As the EU faces growing economic and geopolitical challenges, its next Multiannual Financial Framework (MFF) must be more than business as usual. It will need to enable the EU to maintain financial stability, respond to new demands, and facilitate the EU’s competitiveness and autonomy in key sectors, which the Commission has described as a task akin to “squaring the circle.”
The MFF is the European Union’s long-term budget plan, setting spending priorities and limits over a period of several, typically seven, years. Each MFF is negotiated between the European Commission, the European Parliament, and member states. The Commission’s recent communication titled “The road to the next multiannual financial framework” highlights key policy and budgetary challenges for the next MFF, such as balancing ambitions with available resources, especially considering the reimbursement of NextGenerationEU, EU’s temporary recovery instrument, launched in response to the economic crisis triggered by the COVID-19 pandemic.
The communication echoes key findings from the Draghi Report on the future of European Competitiveness, pointing to critical weaknesses that must be addressed. Both documents note that Europe is not investing enough in research and innovation, making it harder to compete with the US and China. The figures are concerning. For example, the EU spent €381 billion on research and development in 2023, only 2.22 percent of its GDP, which is well below the 3 percent target. EU companies invested €270 billion less in R&D than US firms in 2023. Finally, only a tenth of public R&D spending happens at the EU level and it is spread too thin across different fields.
Both Draghi’s report and the EC’s communication conclude that the EU’s future competitiveness depends on a serious rethink of its priorities. One big issue is how EU money is currently spent. Right now, the budget is built around pre-set programs rather than policy needs. The Commission recognizes there is room for better coordination on this front and makes it clear about the way forward. In the communication, we read:
Overall, Europe’s future competitiveness will depend on our ability to start a new age of invention and ingenuity, putting research and innovation, science and technology, at the centre of our economy.
As Europe relies on innovation, including digital technologies, in the race to regain competitiveness, it is crucial that it continues to critically evaluate current funding structures before committing financial resources to newly designed funds. We have previously noted that the EU’s approach to investment in digital transformation tends to be too technology-driven. This approach has led to an overemphasis on “disruptive technologies” and speculative high-tech solutions, often at the expense of addressing practical public needs and strengthening basic digital infrastructure. In our recent publication, we make three recommendations that result from the analysis of the current framework for financing digital transformation from EU public funds. These recommendations are relevant to the campaign launched by the Commission in parallel with the communication and are therefore worth recalling.
Recommendation 1: Prioritize public digital infrastructure
Instead of emphasizing disruptive technologies, the EU should channel resources into strengthening public digital infrastructure, supporting these investments from the research phase to deployment. This approach would reduce Europe’s reliance on services provided by big tech and promote greater digital sovereignty.
Recommendation 2: Balance industry support with public value objectives
EU funding should ensure a balance between industry growth and public value by investing in projects that directly address well-defined public needs. Funding should support practical, digital solutions that allow people to participate in digital public spaces and enjoy their rights online.
Recommendation 3: Adopt a more critical approach to tech in funding
The EU needs to base its digital policy on a realistic assessment of technological impact, taking into account wider societal implications and avoiding the uncritical adoption of overblown narratives. This approach will help direct resources to practical, needs-based solutions and avoid speculative investments with limited public benefit.
