Merz and Five EU Leaders Issue Budget Ultimatum to Brussels: No Deal Without Hundred-Billion-Euro Cuts
The leaders of Germany, the Netherlands, Sweden, Denmark, Austria and Finland have said they will not approve the European Union's 2028-2034 budget unless hundreds of billions of euros are stripped from it. The stance has exposed a deep rift with a bloc of 17 countries defending farm and regional funds.
RastinewsGerman Chancellor Friedrich Merz and the leaders of the Netherlands, Sweden, Denmark, Austria and Finland have signed a joint letter demanding a "fundamental reform" of the EU's seven-year budget.
The six leaders want funding shifted toward defence and innovative companies, with cuts to the funds set aside for farmers and poorer regions. Those two categories have traditionally made up roughly two-thirds of the EU budget.
A diplomat from one of the signatory countries said no deal would be reached this year unless the budget is cut by hundreds of billions of euros.
Approval requires unanimity
The 2028-2034 budget needs sign-off from all 27 member states. The six countries behind the letter account for roughly 40% of EU budget revenue and are pushing for a significant reduction to the €2 trillion total proposed by the European Commission.
On the other side, a bloc of 17 countries, including Spain and Italy, wants farm and regional development funds increased and the budget to exceed €2 trillion. Some of these countries have proposed financing the extra spending through joint EU borrowing — an option Berlin and its allies firmly reject.
France wants an EU-wide tax
France, both a net contributor and the largest recipient of farm subsidies, is pushing for any increase to be funded through EU-wide taxes.
The Commission has proposed raising roughly €60 billion a year through carbon market revenues, tariffs on carbon-intensive imports, a levy on non-recycled electronic waste, tobacco taxes and a charge on large corporations. But governments unwilling to hand taxing power to Brussels are resisting each of these measures.
Compromise proposal expected in October
Ireland, which holds the rotating presidency, is expected to put forward a compromise proposal by mid-October. A spokesperson for European Council President António Costa noted that leaders have agreed on the goal of reaching a deal by the end of the year.
In June, EU leaders pledged to complete the budget agreement this year, before elections in France, Italy, Spain and Poland make negotiations more difficult.
According to the Financial Times, the letter signed by the six leaders shows that, despite that pledge, the biggest net contributors are now putting the option of withholding approval on the table.