After 2027, European money will be distributed according to new rules. The European Commission has proposed a budget that is more flexible, more targeted and more strongly linked to the priorities of the Union. For the Czech Republic, this means not only less funding than before, but also more emphasis on financial instruments instead of traditional grants.
“Thanks to the repayable nature of the support, access to funding is opened up to a larger number of applicants who would not have been able to obtain a conventional subsidy if the reduced budget had been distributed in the form of non-repayable grants. In addition, a combination of grant support and financial instruments is planned for some of the priorities, which increases the attractiveness for those applicants who would not be interested in a financial instrument alone as a form of support,” explained Ondřej Miffek, Grant Thornton expert on grants.
The new EU budget and its priorities
Following the publication of the proposal for the Multiannual Financial Framework (MFF) for the period of 2028-2034, the European Commission has issued the initial part of the legislative rules for the use of European funds, including in the area of cohesion policy. This marks the start of a two-year negotiation process that will also involve the Czech Republic.
The MFF amounts to almost EUR 2 trillion, representing 1.26% of the average gross national product of the European Union between 2028 and 2034. The Commission wants to redesign the budget to make it more efficient, flexible and effective. It aims to ensure that EU funding is driven by the Union’s political priorities and delivers results that national budgets cannot achieve on their own.
The Commission is also proposing new own resources and adjustments to existing ones, which are expected to reduce pressure on national budgets and bring in EUR 58.5 billion a year. The new long-term budget will bring together EU funds implemented by Member States and regions into one coherent strategy, with cohesion policy and the Common Agricultural Policy at its core. This strategy will be implemented through simpler and better adapted national and regional partnership plans.
The European Commission has set three main priorities in the preparation of the new programming period:
- Strengthening competitiveness and raising citizens’ living standards (green and digital transformation; housing support; deeper single market in energy; sustainable and resilient agriculture; fostering an environment for innovation and entrepreneurship; investment in education)
- Greater defence readiness (increased defence spending and investment; support for Ukraine; strengthening resilience and preparedness to prevent crises; addressing migration; EU enlargement)
- Safeguarding democracy (protecting the rule of law and civil society; promoting global peace)
Where will European money flow in the Czech Republic?
The Czech Republic has also started to prepare for the new programme period. The Strategic Framework for Cohesion Policy 28+ has been created, which proposes where European money could go after 2027 and serves as a basis for negotiations with the European Commission.
Financial instruments instead of subsidies
The key circumstance that the document works with is the expected reduction of the allocation for the Czech Republic. EU funding will therefore not cover the current range of projects and activities. Therefore, there is strong emphasis on wider use of financial instruments such as loans, guarantees or capital injections instead of traditional grants. In addition, these instruments can be combined with subsidies, for example in the form of a net subsidy, forgiveness of loan principal repayments, etc. The aim is to use resources more efficiently and attract private investment.
The advantage of financial instruments is that they are repayable, as the funds can be reused after repayment. At the same time, the involvement of private investors increases the total amount of available funding. This type of aid encourages beneficiaries to use resources more economically and distorts the market environment less than conventional subsidies, which contributes to its natural functioning.
In the Czech Republic, however, financial instruments are still underdeveloped and used only to a limited extent. Cohesion Policy funds have been used for approximately 3% of the allocation over the long term, while the EU average is already above 11% and rising.
European Competitiveness Fund
It will also be crucial to link it with the envisaged European Competitiveness Fund, which is intended to be the main and systemic instrument for promoting European competitiveness, especially in the field of strategic technologies, innovation and high added value industries.
Thematic priorities for cohesion policy
The Strategic Framework for Cohesion Policy 28+ identifies four thematic priorities, which describe the problem to be addressed, the main instrument for addressing it, the rationale and the territorial dimension:
- Adaptation to climate change, sustainable use of resources and environmental protection & Transport & Energy
- Education & Research & Innovation & eGovernment & Cybersecurity & Entrepreneurship & Digitalisation
- Demographic changes
- Defence and resistance
For some instruments, the preference for repayable (or combined) forms of support, i.e. financial instruments, was also indicated. However, this is not a final list and the specific form of funding will be elaborated in the next stages of the preparation of the Strategic Framework.
What is the next course of action?
The current long-term budget of the European Union ends on 31 December 2027. Negotiations at EU level will start in autumn 2025 and the European Commission is expected to publish a draft legislative package for the 2028+ programme period.
