EU Financial Framework | What you should know about EU finances

• How does the Multiannual Financial Framework differ from the EU budget?

The Multiannual Financial Framework (MFF) is the European Union's most important planning instrument for its spending, usually over a seven-year period. It determines how much money the EU may spend overall and which policy areas benefit from it .

The EU's annual budgets must be based on the MFF framework. Their composition is regulated by the EU treaties.

• How is the MFR composed?

Around two-thirds of the MFF comes from so-called own resources, primarily from contributions from member states based on their gross national income. Some countries, such as Germany and the Netherlands, receive rebates. Additional revenue comes from a portion of value-added tax (16 percent), customs duties on imports from non-EU countries (13.8 percent), and new own resources such as the plastics levy or emissions trading (just under five percent).

The current MFF runs from 2021 to 2027 and comprises approximately €1.2 trillion. It is supplemented by the temporary recovery instrument "Next Generation EU," with up to €800 billion, which is intended to cushion the impact of the coronavirus pandemic. This program is based on loans secured by the EU budget. Formally, it is outside the MFF but complements it. Germany is the largest net contributor but also benefits significantly from EU funding.

MFF funds are distributed across seven key policy areas defined in the EU treaties. The largest items are the Common Agricultural Policy and Cohesion Policy, which promotes regional development. Other areas include the internal market, innovation and digital, neighborhood and international cooperation, migration and border management, security and defense, and European public administration. In the future, additional expenditure will be allocated to repaying loans and interest from the "Next Generation EU" program . This money was primarily used for infrastructure, digitalization, and climate protection projects. According to estimates, up to €30 billion must be repaid annually—funds that could be lacking elsewhere.

• Who benefits from the funds?

Through the Common Agricultural Policy, by far the largest pot of funding in the EU budget, agricultural businesses, including many companies in Germany, receive extensive subsidies. While many climate and environmental protection measures have recently been supported, the requirements are to be relaxed again in the future – also a reaction by the conservative-led Commission to the farmers' protests of recent years .

The Regional Development Fund and the Social Fund support projects for green and digital transformation, rail expansion, electromobility, and ecological transformation across the country. Innovations and skills development measures are also supported. The Cohesion Fund primarily helps regions in Central and Eastern Europe. With the "Next Generation EU" program, the EU has also responded to extraordinary challenges such as the coronavirus pandemic and the war in Ukraine.

• Who decides on the budget?

The decision on the MFF is complex and takes place in several stages. The EU Commission will present a draft this Wednesday. The Council of the EU and the European Parliament will then discuss it. The Council must adopt the MFF unanimously, and the Parliament must approve it with an absolute majority. After adoption, the annual budgets will be adopted and implemented based on the MFF.