Cash for reforms – are national competences coming under pressure?

Every seven years, the debate over money returns to Brussels as the European Union (EU) negotiates its next Multiannual Financial Framework (MFF). Public debate tends to focus on two questions: how large should the EU budget be – and what should the money be spent on? For the 2028–2034 MFF, however, this perspective falls short. Beyond the headlines about the budget of around two trillion euros, several things are different this time.

The European Commission’s proposal, presented in July last year, is not limited to the size and allocation of the EU budget: it envisages fundamental changes to the way EU funds are allocated. To this end, the European Commission proposes National and Regional Partnership Plans (NRPPs). These plans are intended to bring together reforms and investments designed to address the specific national and regional challenges they face. The disbursement of funds is to depend on whether previously agreed milestones and targets have been achieved.

What may initially sound like a technical change to the structure of the EU budget could have far-reaching political consequences. This is because reforms linked to EU funding may also affect areas of national social policy, such as pensions. These policy areas remain largely the responsibility of the Member States, but are already subject to economic and social policy coordination under the European Semester.

The principle of “cash for reforms” could give this form of European governance a new dimension. If EU funding is linked more closely to the implementation of agreed reform objectives, the EU-level influence over national reform processes could increase. So who will set the direction in future – and how far should European governance extend? These are questions that also matter for social security.