The New EU budget is “fit for yesterday”, not for a new era – it is time to get serious

The authors are former President of JEF Greece and current Board Member of JEF Piraeus-Athens

On July 16, 2025, European Commission President Ursula von der Leyen unveiled what she proclaimed as a budget “fit for a new era”, the €1.98 trillion Multiannual Financial Framework (MFF) for 2028-2034. Yet beneath the impressive headline figure lies a profound underdelivery that reveals Europe’s persistent inability to match its fiscal ambitions with its geopolitical realities. Despite unprecedented challenges ranging from protectionism and tariffs to climate transition and strategic autonomy, the new MFF reinforces the obsolete fixation on public underinvestment that has led Europe to economic stagnation.

Much Ado About Nothing

The arithmetic of the new MFF proposal reveals the depth of European leaders’ lack of ambition. The Commission proposes a budget of nearly €2 trillion, equivalent to 1.26% of the EU’s gross national income (GNI) on average between 2028 and 2034. While this represents a nominal increase from the current framework’s 1.11% of GNI, the reality is far less impressive than the headline figures suggest.

This modest increase from roughly 1.1% to 1.26% of GNI falls dramatically short of what economists identify as necessary for Europe to address its strategic challenges. The 2024 Draghi report identified an investment shortfall of 4-5% of GDP, while Bruegel analysis has argued that an additional 0.8% of GDP would be appropriate for joint EU-level spending. On its part, the IMF has called for at minimum a 50% budget increase to tackle today’s European public goods challenges. The Commission’s proposal, a humble extra 0.15% of GNI, thus represents a mere fraction of identified needs.

When adjusted for inflation and the escalating costs of defense, energy security, climate adaptation, and digital transformation, this increase barely maintains the status quo, let alone builds for the future. As one analysis noted, “adjusted for inflation, this represents a reduction compared to the current EU budget period” ; despite headline figures suggesting €700 billion for green investments, when calculated in constant prices, this actually represents less funding for environmental objectives than the current period.

It’s the treaties, stupid
This numeric constraint is the direct result of structural limitations embedded in European treaties, and specifically the Treat for the Functioning of the EU (TFEU). Article 311 TFEU establishes that the Union must be financed wholly from “own resources,” which are tightly defined and politically difficult to expand. Article 312 mandates that the MFF “shall ensure that Union expenditure develops in an orderly manner and within the limits of its own resources”.

This effectively locks the EU budget within pre-set ceilings that cannot be breached, not even during emergencies, unless a unanimous revision is agreed by all member states and ratified according to national constitutional requirements. This legal framework creates a rigid system that has trouble responding nimbly to shocks or scaling up investment. As such, negotiations are dominated by net contributor concerns and produce, by nature, lowest-common-denominator outcomes.

The result is paradoxical: although the EU aspires to strategic autonomy, climate leadership, and technological sovereignty it refuses to equip itself with the fiscal tools necessary. The constraints become particularly apparent when considering that effective EU-level public goods provision has been estimated to require spending closer to 2.5-3% of GNI, nearly double the 2028-2034 MFF proposed level. But the own resources ceiling remains frozen at approximately 1.26% of GNI, with minuscule changes since 1999 despite dramatically altered global circumstances.

Integration Requires the Normalization of Crisis Tools

The EU has historically used crises as catalysts for integration. But in the modern era, this simple narrative is complicated by the rise of extra-treaty agencies, the development of more and more “temporary” mechanisms outside of the scope of treaties, and ultimately the rigidity caused by the unanimity largely required for reform. European integration has gotten more ingenious in overcoming deadlocks, and this has added a layer of perplexity; at an increasing pace the answer to a crisis is less the expansion of supranational institutions and more the creation of ad hoc mechanisms. This implies that in the modern policy frameworks, integration requires an additional step: the normalization of crisis tools from the sphere of the “exceptional” into standard policymaking.

The COVID-19 pandemic demonstrated that the EU could overcome treaty-imposed fiscal limitations when political will exists. NextGenerationEU, worth €750 billion (€806.9 billion in current prices), represented a historic breakthrough. Through creative interpretation of Article 122 TFEU’s “exceptional circumstances” provision, the Commission issued common EU debt and channelled €672.5 billion through the Recovery and Resilience Facility (RRF).
The economic impact has been substantial: NGEU is estimated to have boosted eurozone GDP by around 1.5% by 2024, with about one-third of the effect coming from beneficial spillovers between member states. Recent ECB analysis projects that NGEU will increase euro area GDP by 0.4-0.9% by 2026 and 0.8-1.2% by 2031.

Yet rather than building on NGEU’s success, the 2028-2034 MFF represents a retreat to pre-pandemic orthodoxy. Instead of permanently integrating NGEU-tested fiscal machinery, like joint EU debt, larger budgets, and more flexible investment mechanisms, the MFF closes the books on extraordinary solidarity. This represents a fundamental strategic error. The pattern of relying on provisional solutions without anchoring them in the EU’s regular fiscal architecture risks perpetuating a cycle of inadequacy and reactivity, rather than building long-term resilience and strategic capacity.

Time to Get Serious
The Commission’s proposal represents a critical failure of ambition at a decisive historical moment. Europe cannot face the current challenges of the decade by sticking to obsolete rules. The economic evidence is overwhelming: an underpowered EU budget constitutes a structural barrier to European competitiveness, resilience, and strategic autonomy.
The MFF must be redesigned to incorporate permanent, flexible fiscal instruments capable of counter-cyclical intervention and scaling up public investments. Further, the EU must have the ability to issue common debt and finance its budget through it en masse. European leaders thus face a choice: keep on sliding down the slope of insignificance or finally match Europe’s resources to its stated ambitions. In the meantime, the mathematics of inadequacy speaks for itself; as the MFF currently stands, the EU is not “fit for a new era” but rather “barely-fit for yesterday.”