The social legacy in EU budget law: Imaginary-making,retreat and the 2028–2034 Multiannual Financial Framework

A. Imaginary I: The ‘first’ ESF aimed at reinsurance and reemployment (1957–1971)

Established under Arts 123–127 EEC, the ESF's first iteration would appear unfamiliar to contemporary EU lawyers. Designed to improve employment prospects in the common market and thereby living conditions, the fund operated on differentiated contributions: Germany, France and Belgium paid higher shares than their regular budgetary contributions, while Italy and the Netherlands contributed less. ²⁸ Managed by the Commission, the ESF could finance half of national spending on vocational retraining, geographical mobility and short-term work arrangements in enterprises undergoing production restructuring. ²⁹ As already envisioned in the 1956 Spaak Report that prepared the EEC Treaty negotiations, supported projects did not have to respond directly to unemployment caused by the common market, ³⁰ although unemployment insurance compensation was explicitly excluded from the ESF after complex treaty negotiations. ³¹ Funding was granted quasi-automatically upon Member State request, but only once workers had been re-employed for at least six months. ³² In cases of production restructuring, Member States were required to submit reconversion plans for Commission approval. ³³ Although the EU budget is the product of continuous (re)negotiation, these operational rules foreshadow then still future debates on the principles of today's EU budget.

This first ESF embodies a distinctive social legacy that unsettles current assumptions about the EU budget's social purpose. Its significance lies less in practice than in its imaginary – what it stood for in the Community's early years. While many observers considered it inefficient or inadequate in size, ³⁴ some influential actors placed ambitious understandings of solidarity and redistribution in the fund. Then Commissioner for Social Affairs Lionello Levi Sandri described it as ‘an instrument for redistributing Community income’. ³⁵ Commission President Werner Hallstein saw it as a ‘compensation fund financed by all member countries to meet…the social cost of the common market’. ³⁶ Meanwhile, some influential Commission officials portrayed it as a policy instrument to fight ‘the very causes of unemployment’. ³⁷ In other words, the ESF unearthed a process of imaginary-making about the purpose of EU integration, its budget and its social ambitions.

In practice, the fund served a hybrid purpose. On one hand, it operated as a reinsurance mechanism for expenditure on employment policy that addressed the establishment of the common market but also economic transformation more widely. Combined with differentiated national contributions, this logic reveals that the ESF was at least partially understood as a fiscal transfer mechanism. ³⁸ On the other hand, the ESF functioned as a compensation fund for the ‘social cost’ of adjustment, not through direct solidarity between Member States or spatial redistribution, but by promoting stable and productive reemployment of workers. ³⁹ This conception differs markedly from contemporary EU employment policy. The early ESF viewed unemployment as a structural phenomenon linked to industrial-economic change which required collective financial intervention that led to reemployment. For example, the large majority of workers supported and re-employed came from the economically less developed Italy, in particular with regard to retraining. ⁴⁰ Conversely, the European Investment Bank was initially intended to provide company financing for adjustment under market conditions. ⁴¹ By contrast, since the 1990s, EU employment policy, including its budgetary ambition, has often rested on the idea of ‘employability’, ⁴² later reframed as ‘skills’ or ‘upskilling’. ⁴³ In this paradigm, unemployment is attributed to personal deficits rather than to structural economic factors, while the role of public institutions is to provide opportunities for individuals to adapt to market needs. The first ESF, however, placed reemployment and stability at its heart. This double image of reinsurance and reemployment constitutes the first imaginary of the budget's social legacy. It reminds us that the social dimension of the EU budget once involved collective responsibility for economic transformation with workers at the core of this responsibility.

B. Imaginary II: The ‘second’ and ‘third’ ESF between industrial-sectoral, employment and spatial-regional policy (1971–1988)

The first ESF came under strong critique for its modest scope and inefficiency as an instrument of Community employment policy. ⁴⁴ By the late 1960s, as the transition period for establishing the common market drew to a close, the Commission called for its reform. ⁴⁵ The proposal sought to transform the ESF from a mechanism of reinsurance into a more active policy instrument based on Community priorities. Five ambitions informed this conceptual shift: to concentrate funding on limited objectives and regions most in need; to ensure that EU support was additional to domestic spending; to make funds available not only after project execution; to move the focus from reemployment to the prevention of unemployment; ⁴⁶ and to extend support to new social policy fields beyond work, such as disability or certain Community study grants. ⁴⁷ Together with spatial-regional policy, social policy was at the origins of the budget's first strategic turn. Inside the Commission, a dedicated Directorate of DG V managed the ESF, assisted by an Advisory Committee consisting of national delegations of government and social partner representatives. ⁴⁸

The spatial-regional priorities were later echoed by the Heads of State and Government at the 1974 Paris Summit, where, amongst other, a regional orientation of Community funds was endorsed and, in 1975, accompanied by the creation of the European Regional Development Fund (ERDF). ⁴⁹ However, unlike the ERDF, the ESF did not operate on national allocations, and provided funding directly to beneficiaries. ⁵⁰ The debates of the 1960s and 1970s once again anticipate many of today's controversies over EU budget governance: whether the Union can and should govern by funding, how priorities should be concentrated and eventually be spatially-oriented, who coordinates funding access and its policy priorities and whether funding promotes stable work or flexibility through individual skills. ⁵¹ The budget's social legacy, however, was among these debates’ key drivers.

Following protracted negotiations, the Council reformed the ESF in 1971 with a Decision acting as framework law for the fund. ⁵² Contemporary observers considered that not only the Commission but also the Council sought a ‘dynamic instrument’ that could intervene financially in the various areas of employment policy. ⁵³ The new fund thus alternated between objectives of industrial-sectoral, ⁵⁴ employment and spatial-regional policy responding to the political economy of the 1970s, which included the 1973 economic downturn, a starting process of deindustrialization, the rise of youth unemployment, and the Community's enlargement with increased spatial divergence. ⁵⁵ Funding automatism was abolished, while co-financing and the absence of pre-financing were largely maintained. ⁵⁶ Financial resources could now be allocated in two ways to social policy: first, where enabled by a specific Council decision, to projects where employment was directly affected by Community policies or where labour market intervention was deemed necessary; second, in any event, to regions, sectors or groups of undertakings suffering from employment difficulties. ⁵⁷ Although the Council had declared its intention to prioritize the first policy-based category over time, ⁵⁸ most resources throughout the decade were channelled to the second, in line with the ERDF's fresh spatial-regional orientation and the Commission's preference for spatially targeted funding. ⁵⁹ Nonetheless, the Council adopted enabling decisions for workers leaving agriculture, ⁶⁰ textile workers, ⁶¹ migrants workers, ⁶² people with disability ⁶³ or young workers. ⁶⁴ This also allowed the ESF to promote Community priority and policymaking beyond spatial-regional ambitions. In addition, ‘regional policy’ under the ERDF had a notable industrial and employment policy focus. ⁶⁵ As funding applications regularly surpassed available resources, the Member States in charge of forwarding these applications ⁶⁶ and most notably the Commission attributing funding possessed a certain policymaking lever within the limit of the funds available. ⁶⁷ By the late 1970s, the ESF's hybrid character was thus visible: a fund that contributed to industrial-sectoral restructuring, employment promotion and spatial-regional development.

Two policy fields illustrate this hybrid orientation. ⁶⁸ The first concerns the textile and clothing industries, long a cornerstone of European industrial production but severely affected by the economic crisis, global trade liberalization and deindustrialization of the 1970s. ⁶⁹ In 1970, the sector still employed more than three million workers, predominantly women, ⁷⁰ but within a few years hundreds of thousands of jobs disappeared. ⁷¹ To mitigate these effects, Member States introduced adaptation schemes under domestic law, ⁷² while the Commission sought to coordinate these industrial policies within the constraints of EU state aid rules. ⁷³ In 1972, the Council authorized ESF funding to facilitate the occupational and geographical mobility of textile workers. ⁷⁴ Throughout the decade, this measure accompanied industrial adaptation. ⁷⁵

The second policy field emerged from the growing concern over youth unemployment, which became a persistent feature of European labour markets. In fact, not only did the 1974 Paris Summit call for spatial-regional policy but also for a budgetary response for the ‘categories of workers most affected by employment difficulties’. ⁷⁶ In 1975, the Council enabled ESF funding for the employment and mobility of young workers aged under 25. ⁷⁷ The initiative was reconducted and expanded to support job creation, ⁷⁸ eventually dominating the ESF's third iteration after another major reform in 1983. ⁷⁹ This youth employment fund aimed to ‘equip the workforce with the skills required for stable employment’ and to provide new employment opportunities, ⁸⁰ with at least 75% of its resources allocated to youth-related projects. ⁸¹ This 1983 iteration of the ESF combined its youth focus again with industrial-sectoral and spatial-regional orientations, reserving 40% of funds for structurally disadvantaged regions such as Greece, Ireland, Italy's ‘Mezzogiorno’ and Northern Ireland while dedicating the rest to areas affected by high or long-term unemployment and industrial and sectoral restructuring. ⁸²

This section has identified two ESF imaginaries and their underpinning processes of imaginary-making in the early Community. It did so to illustrate the social legacy of the EU budget and its reversibility. Across its first three decades, the ESF combined purposes of industrial-sectoral, employment and spatial-regional policy, each reflecting broader transformations in Europe's political economy. These iterations reveal how the meaning of the ‘social’ within the ‘budget’ was continuously (re)negotiated: from reinsurance among Member States to labour market activation and employability. Over time, ambitions to combat social exclusion and material deprivation and to promote social cohesion in the wake of enlargement should be added. ⁸³ The ESF's history thus prefigures contemporary debates on the EU's social dimension, where the balance between solidarity, competitiveness and security, between redistribution and flexibility, is to be renegotiated. Yet the merit of the policy field itself had never been seriously questioned.

A. Structure and availability of EU funding for budgetary social policy

Under the 2028–2034 MFF proposal, EU funding commitments would be organized into four major budget headings with funds available to social policy risking being compromised. Strikingly, the Erasmus + programme's ambition of learning mobility might turn into the EU's most prominent budgetary social policy.

The first heading makes EUR 1062 billion in July 2025 prices available to ‘[e]conomic, social and territorial cohesion, agriculture, rural and maritime prosperity and security’. ⁹⁹ Most of these resources are to be pooled into a single EUR 865 billion European Fund for Economic, Territorial, Social Cohesion, Agriculture and Rural, Fisheries and Maritime Prosperity and Security (NRPF). ¹⁰⁰ Member States would access the fund through newly introduced national and regional partnership plans (NRPPlan) submitted to, assessed by and negotiated with the Commission, ¹⁰¹ mirroring the RRF. ¹⁰² As the successor to cohesion policy, the NRPF would also absorb what remains of the 2021–2027 European Social Fund Plus (ESF+). ¹⁰³

Within the NRPF, a minimum benchmark requires that 14% of total expenditure be allocated to ‘the Union's social objectives’, that is of all NRPF funds spent by all Member States together. ¹⁰⁴ As contributions to the CAP and Social Climate Fund are excluded from the basis of calculation, this benchmark is likely to correspond to about EUR 79.7 billion in July 2025 prices. ¹⁰⁵ The figure falls below both the current ESF + envelope of approximately EUR 88 billion in 2018 prices, ¹⁰⁶ and its, as of late 2024, inflation-adjusted equivalent of around EUR 110 billion. ¹⁰⁷ Social expenditure would thus decline to around 4% of the total budget, a level not consistently reached since 1981 before the introduction of MFFs in 1988. ¹⁰⁸ Since 1988, the ESF share of the budget has remained relatively stable fluctuating between 7% and 9%. ¹⁰⁹ This is if considering only ESF expenditure as socially oriented, while, as underlined in the next section, the other funds like the ERDF have also pursued social objectives. The proposed framework further weakens social funding through the discontinuation of the Just Transition Fund (JTF), which currently mobilizes around EUR 9 billion in late 2024 prizes to address, inter alia, the social and employment impact of the EU transition to climate neutrality. ¹¹⁰ Although an additional EUR 150 billion in loans would be made available to support NRPPlans, of which at least 14% or about EUR 21 billion should be dedicated to social objectives, ¹¹¹ this support is structurally different from budgetary expenditure. It is in principle outside the EU budget as drawn from additional EU borrowing, ¹¹² relies on a logic of financial assistance rather than redistribution and fiscal incentive and, ¹¹³ for this reason, may be drawn unevenly as experience with loans under the RRF demonstrates. ¹¹⁴

Even though the NRPF allows for higher commitments to social objectives, ¹¹⁵ its 14% benchmark functions as an aggregate target at EU level only. Individual Member States are not required to meet the benchmark. Past practice suggests, moreover, that the Commission may not credibly enforce spending commitments, as flexibility masks political discretion not to finance social policy objectives. ¹¹⁶ What appears as simplification may therefore erode accountability for social spending. The benchmark further competes with other, possibly more politically salient, spending targets in the fields of migration, border management, agriculture and climate investment, ¹¹⁷ such as a 35% benchmark for climate and environmental objectives, ¹¹⁸ or a 10% target for agricultural objectives added to the already reserved CAP funding. ¹¹⁹ Constitutionally, cohesion policy should indeed be aimed at economic, territorial and social cohesion. ¹²⁰ In this landscape, social policy expenditure and its capacity to incentivize domestic policymaking risk being crowded out. ¹²¹

A second heading allocates approximately EUR 590 billion to ‘competitiveness, prosperity and security’, ¹²² which includes a EUR 234 billion European Competitiveness Fund (ECF). ¹²³ Of this, EUR 11 billion is notionally linked to ‘skills development’ for value chain and labour market transitions, hence to an eventual employment policy ambition. ¹²⁴ Yet the same allocation also serves for an ECF InvestEU instrument that can provide loans and guarantees to address investment market failures, project advisory services to businesses, an ‘EU for Business network’ and strengthening small and mid-sized enterprises. Therefore, skills development risks in any event being secondary to the ECF's central objective of business competitiveness. ¹²⁵ As the Commission puts it, the ECF's ‘social’ impact is to flow from ‘larger investment volumes…expected to boost employment’. ¹²⁶ By contrast, the ESF + conceptualized social and employment policy, including skills policy, as an autonomous policy field. Within the same, second budget heading, an enlarged Erasmus + programme would receive almost EUR 41 billion to promote lifelong learning, skills, competences and ‘jobs for all’. ¹²⁷ This Erasmus + programme may become the Union's most prominent social initiative in financial terms. The remaining two headings would allocate around EUR 215 billion to Europe's ‘global’ ambitions, and EUR 118 billion to administration. ¹²⁸

Taken together, the proposed financial resources recast the budget's social legacy. Social objectives are folded into broader funding frameworks primarily geared toward competitiveness and security. The 14% benchmark risks offering appearance only but not substantial commitment to social and employment policy. The model rests on the assumption that competitiveness and security expenditure will automatically deliver employment and social inclusion. It overlooks that remedying social injustice, either structural or caused by market operation, constitutes the core rationale of social policy, while social cohesion is one of three objectives of cohesion policy. The merged fund also sits uneasily with the ESF's unique position in primary law. Although understood and operationalized as a cohesion fund, the ESF is rooted in its own Treaty Title XI. While extracted from its original position within Title X on social policy, the ESF has more specific aims than general cohesion policy, that is the improvement of employment opportunities and living conditions in the EU. ¹²⁹ The EU Court of Justice only recently emphasized in late 2025 how essential upward social convergence in terms of working and living conditions is for the operationalization of EU social policy. ¹³⁰ In this perspective, the EU budget should be intrinsically interested in upward social convergence as also illustrated by the ESF’s Treaty title. Subsuming the ESF into a larger funding instrument with a still uncertain commitment to social spending is at least constitutionally questionable.

B. The articulation of social policy objectives

All cohesion funds of the 2021–2027 MFF, the ERDF, ESF+, Cohesion Fund (CF) and European Maritime Fisheries and Aquaculture Fund (EMFAF), pursue, among their objectives, the promotion of ‘a more social and inclusive Europe’ based on the European Pillar of Social Rights (EPSR). ¹³¹ The JTF complements this framework by addressing the social and employment effects of the transition to climate neutrality. ¹³² With the exception of the EMFAF, these instruments translate their social ambition into more concrete targets. The ERDF and CF, for example, support social infrastructure, the social economy or inclusion measures for marginalized groups and third-country nationals, including in housing and health. ¹³³

At the centre of this social architecture stands the ESF+. It pursues high employment, fair social protection and working conditions, equal opportunities, quality training, social inclusion or investment in children and young people. ¹³⁴ These broad aims are operationalized through more concrete priorities: addressing country-specific recommendations from the European Semester, implementing the EU Child Guarantee, ¹³⁵ social inclusion, ¹³⁶ support to the most deprived ¹³⁷ and youth employment support. ¹³⁸ These concrete priorities are, in turn, presented as ex ante spending conditionalities as they mandate to use ESF + spending, or even a specified share of it, for the priority areas identified; establish clear policy objectives for social spending; and embed these objectives in a governance framework. In the following, I refer to them as thematic conditions. They in principle require to concentrate ESF + funding in the priority area identified.

The Commission proposal for the 2028–2034 MFF departs from this approach. Framed as flexible and strategic, it replaces policy concentration with procedural discretion. Social objectives are absorbed into a catch-all category within the new NRPF where they depend on Member States’ NRPPlans, Commission assessment and negotiation. ¹³⁹ This process lacks clear accountability criteria beyond the vague 14% benchmark for social expenditure. Although the NRPF lists objectives such as employment support, equal opportunities, fair and quality working transitions or demographic change, ¹⁴⁰ these are not convincingly prioritized or accompanied by minimum spending requirements. The MFF proposal also mentions ‘social innovation’, demographic change and material deprivation, but again in permissive rather than mandatory terms. ¹⁴¹

Compared to the ESF + model, this reconfiguration allows more easily to divert funds from social objectives during the RRF-inspired negotiations and monitoring of reform milestones in NRPPlans. Member States may deprioritize social objectives or strategically relabel expenditure as ‘social’ to rhetorically present their use of EU funding as aligned with the admittedly only EU-wide 14% threshold. ¹⁴² The possible strategic use of labelling weakens the credibility of a social spending benchmark that replaces a dedicated ESF allocation for social policy. It de facto allows for greater ease to turn EU funding away from social policy. While greater responsiveness to unforeseen developments over the seven-year MFF period may be desirable, flexibility could have been achieved through other regular review mechanisms. Within a given policy field, the available, broad objectives already gave considerable flexibility to frame different policy reforms and outcomes and adapt them to domestic and changing realities. Under the proposed system, both the Commission and Member States enjoy broad discretion over social policy, coupled with weak accountability criteria. ¹⁴³

A de-strategization of budgetary social policy may also arise from shifts in the Commission's and ESF's internal power structures. ¹⁴⁴ Historically, the ESF has been managed by DG EMPL, ¹⁴⁵ the Commission DG responsible for social, later employment policy. ¹⁴⁶ Its institutional set-up within the budget resembled domestic budgetary policymaking that is usually made up of distinct policy areas with their respective budgets and is managed by different governmental, administrative actors. The NRPF's consolidation is likely to shift institutional power to other DGs less oriented towards social policy and, thus, make the EU budget more dissimilar from its domestic counterparts. The RRF, for example, was managed by a Reform and Investment Task Force situated in the Commission Secretariat-General. ¹⁴⁷ This may reduce the emphasis on social objectives in NRPPlan negotiations, particularly if DG EMPL and the tripartite ESF Advisory Committee, established by Article 163 TFEU, are sidelined or have minimal involvement. ¹⁴⁸ While the MFF will provide criteria for labelling social policy spending, the Commission and the DGs responsible will dispose of a fair share of discretion in defining what counts as social spending in practice. ¹⁴⁹ Labelling is therefore likely to become another topic of negotiation.

From the perspective of policy adaptation, the NRPF system may even reduce flexibility, appropriateness and subsidiarity. Policy and reform choices are moved to higher levels of negotiation between the Commission and Member States, ¹⁵⁰ which risks to forget that social policy is about social cohesion among people, not Member States. Budgetary social and employment policy further have a tradition of involving lower-level authorities, civil society and social partner organizations. ¹⁵¹ Although the proposal requires multi-level partnerships in preparation, ¹⁵² implementation and monitoring of NRPPlans, ¹⁵³ experience with the RRF suggests that meaningful involvement of these actors remains uncertain. ¹⁵⁴

At the same time, the European Competitiveness Fund equates social impact with business support. This aligns the budget's rationale for social policy with a market-oriented vision. The Commission has already indicated that the ECF's ‘social impact’ is to trickle down from growth, which signals that social policy will not be a priority in the next MFF. This is not to say that the risks pinned out in this section will materialize, but they should be kept in mind for the negotiations and later implementation of the 2028–2034 MFF as they may lead to a retreat from or de-strategization of budgetary social policy. They can also serve as a useful tool for scholars to carefully watch and scrutinize social policy in the next MFF's practice. Erasmus+, with its focus on learning mobility, remains the only programme providing a stable, identifiable framework for EU social policy, though it benefits only a limited group of learners.

C. Social policy and economic governance in the budget

Since the 2010s sovereign debt crisis, the budget's social legacy has served as a site of innovation in social governance and how it embeds social policy within economic governance. During the 2014–2020 funding period, the ESF and an integrated Youth Employment Initiative provided targeted support to regions facing high or rapidly rising youth unemployment levels, broadly equivalent to the Member States most in distress during the debt crisis. ¹⁵⁵ This was an experiment with new forms of intervention to provide additional fiscal space for policy innovation in direct response to how this fiscal space had been strained by the debt crisis and its austerity measures. ¹⁵⁶ EU funding and the fiscal space it created here acted as an incentive structure rather than a conditionality scheme.

Under the current 2021–2027 MFF, the ESF+'s thematic conditions tie financial incentives to EU-level standard-setting – EU ‘guarantees’ – on childhood or youth. ¹⁵⁷ For this purpose, the ESF + even goes beyond mere thematic conditions and moves to a people-centred logic in its response to national vulnerabilities: all Member States must dedicate an ‘appropriate’ share of ESF + resources under shared management to the EU Child Guarantee, but those with an over-average rate of children at risk of poverty or social exclusion must allocate at least 5% to this field. ¹⁵⁸ For youth employment, Member States with an over-average rate of young people (15–29 years) not in employment, education or training must allocate at least 12.5% to youth employment support. ¹⁵⁹ This framework represents a distinct governance model in which social coordination is translated into domestic regulation via the European Semester's policy monitoring and EU funding. ¹⁶⁰ This innovative model has opened new, long-term regulatory spaces for EU action in areas where competence was far from given, as for childhood. It also targets policy outcomes to groups identified as vulnerable.

Again, the Commission proposal does not follow up with these models. The thematic conditions are removed, and only reference is made to the rather vague EU employment policy guidelines. These should be followed yet only where Member States already do spend on social objectives considered to fall into the ESF's realm while there is no obligation that each Member State actually allocates EU financial resources to social objectives on its own. ¹⁶¹ Only an annexed ‘methodology for the contribution to social objectives’ gestures toward concentration and policy priorities. It still identifies social inclusion, material deprivation and the Child and Youth Guarantees as priorities. ¹⁶² Yet it does not require minimum allocations from Member States or specify how compliance would be monitored which clearly challenges accountability. The Commission's emphasis on flexibility, therefore, introduces profound uncertainty about the scope of social policy in the next MFF and whether the EU budget is able to pursue long-term, ‘intergenerational’ objectives as it claims. ¹⁶³ In doing so, it risks abandoning a decade of gradually embedding social governance within the EU budget and its economic governance. It also weakens the institutional mechanisms through which social priorities have been translated into domestic action.