BRUSSELS ― Italian Commissioner Raffaele Fitto is leading a rearguard fight inside the EU executive to secure a powerful role for Europe’s regions in the bloc’s new multi-year budget.

Fitto, who is currently in charge of €400 billion in regional funding, is at odds with his boss, European Commission President Ursula von der Leyen, over a plan to dramatically increase the power of national governments in managing the cash pot to the detriment of local bodies.

That would be a major setback for the regions, and for Fitto, who have handled the so-called cohesion policy ever since it was introduced in the 1970s to narrow the gap between poorer and richer areas in Europe.  

Von der Leyen is investing major political capital in radically reforming the EU’s budget, currently worth €1.2 trillion, for the 2028-2034 cycle.

The plan to steer billions in EU funding away from agriculture and regional spending and toward defense and innovation, however, is sending shockwaves through Brussels and across national capitals.

Months of simmering tensions inside the Berlaymont are now at a boiling point ahead of the Commission’s presentation of its budget proposal on July 16.

Von der Leyen supports overhauling a set of criteria ― known as the Berlin formula ― that allocates a major share of the cohesion cash to underdeveloped regions across the bloc, two EU officials and two EU diplomats told POLITICO.

“The first question is: Will [the Berlin formula] be kept or not?” Jan Olbrycht, a former MEP now serving as an advisor to budget commissioner Piotr Serafin, said during a public event last week. “My answer for today is ‘I don’t know’, and I’m not sure it will be kept like this.”

Changing the rules could result in the Commission handing the money directly to national governments, which would have more leeway over how to allocate the funding to regions. Critics view this as problematic, as it could reinforce existing disparities within individual countries and sideline regions from the process.

“It’s basically a renationalization of the programs,” said one of the EU officials who, like others quoted in the story, was granted anonymity to speak freely.

Italy’s Fitto ― who is famed for his quiet and reserved public demeanor ― is leading the pushback against these sweeping changes that could diminish his power in the Commission in the years to come.

His view is broadly shared by Serafin, MEPs from von der Leyen’s own European People’s Party (EPP), 149 regions and 14 national governments, who wrote a critical letter to the Commission president.  

“Sixteenth July will be just the beginning of the fight,” Olbrycht said, predicting tough negotiations with national capitals and the Parliament further down the line.

Budget fault lines

Proponents of the cohesion funding reform ― most importantly, the Commission’s powerful budget department, if not the commissioner himself ― argue that it will allow greater simplification and more strategic investments in defense and industrial build-up.

The changes are part of a broader plan to lump agricultural and regional funds ― which jointly make up around two-thirds of the EU’s €1.2 trillion purse ― into a single cash pot for each country, where payments are linked to the fulfilment of economic reforms.

Critics argue that the new system will effectively bypass regions and create a democratic deficit, with local bodies bearing the brunt of governments’ failing to carry out major economic reforms.

Skeptics also fear that autocratic leaders, such as Hungary’s Viktor Orbán, will cut EU funding to regions governed by political rivals.

To prevent this risk, Fitto and Serafin support linking regional payments to local reforms. They’re also looking for safety nets to secure funding for farmers and regions, even if the reforms are not met.

Disagreement between the Commission’s budget and regions departments over cohesion policy is so strong that less than two weeks out from the budget’s publication date they haven’t finalized a draft text. Unlike many other areas of the budget, internal consultations over this issue haven’t started yet, the two officials told POLITICO.

“There are different visions inside the Commission,” Olbrycht said.