The European Union is gearing up for its next long-term budget cycle, the Multiannual Financial Framework for 2028–2034, amounting to almost EUR 2 trillion. This framework, proposed in July 2025, is likely to bring significant changes to how EU structural and investment funds operate. In particular, the European Commission has proposed reforms to make funding simpler, faster, and stronger, while consolidating multiple funds into a single overarching structure. For policymakers and practitioners – including in countries like Ukraine that are aligning with EU standards – it is crucial to understand how these structural funds operate today, what changes are under discussion for the future, and what the implications might be for governance and implementation on the ground.

To make sense of the evolving landscape of EU structural funding, we've drawn on official EU sources, policy and position papers, and engaged Mr. Francesco Molica, Director of the European Association of Development Agencies (EURADA), for expert insights. EURADA, jointly with the Decentralization portal team, is a partner of the UCORD project in preparing a series of articles on different aspects of EU Cohesion policy and their significance for the Ukrainian legislative and governance landscape. Today, we dive into the logic of EU structural funds and also the proposed changes to see how it could reshape the traditional multi-level governance model of EU cohesion policy.

The contents of this publication are the sole responsibility of the author(s) and do not necessarily reflect the views of the Swiss Agency for Development and Cooperation, or NIRAS Sweden AB.

Multiannual Financial Framework and the Five Funds Explained

First, let's turn to definitions and explanations of key concepts, specifically how the funds work now. European structural and investment funds (ESIF) are the financial tools through which the EU implements its Cohesion policy, based on the principle of shared management, and with an aim to reduce disparities and promote balanced development across regions.  Read more about these funds in the narrative glossary of the EU Cohesion policy on Decentralisation.gov.ua.

The Multiannual Financial Framework (MFF) is the EU's seven-year budgetary architecture that sets binding annual expenditure ceilings for all policy areas, ensuring that spending is predictable, fiscally disciplined, and aligned with the Union's long-term political priorities. Proposed by the European Commission and adopted by the European Council by unanimity, with the European Parliament's consent, the MFF serves as both a strategic roadmap and a budgetary constraint: annual EU budgets must operate within its agreed limits.

The current 2021–2027 MFF provides the overarching financial framework within which Cohesion policy support is programmed. It is done through the EU's main shared-management funds which support cohesion and territorial development. They are: the European Regional Development Fund (ERDF), European Social Fund Plus (ESF+), Cohesion Fund (CF), European Agricultural Fund for Rural Development (EAFRD), and European Maritime, Fisheries and Aquaculture Fund (EMFAF), alongside the newer Just Transition Fund (JTF).

Each fund has its own specific focus – for example, ERDF supports regional economic development and infrastructure, ESF+ invests in employment and social inclusion, while EAFRD and EMFAF target rural development and fisheries respectively – but all operate under the umbrella of the EU budget's cohesion and common agricultural policy goals.

Under the MFF framework, ESIF funding is allocated to Member States and regions based on agreed criteria (such as regional GDP per capita, unemployment, etc.) and then channeled through multiannual operational programs. Here, a defining characteristic of EU cohesion policy is its multi-level governance approach. Funds are not simply managed top-down from Brussels; instead, the European Commission and each Member State agree on Partnership Agreements and operational programmes that involve national, regional, and local authorities in planning and implementation.

As Mr. Francesco Molica explains in our interview, the system has been intentionally designed to accommodate each country's institutional setup: "Up to now, the governance of cohesion policy is shaped in such a way that it adapts to the specific institutional structure of each Member State. It doesn't impose a specific governance structure – it allows countries to define it to align best with their specific institutional frameworks".

In more decentralized countries, this often means regional authorities act as Managing Authorities for ERDF or ESF+ programs on their territory. In more centralized states, programs may be managed by national ministries, but even there, local governments are involved as partners or intermediate bodies. The common thread is the partnership principle: local and regional actors, as well as other stakeholders (business associations, scientific institutions, NGOs, etc.), must be consulted and engaged in the design and execution of the programs.

Mr. Molica emphasizes that this inclusive, bottom-up structure is not just a procedural formality, but fundamental to effective regional development. Local authorities have on-the-ground knowledge that central governments might lack. "In a policy like cohesion policy, with the mission to support local development, you need to involve local governments because they know best what to do – they have more information about the specific investment needs of their territories due to their proximity to the local context," he noted. "When local governments define projects, they enjoy a higher legitimacy than if the national government imposed them… local authorities typically enjoy a higher level of trust from citizens," Mr. Molica added. Thus, the current model's strength lies in its flexibility and the way it leverages local insight and commitment.

This has been reinforced over decades – the partnership principle is embedded in EU regulations (with a formal Code of Conduct on Partnership in place nowadays) to ensure that multi-level governance remains a cornerstone. "Since the establishment of modern cohesion policy, local and regional governments have always been key actors mentioned in the regulations… This principle will always be there – it's the main guarantor of multi-level governance," Mr. Molica said, underscoring the continuity of this approach.

What does the 2028–2034 MFF Proposal Entail?

In June 2025, the European Commission unveiled its proposal for the 2028–2034 MFF, signalling some of the most sweeping changes to cohesion and agricultural funds in recent memory. A single broad fund officially titled the "European Fund for Economic, Social and Territorial Cohesion, Agriculture and Rural, Fisheries and Maritime, Prosperity and Security" is introduced. It would merge the traditional Cohesion Policy funds (ERDF, ESF+, Cohesion Fund, JTF) with the EU's agricultural and rural development funds (EAFRD and EMFAF) into one consolidated structure.

Instead of separate programs for cohesion and rural development, each Member State would prepare a single integrated strategy, the National and Regional Partnership Plan (NRPP), that aligns investments across all these areas. The Commission explains that this streamlined architecture will make EU cohesion policy "more flexible" in supporting all regions while upholding the principles of "shared management, partnership and multi-level governance with regional authorities fully involved in the design and implementation of plans". In other words, Brussels argues that putting everything under one roof will reduce duplication, allow more flexible use of funds, and better tailor funding to local needs through a single planning document per country.

Following the release of the new MFF proposal, several regional development experts have expressed concerns about certain aspects. In particular, authors of EURADA's policy paper "From Partnership to Parentship? Regions in the 2028-2034 EU Budget" – Jade M. Connoly, Inazio Aja, and Francesco Molica – warn that the "mega-fund" model with NRPPs inherently shifts more coordination to the national level. There are signs of a more top-down tilt in how programs would be managed.

Under the proposal, each NRPP is negotiated primarily between the European Commission and the national government – potentially reducing the direct Commission-region dialogues that have characterised regional programmes. As noted in the EURADA policy paper, "It is understood that the main interlocutor of the Commission regarding the plans remains the national government," meaning Brussels would broadly speak with one central coordinating authority per country.

This new "coordinating authority" at the national level would have sweeping oversight, including the submission of payment claims for all funds. In practice, this could limit the autonomy of regional Managing Authorities that currently run their own operational programs. Indeed, the ability to establish stand-alone regional programs (with priorities and budgets managed by regional governments) appears to be eliminated in the draft rules. Instead, at best, regional bodies might implement portions of the national plan, but under the control of a central government.

Mr. Francesco Molica summed up the shift starkly: "With such a new proposal, we might be heading toward a more centralized governance. Regional programs might disappear, and national governments might gain additional powers to define strategic priorities and perhaps even select projects. In contrast, local and regional governments might have a less significant role," he explained. This marks a notable change from the past's versatile Member State-tailored governance model: the new structure may concentrate decision-making at the national and EU levels – potentially at the expense of regional voices.

Another significant aspect of the 2028–2034 MFF proposal is a reorientation of spending priorities. The overall size of the envelope for programmes grouped under the NRPPs is large (around €783 billion). Still, the budgets for programmes integrated under the national and regional partnership plans have been reduced, compared to the 2021-2027 MFF. EURADA analysts note a weighted mean reduction of 9.4% in cohesion-related allocations compared to 2021-2027. This reflects a broader reprioritization within the overall budget proposal: more is slated to go toward innovation, climate, and strategic projects that advance EU-wide objectives, while the classic shared-management funds for regional development and farming could shrink slightly in relative terms. Here, EURADA experts conclude that boosting EU industrial capacity and innovation leadership should complement cohesion goals, so that the future MFF can "drive EU competitiveness while upholding the principle that Europe's strength lies in its regions".

The new MFF proposal shifts not only what gets funded but also how funding is delivered, emphasizing results-based payments tied to milestones and reforms – drawing heavily from the NextGenerationEU model, as authors of "From Partnership to Parentship?" note. To streamline oversight, the Commission proposes reducing the number of performance indicators from over 5,000 to about 900 common ones across the budget. But none of these would track outcomes at the regional level; all targets are set nationally or EU-wide. While this simplifies reporting, it raises concerns that regional disparities could be overlooked. As EURADA experts warn, "what isn't measured won't be prioritised" – and without regional indicators, national governments might focus only on aggregate targets, sidelining local needs.

What would these changes mean on the ground? One immediate implication is for the role of regional development agencies (RDAs) and other intermediary bodies that currently help implement EU funded programmes. Many RDAs in Europe now manage specific programs or funding schemes, or at least assist local public authorities, local businesses, and organizations in accessing EU funds. According to Mr. Molica, this role could shrink if a more centralized model is applied. "Regional development agencies that nowadays run some funding schemes may not be able to do this anymore, because most funding schemes would be run at the national level. Even those agencies that focus on helping local SMEs apply for EU-funded projects, they would still do that. Still, it would become more difficult, because they would have access to less information at the national level," he explained. In countries where RDAs are deeply embedded in the management of funds (often in larger Member States with regional programs), the impact could be significant. "Yes, there can be a big impact [in those cases], which may also mean less funds for regional development agencies, less staff… it would affect the overall capacity of these agencies," Molica warned. In other words, a more centralized system might squeeze out some of the local institutions that have been built up to administer and deliver cohesion projects, unless new arrangements are found for them.

Another example is the fate of Smart Specialisation Strategies (S3) – regional innovation strategies - a key feature of the 2014–2020 and 2021–2027 cohesion policies, required as a condition for receiving certain innovation funds. Under the new proposal, S3 loses its prominent, compulsory status. It would be left to each Member State to decide whether to continue with smart specialisation planning. "In the new proposal, there is no longer a requirement to have Smart Specialisation Strategies in place; this will be at the discretion of member states," Mr. Molica noted. If a national government chooses not to prioritize an S3 approach – and especially if there are no longer regional programs and funds explicitly tied to those regional innovation priorities – it could "definitely have a negative impact" on how much attention is paid to local innovation needs, he said. The worry among regional advocates is that without an EU mandate, some countries might abandon or downplay these regional innovation strategies, leaving certain regions with less support for their tailored development plans.

Many of these changes are still proposals. There is considerable uncertainty over how exactly the new system would work in practice if adopted. Even Mr. Molica cautioned that, for now, "there's a lot of uncertainty" regarding the detailed impacts – for instance, some smaller or less autonomous regions and their agencies might not notice much difference if they are already used to running programs nationally. In contrast, bigger regions accustomed to autonomy could feel a significant change. The European Parliament, Member States, and various lobbies (from regional authorities to farmers' groups) are likely to debate and seek adjustments to these plans before anything is finalized. The desire to simplify and modernize the budget is broadly welcomed, yet finding the right balance between efficiency and inclusiveness will be key.

Ukraine's Perspective & Conclusions

What do these proposed changes mean for Ukraine? Though we are still on the path to accession, we have a strong interest in EU cohesion policy for our own regional development and post-war recovery. The principles of multi-level governance and partnership remain central – even under the proposed 2028-2034 MFF. As Mr. Francesco Molica emphasized in our interview, local actors' involvement "will always be there" in the Cohesion policy's DNA. Understanding these principles and establishing respective mechanisms are crucial steps for Ukrainian stakeholders, as any future EU funding will require coordination across all levels of government.

The next MFF aims to simplify and focus EU structural funds, but it also raises concerns about preserving the EU's bottom-up approach. A likely outcome is a negotiated compromise between efficiency, national coordination, and the preservation of multi-level governance. For Ukraine, the lasting message is clear: good governance, built on partnership, subsidiarity, and transparency, will remain vital. Regardless of how the MFF evolves, development succeeds best when it draws on local knowledge and earns local support.