“The Status Quo is Not an Option”

Having been Director-General for Budget at the European Commission for three years, Stéphanie Riso has been one of the key architects of the most ambitious budget proposal to date, the EU’s Multiannual Financial Framework (MFF) for the period 2028-2034. This proposal introduces significant structural shifts with the aim to make the budget more flexible and responsive to new challenges. In an online lecture on 4 March 2026, held as part of the lecture series “The Future of the Fiscal and the Social State in the European Union”, jointly organised by the Max Planck Institute for Social Law and Social Policy and the Max Planck Institute for Tax Law and Public Finance, Stéphanie Riso outlined the rationale behind the new budget proposal and the crises-driven developments that have shaped its evolution.

Once a “connoisseur issue”, of interest only to a small circle of specialists, the EU budget now attracts a great deal of attention, said Riso, who has been working for the Commission for 25 years. Unlike national budgets, it is a budget designed for long-term investment and is therefore planned on a seven-year cycle. Revenue is mainly driven by national contributions. The EU’s own resources are limited and include, for example, customs duties and a levy on non-recycled plastic waste. In order for the budget to come into effect, it has to be adopted unanimously by the Member States and with the majority approval of the European Parliament. In addition, as with treaties, national ratification is required. This “hyper-consensual procedure”, Riso stated, creates a distinctive negotiation dynamic that oscillates between arguments about the EU’s added value and the logic of juste retour (what do we get for our money?), which largely ignores the benefits of joint action.

The crises of the past two decades – the Eurozone crisis, the COVID-19 pandemic, the war against the Ukraine and the related energy crisis – have exposed the limitations of a very rigid budget structure in responding appropriately. Following the Lisbon Treaty, signed in late 2007, the EU had already begun to substantially adjust its budget to transnational challenges such as the green and digital transformation. Grants were increasingly used to expand the budget’s financial capacity. However, the “game changer” for overcoming the ‘no mutualisation” taboo and using joint borrowing came with the SURE and NextGenerationEU (NGEU) programmes, designed to mitigate the economic and social consequences of the pandemic. The latter nearly doubled the financial capacity of the budget. “Since then”, Riso said, “borrowing has been used to answer every crisis”, as has recently been the case with SAFE (Security Action for Europe), a financial instrument that comprises 150 billion euros and aims at speeding up Europe’s defense readiness.

Given the Union’s growing financial role, Riso argued that “the EU needs to restructure the budget to ensure new synergies, to increase budget capacity to adapt to new priorities and to allow for more flexibility”. The proposed MFF for 2028-3034 seeks to achieve these objectives by simplifying the budget structure, among others. The number of budget headings was cut down from seven to four, leaving greater room for manoeuvre. Moreover, programmes shall be streamlined from 52 to 16 in order to reduce fragmentation and overlaps. The bulk of the roughly two trillion euro budget, equivalent to 1.26% of EU Gross National Income (GNI), is to be invested in agriculture and cohesion (44%) – now combined under one umbrella – through National and Regional Partnership Plans. A further 21% is earmarked for a new European Competitiveness Fund, which focuses on European public goods such as clean energy, the digital transition, defense as well as on research and innovation through the flagship programme “Horizon Europe”. 10% of the budget shall be used to advance the EU’s relationship with third countries, while 8% are envisaged for the repayment of NGEU debts.

Serving traditional interests and new priorities at the same time will require the tapping of new resources. To this end, the Commission proposes changes to existing own resources and the introduction of new ones, e.g. a Tobacco Excise Duty Own Resource. These measures are expected to generate an additional revenue of 65.6 billion euros per year. To enhance flexibility, notably in times of crises, the Commission also suggests a crisis mechanism to be built directly into the MFF. This would allow the EU to provide additional financial support to Member States, primarily through EU-backed loans raised on capital markets.

An agreement on the new budget is not likely to be reached before the end of 2027. Nevertheless, Riso stressed, “there is growing consensus that the status quo is not an option”. Major changes on the expenditure side, she argued, will only be possible if accompanied by fundamental changes on the revenue side. However, Stéphanie Riso acknowledged that “Member States have not entirely digested the consequences of that.” The current volatile geopolitical environment may help in finding an agreement – just as previous exogenous shocks have already contributed to the dissolution of the traditional divide between north and south. Although the juste retour mentality remains widespread among Member States, Riso noted that countries now viewed the EU differently and had a stronger sense of belonging to the EU.

In the ensuing discussion, the question was raised as to what extent the new National and Regional Partnership Plans would rely on conditionality. In her reply, Stéphanie Riso confirmed that there was a conditionality regulation, notably regarding the adherence to the rule of law. Moreover, the regime shall be applied in a more systematic way than in the past, when “different conditionalities applied”.

While the results of the budget negotiations remain to be seen, Riso ventured a prediction: “Considering the past, we will have either a very bad or a very good outcome. Something in the middle is difficult.”