BRUSSELS — German Chancellor Friedrich Merz will on Thursday bring together a group of leaders now pushing for hundreds of billions of euros to be sliced off the next seven-year EU budget — just as the European Council president is touring the bloc trying to broker a compromise.
Merz, who is increasingly unpopular in Germany and is on course to lose a key state election to the far right, has rejected the European Commission’s proposal for the bloc’s near-€2 trillion budget for 2028-2034. He’s convened the heads of the Netherlands, Finland, Austria, Denmark and Sweden, while Council President António Costa continues his rival set of meetings with a trip to Prague.
“The total budget must be substantially reduced — by hundreds of billions of euros,” Austrian Chancellor Christian Stocker told POLITICO, echoing a similar recent call from Merz. “It is unacceptable that Brussels is discussing the largest budget in history while we at home have to tighten our belts.”
With the bloc racing to strike a deal on its budget before elections next year in France, Spain and Italy that risk turning the chance of agreement from difficult to nye-on impossible, the next four months are critical for the EU’s stability, Costa’s legacy and whether leaders like Merz and Stocker can prove to their voters that Brussels isn’t wasting their money.
The leaders meeting in Berlin don’t just want the size of the budget to shrink by hundreds of billions of euros, they also want shift the way it is spent away from areas such as agriculture toward defense and security. And they want to impose conditions to stop governments getting cash if they breach democratic standards.
The discussion is unlikely to result in the publication of any precise numbers but instead produce a united front for the negotiations to come, three people familiar with the preparations said. Ireland, which is shepherding the budget process as part of its role at the helm of the six-month presidency of the Council of the EU, is to put forward fresh compromise numbers in October ahead of a summit of EU leaders later in the month.
“The general priorities of the [budget] proposal are worthy of support and in line with Finland’s objectives,” Finnish Prime Minister Petteri Orpo said in a statement. “However, the overall level of the proposed framework is too high.”
Some countries, such as Spain, believe the Commission shouldn’t reduce the size of the proposed budget and are resisting moves to direct expenditure away from agriculture.
Getting closer?
Costa, who has already visited Bratislava, Tallinn, Riga and Vilnius, believes governments aren’t as far apart as their public statements suggest, according to a senior EU official familiar with the negotiations, who like others mentioned in this article were granted anonymity because the talks are at such a sensitive stage.
While leaders are defending domestic red lines they do all seem to be committed to reaching a deal by the end of the year, the official said.
The immediate question is whether Thursday’s Berlin meeting produces anything more concrete than a general call for cuts. Countries only received the detailed breakdown of the proposed budget, including spending allocations and figures, in June. Only once countries attach hard numbers to their demands, can the budget negotiations begin in earnest.
“For now nobody is putting their cards on the table,” said another EU diplomat familiar with the talks. “It’s still too early in the process for the real horse-trading.” That will happen closer to the October summit.
That Merz has yet to detail what programs he wants cut and exactly by how much is a sign that his real demands may not be as onerous as his rhetoric suggests, the senior EU official signaled.
“The German chancellor has also said he thinks an agreement by the end of the year is desirable. And I’d like to point out that in these big cuts … he never mentioned a figure. That’s important.”
Germany is the EU’s largest contributor, accounting for roughly a quarter of the bloc’s budget.
Berlin or bust
Merz is facing domestic pressure from the far-right, Euroskeptic Alternative for Germany, which is on track to win Saxony-Anhalt’s state election on Sept. 6.
That makes it harder for the chancellor to give too much away in the EU budget.
The outcome of the Saxony-Anhalt election, along with Sweden’s general election on Sept. 13, could affect the negotiations, the EU diplomat close to the talks said.
Still, Merz wants Germany to lead Europe on defense, competitiveness and strategic autonomy — policy areas that require substantial funding.
“In order to finance certain costs, certain financial resources are necessary,” said Lithuanian President Gitanas Nausėda, who met with Costa on Wednesday.
That is pushing new revenue streams up the budget agenda, according to the senior EU official and three EU diplomats.
Taxing times
Northern and Eastern European countries have traditionally resisted giving Brussels new taxing powers. But that opposition appears to be weakening.
Leaders are beginning to recognize that avoiding deep cuts to agriculture and cohesion — while increasing spending on defense, migration and potential enlargement — will require additional revenue, Costa said on Wednesday.
“There are two ways to do this: through the national contributions or through own resources,” he said, referring to new EU taxes. “From my point of view, the main priority now is to fix what kind of new own resources we can agree on.”
Nausėda signaled that Lithuania, which is customarily skeptical of new EU taxes, might soften its position if the budget provides adequate funding for defense, security and regional development.
“If we see the ambition we will of course be flexible, we will be constructive in searching for compromises,” he said alongside Costa.
‘Difficult choices’
Estonian Prime Minister Kristen Michal, who met Costa on Tuesday, also opened the door to new EU taxes, provided they “demonstrate genuine European added value and avoid creating disproportionate burdens for member states,” according to a statement sent to POLITICO.
“The next EU budget will inevitably involve difficult choices,” Michal added.
In its budget proposal July, the European Commission suggested new levies on emissions, carbon imports, non-recycled electronic waste and tobacco products, along with an annual lump-sum payment from large companies. In the spring, the European Parliament proposed additional taxes on digital services, online gambling and crypto assets, winning support from some countries.
The leaders meeting in Berlin will discuss which of those options they are prepared to accept, according to the official from one of the participating countries.
Any new revenue streams will need to provide stable and predictable income throughout the seven-year budget cycle, be legally and technically workable, take effect by Jan. 1, 2028 — or close to it — and secure unanimous approval from EU countries, the official said.
Costa’s tour of EU capitals is designed to identify that landing zone.
This week’s visits to smaller Eastern European countries are a prelude to more politically consequential stops in Berlin, Paris and Rome over the next two weeks.
Gabriel Gavin and Koen Verhelst contributed reporting.
Merz unites EU budget-cutters as Costa gropes for deal
Source: Viral Showbiz Pinay
0 Comments