EU Currents: The Haves And Have-Nots: The Debate For The EU’s Budget

Background

Leaders within the European Union Parliament are struggling to settle the bloc’s €2 trillion budget set to go into effect in 2028. The budget, known as the Multiannual Financial Framework (MFF) was initially proposed by the European Commission in July 2025 and leaders within the EU are looking to the Irish delegation to take the lead on the discussions, as they will take over the Presidency of the Council of the European Union from July 1 until the end of 2026.

As of June 19, rifts have begun to form between different regions of the EU, with member states in the south and east requesting more funding for agriculture and local infrastructure, while member states like Germany and the Netherlands are pushing for increased defense spending and capital to hedge against technological shortfalls to the United States and China.

If larger member states who are “net payers” get the concessions they are seeking on the budget, agricultural and regional funding could be cut, from its current position of 60% of the budget to only 44% of the projected 2028 budget framework.

Late last month, a group of 16 countries signed an agreement pushing for agricultural and regional funding to remain at its current level in the new budget. Signatory nations included Bulgaria, Croatia, Estonia, Greece, Italy, Latvia, Lithuania, Malta, Poland, Portugal, Czechia, Romania, Slovenia, Slovakia, Spain and Hungary.

The “No-Go Box”

Authorities in Cyprus are currently moderating the budget discussions, as the nation currently holds Council Presidency, and a two percent cut was proposed as a starting point for negotiations between the Friends of Cohesion and the “frugal” nations led by Germany and the Netherlands. However, leaders from these nations were surprised at how small the cuts were, citing a need to balance aspirations with stark financial realities.

German Chancellor Friedrich Merz stated that the budget proposals were “not feasible” at the present time and expressed hope that an agreement would be made by the end of this year.

Eelco Heinen, the Dutch Minister of Finance was also quick to point out the issues with the proposed cuts.

“For the Netherlands, this is a no-go box. It is unaffordable, unbalanced and with the wrong focus. The overall volume remains far too high at a time when fiscal space is limited across Europe and difficult choices are unavoidable.”

Distributing The Budget

The upheaval around the budget is not a new phenomenon in the EU. Every seven years, the budget is addressed and key issues can often color the debates around how each budget should be spent.

Current geopolitical tensions are certainly at the forefront of everyone’s minds along with a desire to keep the budgetary debates within a defined timeline of this year, not just for the sake of expedience but to also ensure that the budget debates do not creep into the election messaging of several nations that are having major national elections in 2027.

The argument of fairness frequently creeps into these discussions as well. As stated earlier, “net payers” like Germany and the Netherlands often pay more into the budget than they receive, while smaller member states receive more than they pay.

A key component to maintaining this tight balance is seeking out new sources of revenue to assist the high-contributing nations while ensuring smaller nations do not have to tighten their purse strings. EU leaders are adamant that this new funding is not borrowed against existing resources, referred to as “new own EU resources”.

“Leaders agreed to task our Irish friends to accelerate work on new own resources. We need those additional revenues to reach a deal in December,” said Antonio Costa, chairman of the budget summit.

Ursula von der Leyen, head of the European Commission also added: “We need a robust and stable system of new own resources. By our next meeting we should have a shared understanding of how we want to finance the next MFF.”

One strategy that was proposed was the utilization of profits that member states receive from selling CO2 emissions permits to companies along with collecting a share of the tax on imports from nations with weaker climate policies than the EU.

An additional proposal from Italy, France and Greece involved repaying NextGeneration EU recovery funds through a mechanism known as “rolling debt”. This proposal was roundly criticized by Germany and the Netherlands, citing concerns over new common borrowing.

Taxes on non-collected electronic waste, shares of the tobacco excise duty, a levy on extreme wealth, online gaming winnings and cryptocurrency capital gains were also discussed as possible funding sources.

Coming to A Consensus

As the budget negotiations stand headed into July, all 27 member states have an onerous task ahead to come up with an agreed framework for the MFF. A successful passage of the MFF requires unanimous approval from all member states. Leading that charge will be Ireland as they take the helm of the EU presidency on July 1.

Earlier this month, when asked about his outlook on the MFF proposals, Simon Harris, Ireland’s Finance Minister acknowledged that the proposals would not be “without challenge”.

“It’s clear there is many moving parts in relation to this, but Ireland is preparing to assume that ‘honest broker’ role now in twenty days’ time.”