New EU Funding Model Raises Concerns

Madeira and the Azores could lose some of their power to decide how European funding is spent under a proposed overhaul of the European Union’s long-term budget.

The changes are part of the European Commission’s proposed Multiannual Financial Framework for 2028–2034. However, the plans remain under negotiation and have not yet been finally approved.

Under the present system, Madeira and the Azores have regional programmes and regional managing authorities that can direct European structural funding towards local priorities.

Madeira 2030, for example, supports projects involving business competitiveness, innovation, employment, social inclusion, housing, environmental protection and the transition to renewable energy. Its implementation is overseen within the Region by the Madeira Development Institute.

The Commission’s new proposal would replace much of the present structure with a single National and Regional Partnership Plan for each EU member state.

Funding currently divided between cohesion policy, agriculture, rural development, fisheries, maritime policy, social programmes, migration and security would be brought together within one national framework.

The Commission says the model would simplify access to European funding, reduce the number of separate programmes and provide greater flexibility when responding to changing economic, social or geopolitical circumstances.

It has proposed an overall EU budget of almost €2 trillion for 2028–2034. Approximately €865 billion would be channelled through the new National and Regional Partnership Plans, while €410 billion would be assigned to a new European Competitiveness Fund, incorporating programmes including Horizon Europe and the Innovation Fund.

However, regional governments and representatives across Europe fear the apparent simplification could lead to greater central government control.

Under the proposed system, the Portuguese Government would negotiate a single plan with the European Commission. Madeira and the Azores could help prepare and implement that plan, but critics say the proposal does not provide sufficiently strong guarantees that regional governments would retain their current decision-making powers.

A study prepared for the European Parliament’s Committee on Regional Development found that the proposed system requires national governments to “involve” regional and local authorities. Nevertheless, each member state would largely determine the precise role of those authorities.

The study warned that the absence of strict regional allocations, combined with the integrated national approach, pointed towards a more centralised system.

For Madeira and the Azores, the issue goes beyond administrative responsibility. Both are recognised by the European Union as outermost regions because of their remoteness, insularity, small markets and dependence on transport links with mainland Europe.

Article 349 of the Treaty on the Functioning of the European Union allows specific measures to be adopted to address these permanent disadvantages.

The Madeiran Legislative Assembly has warned that placing funding within a single national plan could create conflicts between national priorities and the particular requirements of the islands. It fears that investment could be directed towards mainland regions with larger populations, greater political influence or projects capable of producing more immediately visible national results.

In a resolution sent to the Portuguese Government, European Commission, European Parliament and European Committee of the Regions, the Assembly called for Madeira to retain full authority over the direct management of its structural funds. It also requested a multilevel system of governance giving the outermost regions a formal role in defining, implementing and evaluating policies financed by the European Union.

Possible consequences for businesses:

The proposed changes could affect both small and large Madeiran companies, although the eventual consequences will depend upon the final rules and Portugal’s national plan.

Under Madeira 2030, the Region can currently design funding competitions around the structure and requirements of the local economy.

Recent programmes have provided targeted support for microbusinesses, small and medium-sized companies and larger firms investing in research, innovation, energy efficiency, renewable energy and decarbonisation.

Regional management allows factors such as additional transport costs, limited land, small market size and the difficulties of operating on an island to be reflected in eligibility conditions and funding rates.

If more decisions are taken nationally, Madeiran businesses could find themselves competing directly with larger mainland companies. Small island businesses may also have greater difficulty satisfying nationally designed criteria or demonstrating the scale of economic impact expected from their projects.

Larger Madeiran companies could be affected if regional allocations are reduced or if investment priorities are concentrated in major industrial centres on the mainland.

These outcomes are possible risks rather than confirmed consequences. The Commission says its model is intended to tailor expenditure to local needs and make funding easier for citizens and companies to access.

Nevertheless, the European Committee of the Regions has strongly criticised what it describes as the “nationalisation” and centralisation of the EU budget. It says the proposal contains insufficient guarantees that every region will continue to benefit from cohesion investment or that regional authorities will have a meaningful role in managing the money.

In May, the Committee called for the European Commission to be able to reject a national plan if regional and local authorities had been excluded from its preparation.

The European Parliament has also opposed using a “one national plan per member state” model for all shared European funding. Members have expressed concern that the approach could weaken the European nature of cohesion and agricultural policies and create differences in the assistance available to businesses and farmers in different countries.

Threat to dedicated island support:

Madeira’s Regional Government has also raised concerns about the future of POSEI, the programme created specifically to compensate agriculture in the EU’s outermost regions for remoteness, insularity and additional production and transport costs.

Regional Economy Secretary José Manuel Rodrigues has warned against allowing POSEI support to disappear into a much larger national funding structure without firm protection for the islands. Portugal’s Minister for the Economy and Territorial Cohesion, Manuel Castro Almeida, has acknowledged that the initial Commission proposal does not sufficiently recognise the particular circumstances of the outermost regions. Both the Regional and Portuguese governments have said that Madeira, the Azores and the other European outermost regions must receive specific treatment in the final agreement.

The proposed model does not mean that Madeira and the Azores have already lost control of their European funding.

The 2028–2034 budget remains the subject of negotiations between the European Commission, European Parliament and the governments of all 27 member states.

The final Multiannual Financial Framework will require the unanimous agreement of EU governments and the consent of the European Parliament. Its structure, overall value, regional guarantees and individual funding allocations may therefore change substantially before it takes effect in 2028.

The central question for Madeira and the Azores is whether simplification can be achieved without weakening regional autonomy or removing the safeguards designed to compensate the islands for their permanent geographical disadvantages.

Without binding regional allocations and a guaranteed role for regional managing authorities, there is concern that decisions affecting island businesses, agriculture and public investment could increasingly be made in Lisbon rather than Funchal or Ponta Delgada.