EU leaders clash over 2028-2034 budget as deal remains out of reach

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EU 2028-2034 budget clash

Highlights

EU leaders remain divided over the 2028-2034 budget size, with the European Commission proposing 1.76 trillion euros and Ireland's EU presidency lowering it to 1.62 trillion euros.
The Irish proposal reduces funding for research, climate action, and competitiveness while increasing subsidies for farmers, reflecting political priorities amid ongoing criticism from net contributor countries.
Political deadlock persists as key countries like France and Germany face domestic challenges, threatening the goal of reaching a budget agreement by end-2026 ahead of multiple national elections in 2025.

Budget size and spending priorities divide member states

As reported by Reuters, European Union leaders are due to confront each other on Thursday over the size of the bloc's 2028-2034 budget, its revenue sources and how money should be allocated across competing priorities.

The seven-year budget must be approved unanimously by all 27 member states and has long been one of the EU's most contentious negotiations. The current round is proving especially difficult because national budgets are already under strain from high energy prices and rising defence spending.

The European Commission proposed last year a budget worth 1.76 trillion euros, or 1.26% of EU gross national income, prompting strong opposition from net contributor countries including Germany, the Netherlands and Nordic states. A newer plan from Ireland's EU presidency lowers the total to 1.62 trillion euros, but criticism has continued.

That revised figure already includes 150 billion euros to service and repay the EU's joint borrowing from the COVID pandemic. The Irish proposal mainly trims spending on the EU's external activities and on financial buffers within the budget, while also reducing funding for research, climate action, clean transport, energy interconnections and measures aimed at improving Europe's competitiveness.

At the same time, the plan increases subsidies for farmers and support for rural living standards, reflecting the political weight of agricultural voters across the bloc.

Political deadlock clouds year-end timetable

The Bruegel think tank says the Irish proposal largely preserves the EU's long-criticised budget structure, which remains focused on support for farmers and regions instead of shifting more resources toward helping Europe compete with China and the U.S.

Bruegel argues that only France and Germany can break the impasse, but sees limited scope for leadership. France is absorbed by political infighting ahead of elections, while Germany is weakened by record low popularity for Chancellor Friedrich Merz.

Although the budget does not have to be finalised until 2028, EU leaders want an agreement by the end of 2026. Elections next year in France, Italy, Poland, Greece, Estonia, Finland and Slovakia could make the negotiations even harder, because the budget is likely to become an issue in domestic campaigns.

To keep that timetable alive, leaders are likely to convene a special summit on Nov. 26-27, ahead of a possible attempt to seal an agreement at their next scheduled summit on Dec. 17-18.

Our earlier article on European defence shares examined why the sector has come under pressure despite a tougher security backdrop and rising calls for higher military budgets. We noted that investors remain cautious about how quickly government spending plans can turn into procurement orders and production capacity, with borrowing costs, delays and technology shifts weighing on expectations.

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