Germany and five EU states seek budget cuts in bloc spending talks

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Germany, EU seek budget cuts

Highlights

Germany, Netherlands, Sweden, Denmark, Austria and Finland, representing about 40% of EU budget revenues, demand drastic cuts to the proposed €2tn EU budget framework.
The six countries prioritize redirecting funds toward defence and innovation, seeking major reductions in traditional farm and cohesion spending that comprise two-thirds of the budget.
Seventeen member states, including Spain and Italy, want total spending above €2tn and back higher traditional allocations and joint EU borrowing, while France presses for new EU-wide taxes to raise about €60bn annually.

Budget standoff before year-end deadline

As first reported by the Financial Times, German Chancellor Friedrich Merz and the leaders of the Netherlands, Sweden, Denmark, Austria and Finland have told Brussels that the EU budget must be fundamentally reformed, with much lower spending than the European Commission's proposed €2tn framework.

The six countries want more money directed toward defence and innovative companies as Europe faces mounting economic and security pressures. At the same time, they are pushing to reduce allocations for farm support and poorer regions, which have traditionally taken roughly two-thirds of the bloc's budget.

Their threat carries weight because the seven-year budget requires unanimous backing from all 27 member states, and the six signatories account for about 40% of EU budget revenues. The stance also cuts across a commitment made by EU leaders in June to reach agreement this year, before elections in France, Italy, Spain and Poland risk making negotiations harder.

Ireland, which holds the rotating EU presidency, is now tasked with producing a compromise proposal by mid-October. Dublin must balance demands from the largest net contributors against a broader group of governments that want existing support for agriculture and regional development preserved.

Competing funding plans split member states

A group of 17 countries, including Spain and Italy, is insisting that spending on traditional budget areas should rise and that the total EU budget should exceed the proposed €2tn. Some of those governments also support more joint EU borrowing to finance higher expenditure, an idea that remains unacceptable to Berlin and its allies.

France, while also a net contributor, is pressing for EU-wide taxes to help cover additional spending. The Commission has proposed raising about €60bn a year through measures including higher income from the carbon market, tariffs on carbon-intensive imports, a levy on non-recycled electronic waste, tobacco duties and a charge on large companies.

Those revenue ideas are meeting resistance because taxation largely remains a national power that governments are reluctant to hand over to Brussels. EU diplomats also say the proposed levies are unlikely to generate enough money to meet all of the bloc's spending ambitions.

A spokesperson for European Council President António Costa says leaders remain committed to closing the gap by the end of the year and reaching a balanced overall agreement. The comment highlights how the bloc is still trying to bridge a widening divide between fiscal restraint and demands for higher common spending.

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