The European Union is entering a delicate phase of negotiations over its long-term budget, with member states divided over how much to spend and which areas to prioritise, ahead of key talks at a summit in Brussels on Friday.
There is a delicate balancing act to make among EU member states over the €2 trillion budget, with a group of net payers led by Germany and the Netherlands pushing to slash total spending, irking southern and eastern European member states who fear funding for sectors such as agriculture will be sacrificed in favour of more defense spending.
While agriculture and regional funding remain the largest spending categories, their share would decline significantly, falling from around 60% of the current budget to 44% under the Commission’s proposed framework for 2028–2034.
In late May, a group of 16 countries signed a document calling for an increase in agricultural and regional funding, describing themselves as the “Friends of Cohesion”.
The signatories were Bulgaria, Croatia, Estonia, Greece, Italy, Latvia, Lithuania, Malta, Poland, Portugal, the Czech Republic, Romania, Slovenia, Slovakia, Spain and Hungary.
The “frugal countries” — Germany, the Netherlands, Denmark, Sweden, Finland and Austria — said any increase in spending would be a no-go.
In a revised text presented last week, the Cypriot authorities, currently chairing the talks among the member states, pitched a cut of €32.8 billion to the overall €2 trillion, describing it as a compromise between the Friends of Cohesion and the frugal countries. EU leaders will begin talks based on the Cypriot proposal.
Meanwhile, the European Parliament, a co-legislator which will have to approve it alongside leaders, has rejected the Cypriot proposal, describing it as insufficient, particularly with regard to agriculture and regional funding.
Budget revenues and rolling debt
The debate over how the budget will be financed remains unresolved.
The Cypriot Presidency did not include revised proposals on revenue in its text.
In its initial proposal, the European Commission included revenue streams from the EU Emissions Trading System (ETS), the Carbon Border Adjustment Mechanism (CBAM), non-collected e-waste, tobacco excise duties and a corporate tax.
During the negotiations, the European Parliament proposed additional sources of revenue. According to several EU diplomats who spoke to Euronews on condition of anonymity, the proposals that have attracted the greatest interest among leaders include a gambling tax, a digital levy and a tax on crypto assets.
However, the frugal countries remain hesitant about the proposed revenue measures, particularly Sweden. They argue that, as some of the EU’s wealthiest member states, they would bear a disproportionate share of the financial burden.
Meanwhile, countries including Italy, France and Greece have proposed repaying NextGenerationEU through the reissuance of debt — a mechanism known as rolling debt. The proposal is strongly opposed by countries such as Germany and the Netherlands, which reject any form of new common borrowing.
EU leaders aim to reach an agreement on the budget by the end of 2026. The co-legislators are keen to avoid extending negotiations into 2027, which will be a major election year in several key European countries, including France, Italy and Poland.
Any agreement on the budget will require unanimous support from all 27 member states, as well as the consent of the European Parliament.