The adoption of the EU’s long-term spending plan, the Multiannual Financial Framework (MFF), is one of the most sensitive political issues in the bloc. The talks are currently entering a crucial phase. The question is not just how much the EU will spend on its member states from 2028 to 2035, but also what they will get in return.
For the EU institutions, it is also a matter of external autonomy: “At a time of geopolitical instability, the budget will allow Europe to shape its destiny, in line with its vision and ideals,” European Commission President Ursula von der Leyen said last July when she unveiled her proposals for a long-term budget.
On Tuesday the European Parliament voted to increase the EU budget. But ultimately, the 27 member countries of the bloc will have the final decision. Last week, EU leaders met at an informal summit in Cyprus and there were already signs of disagreement.
While the European Commission had proposed a budget of €1.76 trillion ($2.05 trillion) (adjusted for inflation), the European Parliament opted to go even further.
EU member countries are divided over the budget
Member countries are divided on this issue. For example, Germany and the Netherlands have spoken out against the Commission’s proposals.
Friedrich Merz, the German Chancellor in Cyprus, said, “At a time when almost all member states are making the most drastic fiscal consolidation efforts at home, a huge increase in the EU budget, as proposed by the Commission, does not fit into the picture.”
Janis Emmanouilidis of the European Policy Center, a Brussels-based think tank, told DW that other member states, particularly net recipients who receive more money than they contribute, believe the budget is too small given current operations. Net recipients in 2024 included Greece, Poland, Romania, Spain and Hungary, according to a study by the Cologne-based German Economic Institute.
Emmanouilidis also said that at the same time the EU’s largest net contributors, such as Germany, France, Italy, the Netherlands and Sweden, also had an interest in keeping their contributions as low as possible.
Reducing funding for farmers and regions
According to European Commission plans, the new budget will reduce funding for agriculture and regional development, but make payments more flexible. For example, the EU will also invest more in enhancing competitiveness and Europe’s role in the world by increasing defense spending and aid to Ukraine.
Nils Redeker, acting co-director of the Jacques Delors Centre, is skeptical about the political feasibility of these reform proposals. He told DW that in principle all member states understood the need for more investment in defense, industry and economic development, but some would find it difficult to accept less funding for agriculture and regional development.
Emmanouilidis told DW that during the negotiations, both small and large member states were primarily concerned with what their citizens would effectively get from the EU budget, while the question of how to jointly extract the greatest benefits from the budget played a lesser role.
New sources of own revenue for the EU
The EU budget is formed not only from contributions from member states, but also from the bloc’s own sources of revenue. The European Commission in its proposal has called for creating five new sources of revenue. These include a levy on large companies, a tobacco tax and increased revenues from the EU emissions trading system. On Tuesday, the European Parliament called for a digital tax on big tech companies.
Redeker told DW that it will be difficult to reach an agreement on these new sources of revenue, as the debate over whether to use its own resources to repay debt from the €750 billion COVID-19 recovery fund has gone on for years and has not yet succeeded. Some EU states fear a burden on their economies.
Another point of contention is likely to be the question of the time limit by which these loans must be repaid. According to news agencies, French President Emmanuel Macron recently said it would be “foolish” to return the money immediately and advocated his idea of more joint debt in the form of Eurobonds. For its part, Germany rejects more debt.
As analysts and politicians expect tough negotiations at the EU member level, the bloc also faces internal pressure. Elections are to be held in many major states including France, Italy and Poland next year. The possibility of a nationalist party victory, especially in France, is putting pressure on member states to conclude budget talks by the end of 2026, Emmanouilidis said.
EU leaders will take up their talks at their next meeting in June, when concrete data will be presented for the first time.
This article was translated from German.