Adapting the EU Budget for Future Enlargements: A Study by the European Parliament

The European Union is on the path to enlargement, with several candidate countries aiming for accession in the coming years. Ukraine, Moldova, and Georgia (officially a candidate country, though negotiations are currently suspended), along with the Western Balkans, are progressing at different speeds in their accession processes. While their integration into the EU is a strategic necessity, it also presents significant budgetary and institutional challenges.

The financial implications of enlargement are substantial and require a thorough revision of the EU’s Multiannual Financial Framework (MFF) for the 2028-2034 period to ensure that future accessions are financially viable and do not disrupt existing policies.

To address these challenges, on January 29, 2025, the European Parliament’s Budget Committee (BUDG) published a study titled “Adapting the European Union Budget for Future Enlargements.” This study, conducted by experts from the Jacques Delors Institute, CEPS, and LSE, examines the impact of past enlargements on the EU budget, estimates the financial costs of integrating new member states, and provides policy recommendations for adjusting the MFF to make future accessions economically and socially feasible.

Three Enlargement Scenarios

The study explores three possible enlargement scenarios:

1. No new accessions before 2034: The EU would continue to provide pre-accession support to candidate countries, but no new members would join the bloc.
2. “Small Bang” Enlargement: The Western Balkans countries would join the EU by 2030.
3. “Big Bang” Enlargement: Ukraine, Moldova, and Georgia would join the EU along with the Western Balkans.

Each scenario has different financial implications and requires adaptations in key EU policies, particularly the Cohesion Policy (CP) and the Common Agricultural Policy (CAP).

Financial Impact of Enlargement

EU enlargement has always had a significant impact on the EU budget. As new member states, often less economically developed, join the Union, they become net beneficiaries of EU funds, including structural funds, agricultural subsidies, and other financial assistance. Therefore, adjustments are needed to allocate resources efficiently.

• In a “gradual integration” scenario, with no new accessions before 2034, the EU would continue to provide pre-accession support through existing financial instruments. Estimated funds for 2028-2034 would amount to €68 billion to help candidate countries strengthen their economies before accession. The EU budget would remain stable at around 1% of the Union’s GDP, ensuring financial stability and resource allocation for other priorities.
• If the Western Balkans join by 2030, the financial impact would be manageable. The study estimates an additional cost of €15 billion per year, primarily to increase funding for cohesion policy and agricultural subsidies (CAP). In this scenario, CAP allocations for current member states would be reduced by 2.5%-3.5%, and some regions would receive less EU funding due to redistribution.
• In the “Big Bang” scenario, where Ukraine, Moldova, and Georgia join alongside the Western Balkans, the financial burden would be even greater. The study estimates an annual impact of €15.6 billion on the EU budget after 2030. Additionally, the CAP budget would need to increase by 22-25% unless structural reforms are implemented. This redistribution would reduce cohesion policy funds for some current member states by 16-21%. While this expansion would bring economic and strategic benefits, it would require deep reforms in EU budget allocation to ensure financial sustainability.

Ukraine and the Common Agricultural Policy (CAP)

The CAP is one of the most sensitive policies in the context of enlargement, and Ukraine’s integration presents a unique challenge. Ukraine has some of the largest agricultural lands in Europe, and its accession could make it one of the biggest beneficiaries of the CAP.

If Ukraine were to receive the same per-hectare subsidies as current EU members, the CAP budget would need to increase by at least 22-25%, which would be unsustainable for the EU.

To prevent a financial crisis, the study proposes several solutions:

• A transition period for CAP payments, similar to what was applied to Central and Eastern European countries in 2004.
• Reforming CAP allocation criteria by reducing subsidies for large farms and focusing funding on sustainability objectives.
• Excluding Ukraine from direct payments under CAP Pillar 1 and providing alternative agricultural support aligned with EU environmental and food security goals.

Recommendations for Adjusting the Multiannual Financial Framework (MFF) for Future Enlargements

To prepare the EU budget for future enlargements, the study recommends the following key measures:

• Maintaining pre-accession funding at current levels to ensure continued support for candidate countries.
• Creating an “Enlargement Fund” to help the EU manage accession costs without negatively impacting other budgetary policies.
• Reforming cohesion policy to ensure that current EU member states do not suffer excessive funding reductions due to enlargement.
• Reviewing the CAP to prevent unsustainable budget increases in the agricultural sector.
• Introducing institutional reforms to improve decision-making efficiency as the number of EU member states increases.

By implementing these measures, the EU can ensure that future enlargements are financially sustainable while maintaining political stability and economic growth.

For more details, the full study can be accessed here.

© European Union 2024 – Source: European Parliament