Thomas Schwab / Nov 2025
Piotr Serafin, European Commissioner for the Budget. Photo: European Union, 2025
Negotiations on the future EU budget have begun. With the European Commission’s proposal released in July, far-reaching changes are on the table. Substantively, the Commission seeks to equip the EU to tackle growing geoeconomic and security challenges, calling for a more proactive stance on industrial policy and defence. These ambitions demand substantial resources, but there is broad consensus on their necessity. Few dispute the need for Europe to act more strategically. In fact, what is now termed “industrial policy” — including support for R&D — has long been part of the EU’s toolkit, often implemented through Cohesion Policy instruments such as the S3+ framework.
The more delicate issue, however, lies in governance. The Commission proposes a more centrally managed budget, with stronger emphasis on planning and on the role of national governments. While this mirrors political reality — national governments already exert significant influence in Brussels through the European Council — it risks marginalising subnational authorities and civil society actors. Both have played central roles in implementing Cohesion Policy, which represents the second-largest share of the current budget. Under the proposed governance model, these actors would lose their formal involvement at the European level. Strategic decisions would instead be made more frequently through continuously updated plans negotiated exclusively between the Commission and national (or federal) governments.
For some member states, this may appear unproblematic. But for federally organised or strongly decentralised countries such as Germany, Austria, Belgium, Spain, Sweden, Italy, and Poland, the shift poses real challenges. The underlying issue is not efficiency but trust: regional and local actors often doubt that central governments will represent their interests fairly. Reforms in federal systems frequently fail when they ignore the realities of shared governance — and the EU now risks repeating that mistake.
Strikingly, today’s debate on the Multiannual Financial Framework (MFF) is not primarily about money. Few have objected to potential reductions in Cohesion Policy funding. Instead, the real controversy concerns governance — who gets to decide, and at what level. In regional development, this is not only a matter of political power but also of practical effectiveness. Successful regional policy depends on broad participation: identifying challenges, designing solutions, and implementing them with wide societal support. This process is inherently complex but indispensable. Undermining it will not simplify policymaking — it will make it more fragile.
Ultimately, the current budget dispute is about decision-making power. The European Commission has handled this dimension poorly. It has largely disregarded the concerns of subnational and civil society actors, labelled investment plans as “national and regional” without genuine regional input, and sidelined the European Parliament — the institution most directly linked to Europe’s territorial diversity, since its members are elected on regional bases. This confrontation was avoidable.
Yet there are realistic solutions to strengthen democratic legitimacy without redesigning the proposal from scratch. The European Parliament’s call to include regional chapters in national plans is both reasonable and compatible with the Commission’s framework. Likewise, the proposals that Andrey Demidov and I made in April — to establish national partnership committees consolidating subnational and civil society voices, and to update the European Code of Conduct on Partnership to guarantee meaningful participation — could offer a practical way forward. Encouragingly, there already seems to be recognition of the need to revise the Code of Conduct.
Europe’s member states are organised in diverse ways: some federal, some centralised, others hybrid. The Commission should have better reflected this institutional diversity. A few targeted adjustments could restore the balance between efficiency and inclusiveness — and, crucially, reinforce the legitimacy of the EU budget process. Without such changes, the proposal risks losing credibility and political acceptance altogether.
It is not Cohesion Policy’s federalism that is blocking MFF reform — it is the Commission’s reluctance to adapt.
If Europe truly wants to deliver, it must not only act faster than its geopolitical rivals; it must also govern better. Weakening the democratic legitimacy and acceptance of the EU budget would push Europe down a path others have already taken — a path the EU can ill afford to follow.
