The following is an adaptation of an article written by Bernadett Petri, a researcher at the University of Public Service Institute for Strategic Studies, originally published in Hungarian on the Five Minutes Europe blog of Ludovika.hu.
The 2028–2034 Multiannual Financial Framework (MFF) marks a comprehensive overhaul of the European Union’s budgetary system: within the approximately €1.8–2 trillion framework, the focus on cohesion is increasingly being replaced by a focus on competitiveness, particularly through direct funding and new instruments such as the European Competitiveness Fund. Fund allocation is becoming increasingly performance- and excellence-based, which, according to current data—where 65–70 per cent of direct EU funding is concentrated in the more developed regions of Western Europe—could further widen regional disparities. Although the European Commission is urging a swift agreement, a delay is realistic due to the European Parliament’s new negotiating strategy, which could also cause delays in payments. For Hungary, this represents both a funding risk and a need to adapt: the key to success will be strengthening innovation capacities and increasing participation in direct funding.
The Topic of This Week’s Council Meeting in Cyprus: The Political Framework of the MFF
The European Union’s Multiannual Financial Framework (MFF) for 2028–2034 could mark a turning point in the history of integration that goes far beyond the technical renewal of budget cycles. The framework currently under development is not merely a resource allocation mechanism, but a strategic blueprint for the Union’s future functioning: it is both a response to the global realignment of power and an attempt to redefine the internal operating model. Given the scale and depth of the changes, this MFF clearly foreshadows a systemic transformation that shifts the focus of the EU budget increasingly from a logic of cohesion toward a logic of competitiveness.
‘For Hungary, this represents both a funding risk and a need to adapt’
The process enters a critical phase politically these days, when the heads of state and government of the European Council meet for an informal session in Cyprus on 23–24 April, at the invitation of President Nicos Christodoulides. The meeting has two objectives: first, to define European responses to the deteriorating geopolitical environment, and second, to provide political guidance to accelerate MFF negotiations. The stated goal is to reach an agreement by the end of the year, which is an extremely ambitious timeline compared to previous cycles, especially given that the volume of the framework under development could reach €1.8–2 trillion, representing an increase of approximately 40–60 per cent compared to the current cycle of around €1.2 trillion.
This urgency stems from several mutually reinforcing factors. For the European Commission, a key issue is ensuring that the EU can quickly mobilize concentrated resources in strategic sectors amid global competition—particularly the United States’ $369 billion industrial policy stimulus package under the Inflation Reduction Act and China’s state-driven technology investments. In addition, an institutional transition is approaching, which could completely reopen the entire framework in the event of protracted negotiations. It is also worth noting that, due to the introduction of new own resources—such as ETS revenues, the CBAM (carbon border adjustment mechanism), or contributions from large corporations—there is a desire to ensure predictability for financial markets as well. But the most important factor is still political, as certain upcoming national elections—primarily in France—would significantly jeopardize the current framework of the MFF agreement.
At the same time, it is becoming increasingly likely that a year-end agreement will not hold. The European Parliament is adopting a new negotiating strategy: it refuses to begin negotiations on sectoral legislation until the member states agree on the total size of the budget. This position was also confirmed by chief negotiator Siegfried Mureșan. This move represents a reversal of the previous negotiating logic and significantly increases the risk that the agreement will be delayed until 2027. According to diplomatic sources, such a delay could have concrete financial consequences: the disbursement of tens of billions of euros in agricultural and cohesion payments could be postponed until the beginning of the 2028 cycle.
What Will the New Resource Allocation Logic Look Like?
One of the most fundamental structural issues in the budget debate is the distribution logic the EU uses to reorganize its resources. Under the traditional model, funds such as the European Regional Development Fund, the European Social Fund, and the Cohesion Fund accounted for approximately 30–35 per cent of the total budget and were primarily aimed at catching up. In contrast, the allocation of direct EU funds—such as Horizon Europe (~€95.5 billion), the Digital Europe Programme (~€7.5 billion), and the Innovation Fund (tens of billions of euros from ETS revenues)—is already highly concentrated.
Based on available data, more than 65–70 per cent of direct funding goes to Western and Northern European member states, while the share of the entire Central and Eastern European region typically ranges between 10–15 per cent. In the case of Horizon Europe, for example, Germany, France, and the Netherlands together attract nearly half of the funding, while the share of the entire V4 region often does not even reach 5–7 per cent. At the regional level, the concentration is even stronger: the EU’s 20 most developed NUTS 2 regions draw down more direct funding than the remaining 230 statistical regions combined.
‘Resources will flow primarily to areas with strong innovation and industrial capacity already in place’
This concentration effect could be further amplified under the new budget structure by the creation of the European Competitiveness Fund, which could amount to 350–400 billion euros. The fund’s allocation logic will focus on performance, excellence, and impact, meaning that resources will flow primarily to areas with strong innovation and industrial capacity already in place.
While this approach may improve the EU’s global competitiveness in the short term, it will structurally exacerbate regional disparities. According to Eurostat data, the difference in GDP per capita between the richest and poorest regions in the EU already exceeds a threefold level (for example, certain regions of Luxembourg or Ireland vs regions of Bulgaria or Romania). The concentration of direct funding and the Competitiveness Fund’s excellence-focused logic could further widen this gap.
The debate thus essentially revolves around two models: efficiency- and performance-based resource allocation, and an approach that prioritizes catching up and cohesion. The current proposal clearly reinforces the former, thereby opening new political fault lines among member states. More developed economies—particularly Germany, France, and the Netherlands—support the performance-based system, while less developed countries advocate for maintaining geographical balance and broader access.
The transformation of the governance model further reinforces this trend. Strategic decisions are increasingly falling into the hands of the European Commission, while member states are granted greater freedom in the use of funds. This duality is accompanied by a weakening of previous safeguard mechanisms, which could particularly reduce the effectiveness of cohesion policies.
Is There Any Chance of a Quick Agreement?
Overall, the negotiations surrounding the 2028–2034 MFF represent not merely a budgetary debate, but a fundamental political conflict over the future of European integration. Efforts to reach a quick agreement, combined with deep structural conflicts of interest, suggest that the process will drag on and the original deadline will not be met. And the stakes go beyond the numbers: the question is whether the European Union will remain a community built on cohesion in the future, or whether it will evolve into a more centralized, competitiveness-oriented structure.
‘The current low share of direct funding…could result in [Hungary’s] relative position deteriorating within the EU funding system’
For Hungary, this could have particularly sensitive consequences. The current low share of direct funding—around 1–2 per cent in many programmes—combined with the expected reduction in cohesion funds, could result in the country’s relative position deteriorating within the EU funding system. The excellence-focused logic of the Competitiveness Fund further exacerbates this risk, as funds may become concentrated in countries with more developed innovation ecosystems. In this environment, Hungary’s most important strategic tasks will be to strengthen its innovation capacities, increase participation in international consortia, and radically improve the institutional and professional conditions for accessing direct EU funding.
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