Making the EU’s Multiannual Financial Framework Fit for Purpose

IMF Working Papers, June 13, 2025

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The Multiannual Financial Framework (MFF) is a key tool for enhancing economic efficiency, achieving redistribution, and helping the Union tackle pressing challenges.
The EU faces an increasingly complex global environment and looming structural and demographic changes that increase the need for decisive EU-level actions to boost productivity and resilience.
The MFF is identified as a critical policy lever to enable required EU-level actions.

Bottom-up estimates indicate spending on European Public Goods to boost productivity and resilience needs to be increased to at least twice the current level.
Achieving this would require an at least 50 percent increase in the budget’s size or about 0.6 percent of EU GNI annually (if spending on programs such as the Cohesion Policy and Common Agricultural Policy is kept unchanged).
Focusing on activities that maximize positive externalities and reduce costly duplication can generate net positive values for member states.

Reforms are needed to make the budget more streamlined and responsive to evolving needs.
The budget should be made more effective by incentivizing good performance.
A clearer focus on strategic investments and measurable outcomes is recommended to reinforce the budget’s positive sum value and help build support for a more ambitious EU budget.

Integrate borrowing as a regular tool within the financing framework.
Bolster debt service capacity through greater own resources.
Increase own resources by about 0.2 percent of GNI annually to cover peak debt servicing costs.
Maintain additional reserves for unexpected challenges to provide financial security to support the proposed increase in the budget.

A combination of: (i) at least doubling spending on European Public Goods, (ii) streamlining and performance-oriented reforms, and (iii) a strengthened financing framework with regular borrowing and increased own resources, is argued to make the next MFF (2028-34) fit for purpose by boosting productivity, resilience, and net positive value for member states.

Source: Making the EU’s Multiannual Financial Framework Fit for Purpose, IMF Working Paper (June 13, 2025).