WOOD Flash – EU macro: Commission presents the new budget

The EU Commission’s proposed magnitude and structure of the new EU Budget cycle for 2028/2034 strikes a balance between securing a minimum size to meet all the Union’s urgent priorities, while respecting the objective political limits that prevent the EU from scaling up its financial firepower due to strong resistance to major new EU funding avenues. The proposal relative to the EU’s gross national income is at the smaller end of what we had expected; however, given that the current RRF programme is still lagging in deployment, that support for Ukraine is earmarked outside of the MFF, and that a new loan instrument of EUR 400bn for emergencies is also separate from the MFF, the message, overall, is that the EU will maintain its current financial support for its members, and it is continuing to find new ways to reduce the budget impact of the defence ramp up on its Member States. The country allocations are not available yet, but the implicit message signals a relative win for Poland, and a relative loss for Hungary, in our view.