The next EU budget is shaping up to be one of the most contested in years, with growing pressure on priorities and funding. In an interview with EESC Info, Anna Heckhausen, EU budget expert at Bertelsmann Stiftung, breaks down the key trade-offs – and why they matter for people and policies across Europe.

In your paper The Devil is in the Budget - A Comprehensive Guide to the MFF Negotiations, you show that the next MFF cycle is facing unusually tight political and fiscal constraints. When looking at the five battlegrounds you identify: budget size, priorities, structure, conditionality, and revenues, which one do you see as the most decisive for determining whether this MFF succeeds or fails?

The battlegrounds EU institutions face in the MFF negotiations are deeply intertwined. Priorities depend on budget size; size depends on new revenues; and the more constrained the overall budget is, the more important structural reform becomes.

If I had to single out one battleground, I would therefore point to the budget’s architecture. The chances of a substantially larger budget are very slim – that makes structure crucial: it will determine whether the EU can spend its limited resources more strategically, effectively and flexibly. This is the logic behind the proposed National and Regional Partnership Plans and the European Competitiveness Fund: to simplify and target spending, reduce bureaucracy, increase synergies across policy areas, and respond better to crises and emerging priorities. 

But structural changes can only go so far. New priorities still need to be backed by sufficient money. Ultimately, the question remains who pays – and how much?

Your policy brief Fund or Fumble – How to Make the European Competitiveness Fund Work argues that the EU currently spreads its industrial funding across too many small, complicated programmes, making it hard to focus on big strategic goals. The new proposal tries to fix this by merging 14 different programmes into one large ‘European Competitiveness Fund.’ Do you view this merger as a transformative solution that will make Europe more competitive, or is it merely a rebranding of existing challenges?

At present, EU industrial spending is highly fragmented, complex and rigid. The European Competitiveness Fund (ECF) is the Commission’s response to these weaknesses. More than just adding money, it introduces three reform levers.

The first is consolidation. Replacing silos and overlapping instruments with a more coherent framework could reduce administrative costs. This could make it easier for smaller businesses to access funds, including those in less developed regions.

The second is focus. Rather than dispersing support across too many small envelopes, the ECF would organise funding around strategic priorities through four policy windows. Maintaining a clear strategic focus within these windows should be a central priority in the negotiations.

The third is governance. Funding in the ECF could be more easily adjusted to shifting priorities over time. Moreover, the ECF would bring together different funding modes, such as loans and grants, in a single toolbox to better target industry needs at different stages of the innovation pipeline.

So, yes – the ECF has real transformative potential.

Given that a significant portion of the next budget is already committed to repaying pandemic-era debt, leaving little room for new initiatives, your research suggests major cuts are likely. If the EU must choose between protecting traditional spending on agriculture and cohesion versus investing in strategic priorities like defence and the green transition, which trade-offs do you consider politically feasible?

Both new and traditional spending have their part to play. Europe needs to invest heavily in security, competitiveness and the green and digital transitions. At the same time, cohesion and agricultural support remain important for regional development and the EU’s perceived legitimacy, especially in less developed regions.

Politically, deep cuts to cohesion and agricultural funds are unlikely. They are strongly entrenched, based on pre-allocated national envelopes and backed by powerful interest groups. However, there is scope to make cohesion policy more effective. 

The most feasible compromise will therefore be to change what this money is expected to deliver: linking cohesion and agriculture more strongly to reforms and investment in competitiveness, skills, and climate resilience.

In the end, the divide between old and new priorities is less clear-cut than it may seem. Funding for infrastructure, industrial capacity and the economic transition can also support regional development. The key is to think these objectives together: using the ECF for excellence-based industrial support, while relying on cohesion instruments to ensure that less developed and transition regions can also benefit from Europe’s competitiveness agenda.

If you could make one recommendation to negotiators entering the final phase of MFF talks that would most improve outcomes for European citizens five years from now, what would it be?

My advice would be to make choices – you cannot spend the same euro twice. The EU budget is too small to fund every priority at meaningful scale. Synergies, leverage effects and efficiency gains can help, but they only go so far. 

Negotiators should therefore resist the temptation to give every constituency, programme and objective a small envelope and instead focus resources where EU-level spending can make the biggest difference – for instance, on cross-border infrastructure, international research projects, or a coordinated EU industrial policy. If the EU wants – or needs – to take on new responsibilities in security, competitiveness and the dual transition, it also needs to decide what should give way – or who pays.

Anna Heckhausen works in the Europe’s Future programme at the Bertelsmann Stiftung, focusing on issues relating to the EU budget. Her research focusses on negotiations on the next Multiannual Financial Framework (MFF 2028-34), budget sustainability and the green transformation of Europe’s economy. The Bertelsmann Stiftung is a German non-profit foundation focused on strengthening democracy, society and public policy.