The European Commission wants a simpler and more focused MFF: What will this mean for the Netherlands?

On the 28th of March, the Dutch government adopted its position on the European Commission’s initial proposals for a more focused, flexible and simpler Multiannual Financial Framework. Meanwhile, parties such as the Association of Netherlands Municipalities (VNG) and the Committee of the Regions have expressed their concerns. Among others, they fear a lack of regional input, the risk of greater regional disparities and reduced room for ‘place-based approaches’ in the Commission’s plans.

Building on our longstanding experience in operating in the European funding landscape, we recognise the importance of the reforms the Commission has proposed but are also conscious of the implications and challenges these might also bring. In this blog, we take you through the European Commission’s most noteworthy proposals and discuss what these might mean for Dutch organisations.

In February, the European Commission offered a first insight into its plans for the Multiannual Financial Framework (MFF). Although the plans are to be shaped further in the coming months, it is already clear that much will change in the European funding landscape from 2028 onwards. Time therefore to take a closer look at what we know, what is still uncertain and how the Commission’s ideas might work in practice. In this blog, we offer a first overview. In the coming weeks, we will be zooming in further on some of the particular aspects involved.

The current European funding landscape is complex, with more than 50 programmes. This includes some that are managed from Brussels, such as LIFE (biodiversity), CEF (infrastructure), Horizon Europe (research) and I3 (innovation). Other programmes, such as CAP (agriculture), ESF+ (labour market) and ERDF (regional development), although set up in Brussels, are further fleshed out and implemented nationally or regionally.

It should not come as a surprise therefore that there is some overlap between all these programmes, and that parties often struggle to determine which programme best suits their idea. As a result, the European funding landscape is (too) often a consequence of the structures of the funds rather than the objectives that these funds should help to achieve. At the same time, Europe is also betting on multiple horses, with programmes in almost every conceivable policy area, thereby fragmenting the funding available per policy area.

In part due to this fragmentation, European funding in areas such as critical technologies or defence is oftentimes dwarfed by the dollars or yens that are being thrown around in the United States or China.

The European Commission wants to change this: fewer funds, more focus and slimmed down rules. This sounds like common sense, but what does it mean in practice? And what are the areas of concern?

The European Commission intends to create a European funding landscape that is simpler, more focused, more flexible and more dynamic. It wants to move towards a “true policy-based” budget and build on the Strategic Technologies for Europe Platform (STEP), which allowed funds from both centrally and decentrally managed programmes to be reallocated to a set of strategic technologies.

In the new MFF, only two major funding structures remain, according to the Commission: National Envelopes and a European Competitiveness Fund.

National Envelopes are intended to foster economic, social and territorial cohesion within and between European regions. They will include at least the current ESI funds, such as the ERDF, ESF+, CAP and EMVAF. Member States will be given a greater degree of freedom to determine their spending on, for example, agriculture, the labour market or innovation.

Yet, Member States will not be left with a completely free hand. The Commission intends to explicitly link the National Envelopes to reforms proposed as part of the European Semester. In doing so, the Commission is hoping to encourage member states to implement necessary reforms: i.e. the metaphorical ‘carrot and stick’.

The European Competitiveness Fund should become a targeted instrument, focusing on a limited number of strategic technologies and sectors within Europe. This is essential if it is to create the critical mass necessary in the area of key technologies.

Unlike the National Envelopes, which focus on cohesion, the Competitiveness Fund revolves around excellence. The strongest ecosystems within priority technology areas are expected to work together, invest in innovations and take these to market. Its overarching ambition: ‘More bang for our European buck’.

Although the Commission has not yet defined the themes, we expect, based on the STEP platform and current geopolitical needs, to see a focus on:

That may seem manageable but the span of these topics remains huge. It is likely, therefore, that the Competitiveness Fund will function as an umbrella fund over existing programmes such as Horizon Europe, Digital Europe, LIFE, EU4Health and the European Defence Fund.

Figure 1: An overview of the funds under the current STEP platform . Could it be the blueprint for the Competitiveness Fund (left) and the National Envelopes (right) that the European Commission is pushing for.

(source: https://strategic-technologies.europa.eu/about_en)

Complexity
At first glance, the European Commission’s proposals seem to make a lot of sense. The complexity of the current funding landscape and the overlap between the dozens of programmes have long been familiar bottlenecks for applicants. The idea of streamlining and making the landscape more manageable is therefore appealing.

However, the question is whether the creation of two major instruments, the National Envelopes and the European Competitiveness Fund, would really make it easier for Dutch parties to apply for European funding. Much will depend on the exact design of the Competitiveness Fund in particular. The intention to replace the divergent rules, formats and governance structures of the existing programmes by one common framework is in itself an important step forward. This will mean that applicants will soon no longer have to choose between a LIFE, Horizon Europe, I3 or Interreg application, each with its own requirements and procedures.

Yet this also raises new questions. What exactly will the governance of this programme look like? Will it be a genuinely coordinated fund, with a single central implementing organisation? Or will it in fact consist of several sub-programmes, each managed by its own directorate or agency within the European Commission? In the latter case, there is a risk that the simplification which the Commission has promised will exist only on paper, while in reality applicants will still be faced with divergent procedures and points of contact.

Focus
The current geopolitical context, the recommendations made by Draghi, Letta and others, and the pressure on the European budget as a result of the repayment of NextGenerationEU loans are forcing the Union to make firm choices. The European Commission wants to make Europe more competitive with targeted investments in critical technologies, defence and climate, among others. But even the European Union can only spend its euro once. For that reason, it must set clear priorities and accept that this will mean it cannot finance some of its other ambitions.

Whether the Commission is able to do so will depend on how clearly it is able to determine, together with market players and Member States, in which technological areas Europe can actually assume a leading position. At the same time, a political dynamic will inevitably emerge: every Member State and region will want to benefit from the Competitiveness Fund. This may strain the Commission’s intention to narrow its focus to a limited number of strategic themes.

A possible compromise is already beginning to take shape: some regions will fit perfectly within the objectives of the Competitiveness Fund and will have no trouble positioning themselves there. Other regions, however, may find it harder to align but could instead benefit from a larger national envelope as compensation. This suggests that the Commission is steering towards a functional separation between investments in competitiveness (excellence) and investments in cohesion.

Empowering Regions
To be entitled to the full scope of National Envelopes, member states will have to submit a national plan indicating how they will implement proposed reforms as part of the European Semester. This implies a strong national steer of these European funds, whereas historically funds such as the Common Agricultural Policy and the Cohesion Funds have been characterised by strong regional involvement.

This raises important questions about the future governance of the National Envelopes and the role of Dutch regions. Will provinces and regions still be at the table when national plans are drawn up? Will these plans offer sufficient room to meet regional needs, or will frameworks be largely predetermined nationally?

Likewise, it remains unclear how the National Envelopes will be put into practice. Will regions receive separate sub-envelopes per theme or one broad envelope in which all priorities come together? And, not unimportantly: could Dutch regions even miss out on European funds soon if the Commission deem that the national government has not made sufficient progress in implementing proposed reforms?

Interregional cooperation
It remains unclear to what extent funds for cooperation between regions, such as Interreg, the European Urban Initiative (EUI) or the I3 programme, will fall under the umbrella of National Envelopes. Whereas the Commission wants to promote excellence and cooperation between regions on a limited number of European priorities within the Competitiveness Fund, regions will still feel the need to (also) cooperate in other areas with their European partners across borders.

While the exact form remains unclear, the European Commission will, in any case, have to determine how interregional cooperation can be encouraged within the National Envelopes, without diluting the regions’ “own” resources as a result. At the moment, there is comparatively little use of opportunities to cooperate with other European regions within the ERDF programme, while, at the same time, programmes such as Interreg and I3 enjoy great popularity.

If implemented, the European Commission’s plans will radically change the European funding landscape. While much is still uncertain, clear trends are already beginning to emerge: fewer funds, more focus, as well as a stronger national steer.

In the coming blogs, we will explore some key topics such as the new partnerships between state and region, the balance between competitiveness and cohesion, and performance-based reporting.

Of course, we are also keeping a close eye on the latest developments. On the 12th of May, for instance, we will attend DG Grow’s “From InvestEU to the European Competitiveness Fund” event. Should you run into us, please feel free to approach us! Not attending but interested in exchanging ideas, please send me a message.