Council adopts negotiating position on national and regional partnership plans.

On 16 June, the General Affairs Council adopted its partial negotiating position on the Regulation on national and regional partnership plans, thereby defining its position on the new structure of the Multiannual Financial Framework (MFF) for 2028–2034. The Council maintains the link between the allocation of funding for social policy measures and the implementation of national reforms. Luxembourg was the only Member State to oppose this approach during the meeting and voted against the partial negotiating position. It warned against using funding intended to safeguard social cohesion as leverage to enforce social policy reforms.

New governance framework

The Commission's proposal for the 2028–2034 MFF envisages that a substantial share of EU funding will in future be channelled through so-called National and Regional Partnership Plans (NRPPs). These are intended to bring together several previously separate programmes – including the Cohesion Fund and the European Social Fund Plus (ESF+) – under a single framework. At the same time, the disbursement mechanism is set to undergo a fundamental change: Instead of direct allocations to regions and local authorities, funding will in future be channelled through the national budgets of the Member States, which will subsequently decide how the resources are allocated. The release of funding will be conditional upon the implementation of reform plans agreed in advance with the Commission. The crucial point is therefore not so much the formal restructuring of the programmes as the new conditionality mechanism, which links the allocation of funds closely to progress on national reforms.

This model is based on the Recovery and Resilience Facility (RRF) established in the wake of the COVID-19 pandemic. Under the RRF, the disbursement of funding was made conditional upon the implementation of specific reforms and investments aligned with the country-specific recommendations. This principle of "cash-for reforms" is now intended to become a permanent feature of the EU budget. As a result, the country-specific recommendations, which have so far been politically non-binding, are likely to gain considerably greater practical significance. As in previous years, this year’s country-specific recommendations call on Germany to limit tax-funded transfers to the pension system (see our news on the European Semester spring package).

Luxembourg warns against reform pressure through EU funding

It was precisely this close link between EU funding and national reforms that was Luxembourg’s main point of criticism during the vote in the Council. In the view of the Luxembourg government, social policy remains a core competence of the Member States. Social policy reforms must be decided through national democratic debate. If, on the other hand, the impression arises that these are being dictated from Brussels, this does not strengthen Europe but rather plays into the hands of populist and Eurosceptic forces.

Study commissioned by Parliament

The concerns raised by Luxembourg are also reflected in a recent study commissioned by the Committee on Employment and Social Affairs (EMPL). The study analyses the implications of the Commission’s proposal for the MFF 2028–2034 on employment and social policy, as well as on the future governance of the EU budget.

The authors conclude that the planned increased control over EU funds by the Commission and Member States under the NRPP carries the risk of weakening democratic oversight by the European Parliament. They also point out that, unlike previously, the proposed ESF Regulation is no longer intended to include its own financial framework. They also criticise the fact that the funding of specific social policy measures is to be made conditional on macroeconomic reforms in future, even though there is often no direct link between the two.

Less funding for social affairs

In addition to the changes to governance, the Commission’s proposal also provides for a shift in spending priorities within the EU budget. Whilst in the current Multiannual Financial Framework more than 60 per cent of funding is allocated to the Common Agricultural Policy (CAP), the ESF+ and the various cohesion policy funds, the proposal for the period 2028–2034 reduces this share to 47 per cent. Of this, at least 14 per cent is to be earmarked for social objectives. However, how this quota is to be implemented and safeguarded in practice remains the subject of further negotiations. The aforementioned study also criticises this point. The outstanding clarifications of the rules governing the funds earmarked for social objectives are crucial. Only clear rules can prevent funds intended for social purposes from being reallocated or misused.