Questions and Answers - Agreement on the EU Annual Budget 2025

An agreement was reached on 16 November between the European Parliament and the Council of the European Union on the EU’s annual budget for 2025

Here are some targeted questions and answers to help you understand the issues

What are the priorities of the annual budget for 2025? How is the Mid-Term Revision of the MFF reflected in the annual budget for 2025?

The budget 2025 directs funds to where they can make the greatest difference, in cooperation and in line with the needs of the EU Member States and our partners around the world to make Europe more resilient and fit for the future to the benefit of EU citizens and businesses. This will be done by fostering the green and digital transitions, by creating jobs while strengthening Europe's strategic autonomy and global role. It will enable support to key critical technologies through the Strategic Technologies for Europe Platform (STEP).

The Union's capacity to respond to natural disasters has been reinforced in the MFF mid-term revision, with increased funding for the EU Solidarity Fund and for the Emergency Aid Reserve. Moreover, the budget 2025 also includes an additional amount of €3 billion in payment appropriations to respond to the recent floods and other national disasters, which have been placed in reserve awaiting the adoption of the Commission's two dedicated proposals of 21 October 2024.

The budget 2025 will also provide – in line with the MFF mid-term revision – continued support for Syrian refugees in Türkiye and the wider region, the Southern Neighbourhood including the external dimension of migration, as well as the Western Balkans. Crucially, it will provide stable and predictable support to Ukraine.

How does the budget for 2025 relate to NextGenerationEU (NGEU) ?

NextGenerationEU (NGEU) provides the EU budget with additional means providing extraordinary support to investments and reforms across the Union, notably through the Recovery and Resilience Facility (RRF). Additionally, with REPowerEU, the financial means of the RRF have been strengthened to accelerate the EU energy resilience in response to the energy challenges emerging from Russia's war of aggression. REPowerEU chapters complement the Recovery and Resilience Plans of the Member States, to strengthen the collective effort to end Europe's dependence on Russian fossil fuels and to accelerate the green transition.

While NGEU commitments were frontloaded in the budget in the years 2021 to 2023, NGEU implementation continues until the end of 2026, with large-scale disbursements providing significant support to the EU economy.

To finance NGEU, the Commission is borrowing up to €712 billion on the capital markets until end 2026. To obtain the necessary funding under optimal financial terms, the Commission uses a unified funding approach. The funds are disbursed via grants or loans, either through the RRF or through several EU budget programmes which have received top-ups from NGEU. As of today (15 November 2024), the Commission has disbursed more than €269 billion (€174.69 billion in grants and € 94.71 billion in loans) to EU countries under the RRF, on top of further support to other EU programmes benefitting from NGEU funding (€64.5 billion as of 15^th of November).

How will the new instrument for the borrowing costs for NextGenerationEU work?

In light of the increase of interest rates since 2022, a new ‘cascade mechanism' will be put in place to cover the additional needs for the NGEU interest payments. It includes several steps to finance the additional needs, by making use of availabilities to redirect existing funding within the budget, mobilising special instruments within the long-term budget, and the mobilisation of a new and exceptional instrument over and above the MFF ceilings if financing for the interest payments cannot be found within the existing EU budget.

In the 2025 budget, the additional needs for the borrowing costs of €2.3 billion will be financed through a combination of the unallocated margin in heading 2b (resilience and values), the Flexibility Instrument and the new ‘EURI instrument' for the remaining amount, which is fully covered by past decommitments. Therefore, there is no need to recourse to the so-called ‘financial backstop'.

What are commitments and payments?

Commitments are the total volume of contractual obligations for future payments that can be made in a given year. Commitments must then be honoured with payments, either in the same year or, particularly in the case of multi-annual projects, over the following years.

Payments are the actual money paid in a given year from the EU budget to cover commitments of current and previous years.

When the EU decides to co-fund the building of a bridge, the total amount which the EU agrees to cover is a commitment. The bills for the work done are the payments that are paid over the coming years in line with the implementation life cycle of the project. The commitment is made in year N. The payments from the EU budget may follow in the same year N, but also in following years, depending on the financial rules on when the invoices are reimbursed.

What happens next?

The annual budget for 2025 will now be formally adopted by the Council of the European Union and by the European Parliament. The vote in plenary, which will mark the end of the process, is currently scheduled for 27 November 2024.

Could you give more details by MFF heading and programme?

For More Information

Press release on the Annual Budget 2025

All Annual Budget Documents

Annual budget procedure

2021-2027 long-term EU budget & NextGenerationEU

EU budget in motion

EU as a borrower