WHAT’S EUp? The great battle over the EU’s long-term budget for local governments

Unpacking the proposition of the European Commission


About

Publication date

18/09/2025

Related legislative initiative

EU Budget

In July, the European Commission presented its proposal for the EU’s next long-term budget (2028–2034): €2 trillion in total, including €168 billion earmarked for repaying the post-COVID recovery plan. Energy Cities unpacks the proposal, shares a first analysis, and outlines its two main demands for the next EU Budget: to invest in local institutional capacity as a guarantee of democracy, and to invest in affordable living through the strategic transformation of places.

What is the MFF? Why does it matter for cities?

Beyond priorities of the EU funding, the Multiannual Financial Framework (MFF) is a political project: it has funded the unique Common Agriculture Policy and invested in less developed regions for more than 3 decades to increase regional cohesion. Cities and regions benefit from EU funding for infrastructure, innovation, employment, community services, culture and education directly through EU projects (e.g. LIFE, INTERREG, Horizon) or indirectly through regional programmes (e.g. ERDF).

How does it work? What is new?

The Commission proposes to move from 7 headings to 4 and reduce the programme from 52 to 16 with the following structure:

Breakdown of the proposed next MFF budget according to the State of the Union report (September 2025)

Two of the four headers are essential to local governments:

  1. Economic, social and territorial cohesion; agriculture, rural and maritime prosperity; and security — €865 billion. The funds will be spent through 27 National and Regional Partnership Plans (NRP Plans), which detail their investments and reforms, following the same logic as the Recovery and Resilience Plans. The NRP plans will be based on the partnership principle and shared management. They do not provide earmarking for cities (like in the current ERDF) and regional programmes, only the option to integrate regional and territorial chapters “when relevant”. Environmental actions (part of the LIFE programme), agriculture, and social spending would be included in the NRP plans.
  2. Competitiveness, prosperity and security — €410 billion. This includes a new European Competitiveness Fund that will merges several programmes, including LIFE, a standalone and Horizon Europe (with an increased budget), a Connecting Europe Facility (mainly covering energy, mobility and defence cross-border investments).

The latter header will also include Erasmus+ (€41 billion) and AgoraEU (€9 billion). The programmes will respectively support education mobility, civil society and fight for fundamental rights and invest for the first time in media independence.

The Commission has proposed new “own resources” (beyond Member States’ contributions) to finance the next MFF, such as the EU Emissions Trading System, the Carbon Border Adjustment Mechanism, an EU-wide tax on tobacco, a levy on uncollected e-waste, and a corporate levy on companies with annual turnover above €100 million.

A new performance mechanism would monitor the effectiveness of the EU budget, using a list of standardised outputs and result indicators (over 70 pages long). These are grouped by policy area and weighted (0%, 40% or 100%) depending on their contribution to EU social and climate goals.

Finally, the Commission sets a 35% climate and environment spending target and a 14% social spending target for the entire budget. The “Do No Significant Harm” (DNSH) principle would also be extended to the whole budget.

Energy Cities’ opinion

The proposed MFF structure risks locking Europe into a double centralisation of funding: at the EU level, through competition funds and top-down programmes, and at the national level, through national and regional partnership plans. This is a recipe for failure as it sidelines local realities. We risk having 27 competing agendas across the EU disconnected from local needs, with symbolic but weak partnership and governance provisions, and having funds that do not deliver, as already seen with the fragmented Recovery and Resilience Facility, which is being used as a model.

Reforms linked to these plans could be an opportunity to train municipal staff for the ecological transition, adapt fiscal and budget rules for long-term green investment, and strengthen public services that support both well-being and the transition. But the agenda of reforms asked in exchange of National and Regional Partnership Plans and its governance is so far unclear.

The performance indicators must go further, to measure local impact, and wellbeing of today and for tomorrow. Democracy and the rule of law must be at the centre of the budget, ensuring that all local authorities can access EU funds, even in the case of political weaponisation by national or regional authorities.

Our demands

1 – Invest in local institutional capacity as a guarantee of democracy & resilience

  • Foster long-term investment planning for every territory and Connect National and Regional partnership plans to reforms that adapt public budgetary rules to the challenge of resiliency and reinforce local institutional capacity
  • Set up performance indicators to encourage local investment that fosters independence and avoids future resource depletion and public expenditures
  • Ensure direct access to EU funds for local authorities in case of political weaponization by their national or regional governments

2 – Invest in affordable, good living through the strategic transformation of places

  • Make mandatory the integration of a territorial chapter in National and Regional partnership Plans with minimum earmarking for integrated territorial investments (e.g. with a Territorial Experimentation Fund)
  • Create an EU budget spending committee at the national and regional levels to discuss with local and regional authorities and various stakeholders the spending of the EU funds
  • Prioritise infra-territorial cooperation over competition in the Competitiveness Fund to invest in local ecosystems

Read our full analysis and proposals here.

What’s next

The negotiations will kick off now in the European Council and Parliament and last until 2027. Energy Cities, as part of the local alliance, will make local governments’ voices heard. If you want to get involved at the national or European level, please reach out.

If you want to know more, stay tuned for our upcoming Q&A on the next MFF and our next article of this series of What’sEUp, breaking down the future MFF for our cities.  


We thank the French Agency for the Ecological Transition (ADEME) for their financial support that enabled us to write this article.