The 2028-2034 MFF will need to focus on several major challenges, but it seems likely that competitiveness will take centre stage. This is because the EU has been overtaken by two major competitors, with the Letta and Draghi reports proposing several policy changes to address this challenge. In this paper, we build on these proposals and focus on the question of how policies’ design in the MFF could deliver better results. We argue the impact of the EU budget has been sub-optimal for three key reasons:
- uncoordinated and scattered EU-level funding across numerous technology and innovation domains, entailing bureaucracy, red tape and slow processes, while foregoing potential critical mass and synergies;
- a mismatch between support targeting development and breakthrough innovation and supporting for their deployment; and
- missed opportunities for synergies between the EU and national public innovation funding.
To address these challenges, the next MFF should arguably:
- strengthen the directionality of its actions i.e. increase the collective focus on transformative change in key areas;
- increase the alignment of centrally managed and shared management (place-based) policies in set priority directions; and
- improve its leverage and impact by engaging EU, national and regional funding to work in the same directions.
How could the post-2027 MFF be reformed to ensure more coordinated policies and aligned governance structures, taking into account the above principles? There is a case for the MFF to be structured by priority strategic directions to encourage vertically targeted and more integrated financial and non-financial support across the entire innovation cycle, from both the EU as well as Member States and regions. The directed EU funding should cover both centrally managed well as place-based funds under shared management, building on the best practice example of STEP and ICPEI approaches. Priority strategic directions would be determined in an EU Strategic Framework, with financial and non-financial measures elaborated at a more granular level in action plans for each priority direction. Member States and regions would select the action plans which they would (voluntarily) contribute to, either via their EU Cohesion Policy and other territorially delivered EU funding and/or their national and/or regional public funding. Under this approach, Cohesion Policy would partly become more vertically integrated. It could thereby contribute greater European value added by supporting a collective and coordinated EU effort to improve competitiveness and the functioning of the single market. Furthermore, with stronger vertical integration, it could potentially enhance its contribution to convergence and cohesion because lagging behind places would become more strongly integrated into global value chains and strengthen their tradable sector, both being key convergence enhancing factors. Lastly, by voluntarily aligning their EU, national and regional funding with collective EU action plans, Member States could benefit from the network effects of working together with key EU, national, regional as well as private sector representatives. This could strengthen the leverage of public investment, incentivise private investment (and engagement with leading firms), and accelerate the roll-out of new technologies.