Europe stands at a crossroads. Negotiations on the 2028–2034 Multiannual Financial Framework (MFF), the EU’s long-term budget, are now underway. Often dismissed as technical number-crunching, these talks will determine whether Europe can regain competitiveness in a challenging geopolitical landscape.

At the heart of the MFF negotiations is the European Commission’s radical “Multi-Fund” proposal, which would merge traditional EU programmes—including cohesion, agriculture, migration, and security funds—into a single instrument. This consolidation entails major potential cuts to cohesion funding, justified by claims that the redirected resources will strengthen competitiveness and defence. However, this trade-off risks backfiring by undermining the economic resilience and social cohesion that Europe needs to regain its competitive edge.

The Multi-Fund proposal comes at a time of profound structural challenges and an urgent need for a modernised EU budget. Europe faces pressing investment demands driven by the climate transition, digitalisation, industrial restructuring, demographic shifts, and mounting geopolitical pressures. Relying on old approaches will not meet these challenges.

Yet the negotiations revolve around familiar fault lines. While the European Parliament, regional actors, trade unions, think tanks, and scientists repeatedly stress the need for forward-looking investment to support EU transformation and economic resilience, several member states in the Council remain primarily focused on budgetary restraint.

Countries such as Germany, Sweden, Austria, and the Netherlands have committed to a strict fiscal path, insisting on cuts to the proposed EU budget. They argue that the Commission’s plan is inflated and incompatible with tight national finances. Yet this claim is difficult to justify: the proposal would raise the budget by a mere 0.02 percentage points of EU gross national income—from 1.13 per cent to 1.15 per cent—amounting to €1.76 trillion (based on 2025 figures, and excluding repayment for Next Generation EU debts). Framing such a modest increase as “excessive” overlooks the scale of Europe’s structural challenges. Organised civil society, including trade unions and business associations, has therefore called for a “substantial increase in real resources of the future EU budget” in the European Economic and Social Committee.

More importantly, this debate exposes a deeper strategic flaw: instead of investing in long-term growth and regional competitiveness, the EU risks prioritising short-term savings that could undermine the very economic resilience it claims to protect.

Social investment faces the sharpest cuts

The proposed reductions could prove especially damaging to social investment. While the European Commission insists there will be no reductions to the European Social Fund Plus (ESF+), the EU’s main instrument for supporting quality jobs and social inclusion, this claim does not withstand scrutiny. As the German Trade Union Confederation (DGB) has shown, the ESF+ faces cuts of around 26 per cent compared to the current period.

The Commission’s calculations rest on a broadly expanded definition of social investment and on loans from a newly created “Catalyst Europe” facility. This is misleading. Catalyst Europe provides repayable loans, whose uptake is highly uncertain given strained national budgets. Moreover, such loans are ill-suited for social investments, which typically do not generate direct financial returns. By treating these loans as guaranteed funding, the Commission artificially inflates its figures, presenting a distorted picture of available resources for social initiatives.

The consequences are serious. The ESF+ funds training, upskilling, labour market integration, and support for workers affected by restructuring. It underpins the human capital essential for economic development. Reducing these resources sends a troubling signal: that skills, employment security, and social resilience are optional rather than foundational to Europe’s long-term economic success.

Cohesion policy is often dismissed as redistributive spending that cannot be justified in times of lagging competitiveness—but this view overlooks its crucial economic role. Numerous analyses show that structural investments generate measurable long-term gains in regional GDP. These benefits stem from improved transport and digital infrastructure that supports businesses, a better-qualified workforce that drives innovation and adaptability, and stronger local networks connecting academia, government, and industry—accelerating knowledge transfer and the spread of new technologies. In short, more productive and innovative regions strengthen the entire single market. If these support structures are cut, it is not just individual locations that suffer; the entire EU economy loses out.

Centralisation threatens what makes cohesion policy work

EU cohesion policy is not just for the least developed regions—it benefits all EU regions. Its proactive approach shields regions from falling behind, equipping them to navigate economic and industrial transformations: a task that has become more urgent than ever given today’s rapidly changing economic and geopolitical context. Yet the next MFF no longer guarantees funding for regions in transition—those most exposed to structural change. This shift threatens to widen single market inequalities, slow long-term development, and aggravate labour mismatches, ultimately weakening EU competitiveness.

This risk is further compounded by plans to replace the traditional Operational Programmes with centrally managed National and Regional Partnership Plans (NRPPs), which undermine the principle of shared management. By moving decision-making to the national level, social partners and regional authorities—who have been key to aligning investments with local needs and labour market realities—would be sidelined. This defies evidence, given that place-based investment strategies consistently outperform one-size-fits-all, centralised approaches in addressing structural weaknesses and driving long-term growth.

Beyond these economic effects, cohesion policy also strengthens political resilience. Research shows that regions benefiting from cohesion policy are less susceptible to support for extremist parties, highlighting the policy’s role not only in economic development but also in maintaining political stability and trust in EU institutions.

The political stakes have never been higher. Europe must remain competitive, innovative, and socially just—and the MFF is central to achieving these goals. Cutting or reorganising cohesion and social funds, like the ESF+, in ways that dilute their impact would threaten social progress, political stability, and economic performance alike.

Policymakers face a clear choice during the negotiations: use the next budget to invest in regions, skills, and social resilience, or pursue a narrower path of consolidation and ill-suited reforms that weaken cohesion and undermine the very competitiveness they aim to protect. Especially in an era of intense global competition, Europe needs an investment logic, not austerity: investment in regions, in people, in future-ready jobs, and in the resilience of communities. Cohesion policy is not a luxury—it is a strategic advantage. An MFF that abandons it risks weakening Europe permanently.