FT: Germany and other donor countries threaten to block the EU's €2 trillion budget

Germany and five other EU countries have increased pressure on Brussels in negotiations over the EU budget for 2028-2034. They warned that they will not agree to a new seven-year financial plan unless it is cut by hundreds of billions of euros.

This is reported by the Financial Times, which has seen a joint letter from the leaders of Germany, the Netherlands, Sweden, Denmark, Austria and Finland.

Thus, the dispute over the future budget has moved to a new level. Previously, the largest donors demanded that the European Commission reduce the proposed spending, now the six states directly link their agreement to the entire budget with a large-scale revision of its volume.

This is a significant lever of pressure, as the seven-year EU budget must be agreed by all 27 member states. The six countries that demanded cuts together provide about 40% of the EU budget revenues.

The European Commission proposed a financial framework of almost €2 trillion for 2028-2034. It must simultaneously fund traditional areas - agriculture and support for less developed regions - and much larger spending on defense, security, technologies and competitiveness of European industry. The European Commission estimates the proposed budget at about 1.26% of the EU average gross national income.

Berlin and its allies are in favor of reallocating resources in favor of defense and innovative companies, while demanding a reduction in some traditional spending. It is farmer subsidies and regional development funding that historically absorb most of the European budget.

They are opposed by a large group of countries that do not want cuts to these programs. According to the FT, 17 states, including Spain and Italy, on the contrary, are in favor of increased funding for agricultural and regional policy, as well as a budget larger than the proposed €2 trillion. Some countries propose attracting new joint EU borrowing for this, which Germany and its allies oppose.

Another point of contention is finding new revenues. The European Commission proposed additional sources of funding linked to the emissions trading system, CBAM, electronic waste, tobacco excise duties and large corporate contributions. Together they are expected to generate about €58.5 billion a year.

Negotiations are now moving into a decisive phase. Ireland, which holds the EU Council presidency in the second half of 2026, must prepare a compromise between large donor countries and states opposed to cutting traditional programs. The EU Council aims to reach a political agreement by the end of 2026 in order to approve the necessary legislation in 2027.

If a compromise cannot be found, even one of the states can block the final adoption of the multiannual financial framework. Therefore, the ultimatum of six major donors significantly raises the stakes in negotiations over what the EU will spend money on after 2027.

Based on: Financial Times, European Commission, EU Council