Impact community Cohesion102

Analysis of the EU budget proposal of the European Commission: time to raise the voice of local and regional governments

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On 16 July, the European Commission unveiled its proposals for the next EU long term budget: the Multiannual Financial Framework (MFF) for 2028-2034. This proposal represents a significant shift in the EU’s approach and governance to its long-term budget. While the Commission is proposing an overall budget increase compared to the current period, investment priorities are being substantially reshaped.

There is a marked shift towards funding for defence and security, as well as for competitiveness and support for European businesses and industries. However, this change comes at the expense of traditional EU policies such as Cohesion Policy and the Common Agricultural Policy (CAP), which have long provided relevant funding to local and regional governments for structural investments in their communities.

In this context, the coming months will be crucial. CEMR and its members will engage with decision makers in the European Council and the European Parliament to ensure that local and regional governments are not sidelined in the negotiations.

These are the key areas for which CEMR will be advocating in the coming months:

1. Multi-level governance and funding for Cohesion Policy

The Commission proposes a major restructuring of all shared management funds, including Cohesion Policy, CAP, Common Fisheries Policy, and funding instruments for internal security, border management, asylum and migration. All these funds would now be brought together under comprehensive ‘National and Regional Partnership Plans’.

The proposed MFF represents a major turning point for the role of cities and regions in delivering economic, social, and territorial cohesion. While Member States may still choose to collaborate with local and regional governments as Managing Authorities – as currently practised under Cohesion Policy – the new framework grants them broader discretion in setting investment priorities. This increased flexibility, however, comes with a clear risk: a shift toward greater centralisation of funding decisions at both the European and national levels. Such a trend could weaken the place-based approach and marginalise the very actors – our cities and regions – who are best positioned to respond to local needs and deliver tangible results on the ground.

Another major concern is the reduced financial weight given the cohesion objectives. The proposed national and regional funding now merge resources from cohesion policy funds, CAP, fisheries, and other programme objectives (e.g. LIFE, Social Climate Fund), diluting the funding explicitly dedicated to economic, social, and territorial cohesion. CEMR estimates that Cohesion Policy could shrink to just 20% of the total EU budget, compared to nearly one-third in the current MFF. In addition, repayment of Next Generation EU has been integrated in the MFF first heading together with the national and regional partnership plans, which could raise an issue of additional decrease in this budget in case of increased interest rates.

2. Acknowledging the role of local and regional governments in competitiveness

The main spending priority in the European Commission proposal is competitiveness, with a focus on the new European Competitiveness Fund, a strengthened Horizon Europe programme, and flagship EU initiatives such as Erasmus +.

Local and regional governments are crucial drivers of economic and social ecosystems at the local level, leading innovation and fostering local economic development. Many municipalities and regions have already benefited from the Horizon programme. It will therefore be essential to clearly identify local and regional governments as key beneficiaries in order to achieve the dual objective of cohesive competitiveness.

Likewise, the increased focus on defence and security must be matched by a recognition of the role local and regional authorities play in securing resilient infrastructure and essential public services, including civil protection and crisis preparedness. This role must be reflected in both national and regional budget allocations, as well as in EU direct fundings.

3. Consistent approach in the role of local and regional in the Global Europe pillar

CEMR and PLATFORMA welcome the attention given to local governments in the proposed Global Europe regulation, particularly their inclusion in consultation, engagement, and capacity-strengthening in line with their respective mandate, as well as the support foreseen for local authority networks and alliances in Europe and partner countries.

However, this recognition is not applied consistently across all geographic pillars. It is notably absent for candidate and potential candidate countries, including Ukraine, and for the neighbourhood countries East and South. Furthermore, the regulation  overlooks the potential of decentralised (city-to-city and region-to-region) cooperation as a proven modality to empower local authorities in partner countries, provide local public services for the populations, localise the Sustainable Development Goals of the 2030  Agenda, and create an enabling environment for Global Gateway investments and for civil society organisations.

As inter-institutional negotiations begin, CEMR will actively engage with EU institutions, building on existing coalitions such as the Local Alliance and the Cohesion Alliance to amplify the messages of united local and regional governments in Europe.

Note: This is an initial analysis of the proposal presented by the European Commission. CEMR will provide its members with a more in-depth assessment in the coming weeks, once all the regulations have been thoroughly reviewed.

Main conclusions of the EU Budget event at the European Parliament 

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As the European Commission lays the groundwork for the next Multiannual Financial Framework (MFF) beyond 2027, the role of Local and Regional Governments has taken centre stage in Brussels. On 24 April, CEMR joined forces with Members of the European Parliament Vladimir Prebilič and Ľubica Karvašová to organise the high-level event “EU Budget: What Does the Future Hold for Multi-Level Governance?” 

The discussion comes in the wake of the Commission’s strategic communication, “The Road to the Next Multiannual Financial Framework”, which signals a potential shift in the architecture and the approach to the EU budget. What will the future EU budget look like, and how will EU funds be managed and by whom? These and other questions were discussed in this event, taking place at the European Parliament. 

Strong calls for local and regional involvement 

During the opening session, Vladimir Prebilič synthesised the next steps for the MFF proposal, focusing on the centralisation trends and the need to keep the regions at the centre of the design and implementation of Cohesion Policy, which must retain its long-term rationale and not be used for short-term crises. 

His view was echoed by L’ubica Karvašová‘s discourse, who underlined the need for the EU to work on both a global pillar, with defence and trade policies, and a socio-economic pillar, where Cohesion Policy is at the forefront. 

CEMR Co-President Christoph Schnaudigel recalled the central role of the Local and Regional Governments in the implementation of Cohesion Policy, and thus the need to be co-designers. 

Aligning EU priorities with local and regional needs 

The first panel discussed the interactions between EU-level priorities and local and regional governments’ investment priorities in view of the next long-term budget. 

Florentine Hopmeier, Deputy Head of Cabinet of Commissioner Serafin, confirmed that Commissioner Serafin is touring Europe to meet beneficiaries of EU funds and collect as much feedback and proposals as possible, but also insisted that the immediate challenge lies in the successful delivery of the current programming period. She recalled the difficult financial context lying ahead, with new priorities to be funded, together with the need to repay NextGeneration EU. The Commission must therefore work on the assumption of more constrained financial resources available. Hopmeier insisted on the need for more flexibility and the lessons learned from the Recovery and Resilience Facility (RRF), including the new approach linking investments and reforms. Finally, she concluded by reaffirming the Commission’s willingness for Local and Regional Governments to be involved and for the continuation of the Partnership Principle even in the presence of a single national plan. 

Maria Teresa Fabregas Fernandez, Director of the Task Force on Reform and Investment at the European Commission, came back on the lessons learned from the RFF, highlighting the added value of the holistic approach linking investments on EU priorities to reforms improving the impact of investments. She confirmed that the Commission has been warning Member States to involve Local and Regional Governments when reforms affect subnational authorities. 

Ester Borràs, from the Catalan government Delegate to the EU, warned about the risks of centralising decision-making with a single plan. She called for simplification, while recalling that centralisation is not simplification, and for harmonisation in the now fragmented EU funds. 

L’ubica Karvašová concluded the panel by suggesting a focus on impact rather than performance, and a two-tiered single plan: a national tier and a second tier for individual regional plans, using the Integrated Territorial Investment (ITI) model. She also pleaded for the institutions to reach a bigger budget in view of the increased investment needs of the Union, and emphasised that investments in social and educational infrastructure also contribute to competitiveness. 

Ensuring efficient implementation of the EU’s investment policy 

The second panel on ensuring both rapid and efficient implementation of the EU’s investment policy opened with Vasco Alves Cordeiro, Chair of the European Committee of the Regions’ (CoR) COTER Commission, presenting the CoR’s priorities for the next MFF, which can be summarised as “flexibility with predictability“. These include ceilings and rules to allow for the reallocation of funds, simplifying the work of managing and auditing authorities, and the need for qualitative criteria to assess the results of cohesion policy. Finally, he stressed the need to maintain the long-term investment perspective of cohesion policy. 

Kadri Uustal, Head of Unit for Cities, Communities and People at DG REGIO in the European Commission, provided additional information on the upcoming “ambitious policy agenda for cities”, as it will aim at supporting cities, not only in the framework of the Cohesion Policy, but even beyond. One of the first challenges for this will be to bring clarity to beneficiaries on the different programmes and initiatives targeting cities.  Uustal explained that the Commission is also exploring a better involvement of cities in EU legislation, given the important role of subnational governments in the effective implementation.  

CEMR co-president Christopher Schnaudigel recalled that Cohesion Policy is part of the EU treaties and must therefore remain a priority. He also warned that “we cannot achieve competitiveness without investing in the regions”. He recommended that Local and Regional Governments are closely associated in the drafting of the single national plans, pointing to the existing Partnership Agreements in the current Cohesion Policy framework as the model to follow in order to develop an investment plan that is both consistent at the national level, and fit for purpose at local and regional levels.  

Vladimir Prebilič started by recalling the benefits Cohesion Policy has brought to the many territories where it has been invested. He then shared insights from his ongoing work as rapporteur on the Committee on Regional Development in the European Parliament for the report on simplification of the Cohesion Policy funds. As solutions to be explored, he proposed improved and more systematic territorial impact assessments, a single set of rules for funding, and a stronger distinction between errors and fraud in auditing. 

Alva Finn, Executive Director of the European Liberal Forum, former member of the Commission’s expert group on the future of Cohesion Policy, suggested a full rebranding of the Cohesion Policy to increase its effectiveness and by in from citizens. Cohesion Policy is still the largest and most successful investment policy in the world, but it does need to be updated, using, for instance, smart conditionality. She advocated for cross-border and inter-European infrastructures to connect Europe and suggested integrating the place-based approach with a people-based one. 

In closing remarks, Karvašová called for co-responsibility, building on Cohesion Policy to fight Euroscepticism and gaining people’s support for the European project. This message was supported by Prebilič‘s appeal to the democratic decision-making model and by Schnaudigel, who concluded by recalling CEMR’s position paper on the subject and the launch of CEMR’s new campaign on the topic. 

Cohesion Policy mid-term review: is the glass half empty or half full? 

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The rationale for the Commission’s latest communication “A modernised Cohesion Policy: the mid-term review” is clear and compelling: the operational programmes of the Cohesion Policy  funds were negotiated four years ago: before a global pandemic, before the paradigm shift of massive EU joint borrowing, and before Russia’s war of aggression on Ukraine and its dramatic impact on inflation and cost of living. 

As Executive Vice President Raffaele Fitto reminded Members of the European Parliament’ Regional Development Committee on 9 April: the world has changed, and so too must the Union’s priorities and policies. 

This new proposal – yet another amendment to Cohesion Policy regulations in the last five years – intends to offer new spending possibilities for Managing Authorities. It does so by creating new specific objectives, expending the scope of eligible expenditures and beneficiaries in line with  five new key priorities identified by the Commission: 

1. Competitiveness and decarbonisation of industry 

2. Defence and security 

3. Affordable housing 

4. Water resilience 

5. Energy transition 

These are undeniably pressing issues: Mayors have long raised awareness on the housing crisis, and recent dramatic floods across Europe highlighted the urgency of climate-resilient water management systems.  

At the same time, it also reflects the new Commission’s political priorities: competitiveness and defence. One could be satisfied that including them within Cohesion Policy underlines the role of local and regional governments in fostering Europe’s competitiveness, driving strategies for local economic development and creating attractive environment for business to settle in European municipalities and regions. 

And yet… 

Despite its forward-looking intention, the mid-term review feels like a glass half empy or half full: the proposal does open new funding possibilities, to be used on voluntary basis by Member States or regions – depending on who the managing authority is. But the potential uptake of the amendments, at this advanced stage of the programming period, is likely to be limited – raising questions on the real added value of the entire proposal. It is also a risk to undermine previously agreed priorities with the addition of new eligible activities and eligible beneficiaries – with very attractive conditions (pre-financing, 100% co-financing from the EU), but without any additional budget. 

The Commission seems haunted by its initial decision to reduce the timeline for completion of programmes to two years (N+2) after the end of the period, down from the current programming period N+3 rule. This despite the assurance of Managing Authorities that they are still on track to spend all their budget – based on decades of experience managing Cohesion policy funds. For the Commission, it is still not fast enough. With this new proposal, the Commission not only opens new eligible investment areas, but also further opens the door to large enterprises, notably  defence companies to apply to Cohesion Policy funding, without requiring justifications on how these beneficiaries will contribute to the economic, social and territorial cohesion where they are located, thanks to EU funded investments. 

And this last point could be the most dramatical change to Cohesion Policy as we know it. While the uptake of this new reform is likely to remain low given that most of the funds are already committed, it should be seen as a preview of the Commission’s proposal for the next budget period: It is the return of “EU structural investment policy” except that the focus will be much less on the treaty objectives of economic, social and territorial cohesion, but more on the political priorities of the moment. Less on the partnership principle and multi-level governance, more on the private sector that has the capacity to spend large sums fast.  

This communication is not reassuring in terms of respect for the multi-level governance and partnership principle. As we saw with the Recovery and Resilience Facility, it’s not enough to mention “in partnership with national, regional and local authorities”. The Commission must put in place methodologies and binding requirements for the multi-level governance to actually take place. Yet in this mid-term review, the Commission does not even encourage Member States and managing authorities to discuss the reprogramming opportunities together with the stakeholders.  

Lessons learned 

A serious structural investment policy cannot afford to be subject to constant regulatory changes within a programming period. Real flexibility should not come from the Commission’s possibility to periodically change its own political priorities; but from the very design of the programmes where investments priorities would be defined from a bottom-up perspective, driven by local and regional governments who best understand their territories’ long-term and specific needs.  

While the EU certainly define broad strategic goals such as decarbonisation of the society, increasing competitiveness of all European territories or strengthening the resilience of public administration at all levels; it must avoid overly narrow thematic concentrations that limit the investment opportunities in municipalities and regions, and are not always fit for purpose on the ground.  

Only then can the next EU budget deliver both on common European objectives and the unique needs of each territory.