How the New EU Budget Is Set to Become a Powerful Tool for Exerting Influence on Member States

The new EU budget

In mid-July, the European Commission presented the main outlines of the European Union budget for the coming years. The presented draft of the so-called Multiannual Financial Framework for 2028-2034, compared to previous periods, provides for a number of significant changes. According to the Commission’s announcements, the planned EU budget is intended to be more flexible, rely on fewer programs, and raise funds from new sources of revenue. It is also worth noting that the Multiannual Financial Framework currently being prepared, totaling 2 trillion euros, will be the largest budget in terms of funding in the EU’s history to date.

In the context of the EU budget proposal presented by the European Commission in July, particularly significant is the announcement to introduce measures under which the disbursement of funds from the Multiannual Financial Framework to Member States will be linked to an assessment of their compliance with the rule of law and as set out in Article 2 of the Treaty on European Union and with the provisions of the Charter of Fundamental Rights of the European Union.

The EU budget for 2028-2034 and the conditionality mechanism

In the Communication published by the European Commission in mid-July, concerning the Multiannual Financial Framework for 2028–2034, it was stated that the budget being drafted would “be rooted in respect for the rights and values that define the Union” (p. 17). The Commission underscores that “respect for the rule of law is a prerequisite for benefiting from any fund and that “It is essential that EU spending has

strong safeguards on the rule of law to guarantee the protection of the EU’s financial interests.” (p. 25). In the same document, the European Commission notes that it concerns the values enshrined in Article 2 of the Treaty on European Union and the provisions of the Charter of Fundamental Rights of the European Union.

Analyzing the content of the European Commission communication, one can infer that the conditionality mechanism is to be applied in the EU budget for 2028-2034 in at least two forms: the so-called “milestones” known from the practice of applying the Next Generation EU instrument (implemented in Poland through the National Recovery Plan), and the application of the Regulation of the European Parliament and of the Council (EU, Euratom) 2020/2092 of 16 December 2020 on a general regime of conditionality for the protection of the Union budget, which is already in force.

The latter legal act will be the main basis for applying the conditionality mechanism in the context of the Multiannual Financial Framework, since the EU legislator has expressly introduced an obligation to apply the Regulation to the adoption and implementation of the Union budgets in Article 6(2) and point 9 of the Preamble to Regulation of the European Parliament and of the Council 2024/2509 of 23 September 2024 on the financial rules applicable to the general budget of the Union.

The aim of the proposed budgetary instruments is to pool the existing funds and disburse them under the National and Regional Partnership Plans on terms similar to those of the Next Generation EU program, that is, contingent upon the fulfillment of individual milestones. Unfortunately, at the moment it is difficult to provide any further details on what exactly such plans would look like. The proposal for a Regulation of the European Parliament and of the Council establishing a budget expenditure tracking and performance framework and other horizontal rules for the Union programmes and activities, confirms the applicability of the Regulation and refers to a Regulation on National and Regional Partnership Plans that does not yet exist (even in the form of a legislative proposal).

Based on the experience of conditioning the disbursement of NextGenerationEU funds on “milestones” agreed between the governments of individual EU member states and the European Commission, we know, however, that this will give the Commission a powerful tool to influence member states’ policies, including in areas that, under the EU treaties, do not fall within the European Union’s competences.

Definition of the term “rule oflaw”

The subject matter of the Regulation is the establishment of rules necessary to protect the Union budget when the European Commission finds breaches of the rule of law in the Member States (Article 1). At the same time, it is worth noting that the understanding of this term is elaborated in the preamble, where point 3 states that “The rule of law requires that all public powers act within the constraints set out by law, in accordance with the values of democracy and the respect for fundamental rights as stipulated in the Charter of Fundamental Rights of the European Union and other applicable instruments, and under the control of independent and impartial courts.”

Sanctions for violating the rule of law

The Regulation also provides (Article 4) for the possibility of adopting appropriate measures where breaches of the rule of law are found to have an impact on, or pose a serious risk of impacting, the EU budget, alongside a catalog of anti-breach measures (Article 5). Among the latter, depending on the type of measure, this may include the suspension of payments or of the performance of a legal obligation, or the termination of that obligation in the case of funds distributed by the European Commission or other authorized entities, as well as the limitation of commitments, including by way of financial corrections or by reallocating funds to other expenditure programs.

In accordance with the provisions of the Regulation (Article 5), the measures taken are proportionate. They are determined in light of the established actual or potential impact of breaches of the rule of law on sound financial management within the Union budget or on the Union’s financial interests, and the nature, duration, gravity, and scope of such breaches are taken into account. These measures are, insofar as possible, targeted at the Union actions to which the infringements relate.

Procedure for adopting sanctions measures

In accordance with Article 6 of the Regulation, when the Commission finds that there are reasonable grounds to consider that one of the infringements set out in Article 4 has occurred, unless it considers that other procedures ensure more effective protection of the EU budget, it sends the suspected Member State a written notification indicating the reasons and facts underlying the suspicion of an infringement. The Commission shall inform the European Parliament and the Council of any such notification, and, in accordance with Article 6(2), the European Parliament may invite the Commission to take part in a “structured dialogue.” Paragraph 3 clarifies that, when assessing whether the conditions set out in Article 4 have been met, the Commission takes into account relevant information from available sources, including decisions, proposals and recommendations of the Union institutions, other relevant international organizations and other recognized institutions. The Commission may request additional information to conduct the assessment at any stage of the procedure (paragraph 4). The Commission’s Guidelines (point 72) also expressly mention the possibility for the Commission to contact a Member State even before initiating the procedure to obtain clarifications.

The European Commission plays the central role in the procedure described above, having been granted broad discretion in this regard. Pursuant to the provisions of the Regulation, it is the Commission that is, in a sense, the “master of the procedure,” since it decides on its initiation, the evaluation of the evidence, remedial measures, the severity of sanctions, and the assessment of the removal of infringements. Notably, the European Court of Auditors reached similar conclusions in its 2024 special report (points 98–106).

Risks to Poland

As indicated above, numerous risks to the disbursement of funds to Poland from the EU budget under the 2027-2034 Multiannual Financial Framework already stem from the Regulation itself. That’s the case for at least a few reasons. First, as set out above, the Regulation will apply to the Multiannual Financial Framework 2027-2034. Secondly, the EU institutions have already paved the way for applying this Regulation and for using it as a tool of blackmail. Third, in the context of an ongoing rule-of-law dispute, the broadly worded provisions of the Regulation create scope for the Commission to intervene in areas of competence that are theoretically reserved to the Member States by the Treaties. Fourth, the latest judgments of the CJEU and the Supreme Court indicate a desire for further escalation of the “rule-of-law” dispute on the part of the domestic and European liberal camp. Fifth, among liberal commentators and, occasionally, politicians, there are recurring calls to “starve” governments that are deemed populist by cutting off their sources of funding.

Point three, in particular, from our viewpoint, requires more detailed discussion, concerning the possibility of holding Poland accountable under the Regulation in connection with the ongoing so-called rule-of-law dispute. It is evident that, in light of the Regulation, the protection of the rule of law includes, in particular, the independence and impartiality of the courts, guaranteed inter alia by the organization of the judiciary and the manner of selecting judges (see in particular Article 2(a); Article 3(a); Recitals 3 and 10 of the Preamble). In its judgment of September 4, 2025, in Case C-225/22 „R” S.A. v. AW „T” sp. z o.o. the CJEU held that, for an adjudicating panel not to qualify as a “court” within the meaning of Union law, it is sufficient that only one judge has been appointed by a body not authorized to do so, within the meaning of EU law. Under the current legal framework, this means that, in light of the principles adopted in recent years by the CJEU, it can be argued that there is no independent judiciary in Poland.

Importantly, Article 6 of the Regulation grants the EU broad discretion in assessing evidence intended to demonstrate violations of rule-of-law values. There is, however, no doubt that even such ultra vires (i.e., outside the scope of the EU Treaties) judgments of the Court of Justice of the European Union not only can constitute such a means of proof (Article 6(3), point 14-16 of the Preamble), but, in light of the Commission’s Guidelines, become a means of proof of particular value.

What’s next for the draft EU budget?

The European Commission’s preparation of the European Union’s draft budget is only the first step in the complex process of establishing the Multiannual Financial Framework, in which the Commission presents proposals concerning, among other things, revenue sources and the amounts of planned expenditures. Subsequently, the Commission negotiates with the European Parliament and the Member States (within the Council of the European Union). The objective of this stage is to reach an agreement between the negotiating parties. The EU budget is then adopted under a special legislative procedure.

Ordo Iuris comment

When assessing the European Commission’s announced actions with respect to the EU budget currently being prepared for the next period, and taking into account the applicable legal acts, it should first be noted that the above circumstances pose numerous risks to the disbursement of EU budget funds to Poland under the 2027–2034 Multiannual Financial Framework. This results, among other things, from the possibility of applying the provisions of the Conditionality Regulation to the 2027-2034 Multiannual Financial Framework, from the conflict between Poland and the EU in the context of the rule-of-law dispute, and from the European Commission’s broad discretionary power in applying the procedures provided for in that Regulation. We should also remember the emerging calls by left-liberal commentators and other figures in political life, sometimes by politicians themselves, to “starve” what they call “populist” (right-wing) governments by cutting off their sources of funding. In other words, the European Commission will gain yet another tool to exert influence over member states under the guise of protecting the rule of law, which also applies to Poland. Therefore, the Polish government—and likewise the governments of other countries, insofar as they are committed to the ideas of sovereignty, the rule of law, and democracy—should under no circumstances allow the adoption of the European Union’s Multiannual Financial Framework for 2027–2034 until all mechanisms that condition the disbursement of EU funds on the European Commission’s assessment of a given Member State’s compliance with the rule of law have been removed from it.

Patryk Ignaszaczak – analyst at the Ordo Iuris Center for International Law.