Seven-year money, twenty-seven wills: will the EU budget bleed out on a German belt?

On Saturday, German Chancellor Friedrich Merz swept the latest compromise proposal on the European Union's long-term budget for 2028–2034 off the table with a single sentence. According to Mediafax and Politico, Merz said they are still far from a deal, that the proposed amount cannot serve as a basis for an agreement, and that the budget must also be bearable for those who shoulder the larger share of the financing. The rotating Irish presidency had trimmed the European Commission's original proposal of nearly two thousand billion euros by roughly 8 percent, about 159 billion euros, which is still too much for Berlin and its allies, while for the less affluent member states and the European Parliament it is already too little. This clash encapsulates the whole European debate: who pays, who receives, what the money should be spent on, and how large the Union—from which everyone expects ever more—should even be.

The Commission presented the seven-year framework on 16 July 2025, which, according to Council documents, would amount to 1,763 billion euros in commitments at constant prices, or roughly two thousand billion at current prices—figures that are not simply larger than the current ones but also structured differently. The proposal's most contested innovation is to merge cohesion and agricultural support, as well as the fisheries and migration funds, into a single 865-billion-euro fund. Under this, every member state would operate according to a national and regional partnership plan, roughly in the way the post-pandemic recovery fund worked. At least 300 billion euros would be set aside within this for farmers' income support, with the largest national envelopes going to France (50.9 billion), Spain (37.2 billion), Germany (33.1 billion), Italy (31 billion) and Poland (24.6 billion). Alongside the framework there would be a new competitiveness fund, which would also finance defense, space and technology investments, as well as a strengthened external action framework and debt-financed instruments, including the Ukraine reserve. All of this would be topped up by five new sources of own revenue—the Carbon Border Adjustment Mechanism (CBAM), revenue from the emissions trading system, an EU contribution levied on large companies, a levy on non-recycled electronic waste, and part of the excise duty on tobacco products—which, according to the Commission's estimate, would bring in roughly 58 billion euros a year. On top of that, this same framework would also have to cover repayments of the joint loans under the NextGenerationEU recovery fund, which alone represents a burden of several tens of billions a year in the coming cycle.

The negotiations essentially stood still for two years. The Cypriot presidency cut the proposal by only about 2 percent in June, to 1,730 billion euros, which failed to convince either the frugal camp or the pro-cohesion camp at the June summit. The Irish presidency has now skillfully cut deeper, precisely where it hurts most governments the least. It would leave the agricultural and regional development funds at the originally planned level, and would achieve the savings at the expense of competitiveness, defense and development aid. According to Siegfried Mureșan, the European Parliament's chief negotiator, this is precisely the proposal's biggest contradiction: one cannot spend four years saying that Europe must defend itself better and then cut the very defense budget, nor can one preach for years about competitiveness vis-à-vis China and then trim the competitiveness fund. Mureșan compared the Dublin proposal to the bookkeeping mentality of a condominium administrator—which, in EU jargon, counts as a decidedly biting compliment.

Berlin and the "frugals" vs. the "Friends of Cohesion"

Germany today leads a six-member group that includes Sweden, Denmark, the Netherlands, Finland and Austria. Together these countries provide roughly 40 percent of the EU budget, with Germany alone contributing about a quarter. Already in July, in Dublin, during the first visit by a German chancellor in seven years, Merz told Irish Prime Minister Micheál Martin that no item could be exempt from the major cuts. He put the necessary savings at several hundred billion euros, so that the outcome would be compatible with the German federal budget, while Berlin wants to bring the overall framework closer to one percent of the Union's gross national income. Dutch Finance Minister Eelco Heinen has already said outright that at this pace there will be no agreement by the end of the year. The frugal logic is simple and easy to sell domestically: according to the net contributors, the money is needed at home too, the growing EU coffers should be financed by their own taxpayers, and they fear that new EU taxes would erode national sovereignty. It is no small irony that it is precisely the German government—which last year approved a domestic infrastructure and defense package worth several hundred billion euros financed by debt—that is now demanding fiscal discipline from the common budget. Yet a significant share of German companies' exports goes precisely to those Central European markets that are, in part, kept on a growth trajectory by EU funds.

On the other side stands the 17-member group called the "Friends of Cohesion," which includes Romania, Poland, Spain, Portugal, Greece and most of the Central and Eastern European member states. These countries are unwilling to give up any part of the agricultural and regional funds. Spanish State Secretary Fernando Sampedro has so far refused even to discuss further cuts, the French government is protecting agricultural funds for the sake of its farmers, and the Poles, because of the need to reinforce the eastern border, are guarding both defense and cohesion funds at once. Since agriculture and cohesion together make up roughly half of the framework, these items are the most politically sensitive: few governments can afford to have their own farmers march against them with tractors. Many among the Friends of Cohesion also oppose the centralized national plans. Fifteen member states, including France, Italy, Poland, Romania, Hungary and Germany, as well as the leaders of the European Parliament's four largest groups, already warned back in spring that regions and farmers would receive fewer guarantees if everything were folded into a single national plan.

The third actor is the European Parliament, which in April voted for a framework even 10 percent larger than the Commission's proposal. Although the budget must be adopted unanimously by the 27 governments, it cannot enter into force without Parliament's approval—the most uncomfortable veto power in the negotiations as far as the frugal camp is concerned. Mureșan also pointed out that if member states want to pay less, it makes no sense to drop from the proposal precisely those new own resources meant to replace national contributions. According to the Council's September document, there is a deep divide on this question too: some member states would reduce the framework, others would be willing to pay more, and still others believe there is no solution without new EU revenues. The Irish presidency therefore asked ministers which three programs they would under no circumstances give up, and how willing they are to increase national contributions. The answers to such questions usually reveal that everyone wants everything, as long as someone else pays.

Because of the timing, the dispute is now especially sharp: EU leaders are discussing the proposal at the Brussels summit on Thursday and Friday, and governments want to reach an agreement by the end of the year, since elections will be held in 2027 in France, Italy and Poland. In the middle of a campaign, hardly anyone would want to take on a major cut or a major increase in contributions. If there is no agreement, under the EU treaty the current year's framework would simply roll over—something Berlin, too, reportedly fears according to Politico and the Greek press, since that would not mean a reduction but a freeze at the current level. Funding must reach farmers, regions and researchers without interruption starting in January 2028.

What is really at stake?

Behind the budget dispute lies a strategic question. The Union today wants, all at once, to become a military power in the shadow of Russia, to remain competitive between China and an increasingly unpredictable America, and at the same time to preserve the solidarity model that finances the catching-up of Central and Eastern Europe. And all of this from a budget that barely exceeds one percent of the EU's gross national income. The Irish proposal would cut precisely the items of the future—defense and competitiveness—while leaving the items of the past—agriculture and cohesion—untouched, which is politically understandable but strategically hard to justify, especially at a time when Washington is easing sanctions in exchange for Russian diesel, while Moscow is hunting the executives of European arms manufacturers.

For Romania, and within it for the Hungarian community of Transylvania, protecting cohesion and agricultural funds is an existential issue. Yet the arguments of a country whose government crisis has dragged on for months, and whose institutions apparently finance even weather forecasts with luxury lingerie, are unlikely to carry much weight in Brussels. The frugal camp, after all, is not only interested in how much money someone is asking for, but also in what it is spent on—and on that question, Bucharest currently has no convincing answer.

Ugar