one advantage of additional debt-funded instruments is to ‘increase the impact of the EU budget, by providing further financial resources to support EU policy goals via borrowing for lending (COM(2025) 570 final)’. 

Most loan-based support is ultimately guaranteed by the EU’s budgetary headroom — that is, the gap between the spending ceilings under the MFF and the Own Resources ceiling. Compared to the current MFF, the Commission’s proposal increases the headroom significantly, from 0.25% of EU gross national income to over 0.5% of EU GNI. The proposed crisis mechanism is to be guaranteed by another increment of 0.25% of EU GNI. As a result, while expenditure under the proposed MFF remains broadly comparable to the current framework as a share of EU GNI, the proposal would create significantly greater budgetary space for future debt-funded instruments.

Joint borrowing is thus set to remain a part of the EU’s public finances over the next long-term budget. The Commission’s proposal shows that it is seeking to focus on long-term loans, involve the European Parliament more directly, and increase its overall borrowing capacity. Whether a sufficient number of Member States agree with these ideas will remain another matter.

Lukas Spielberger is a research scientist in political science at the University of Luxembourg and a senior associate at CSDS, Vrije Universiteit Brussel. Since 2025, he has led the research project ‘Greening Europe’s Public Finances’, funded by the Luxembourg National Research Fund.

David Howarth has been Professor of Political Science, specialising in European Union studies, at the University of Luxembourg since 2012. From 2018 to 2025, he headed the University’s Jean Monnet Centre of Excellence, the interdisciplinary Robert Schuman Initiative.