Key facts
- EU leaders will convene for crucial talks on the bloc's 2028-2034 budget.
- The European Commission proposed a €2 trillion budget, which faces opposition from both net payers and beneficiaries.
- A compromise proposal from the Cypriot EU presidency suggests a €32.8 billion cut to the budget.
- Traditional spending categories like agriculture and regional funding are under pressure from defense spending priorities.
- New revenue streams, including digital and crypto taxes, are being considered.
- A proposal for common borrowing to repay NextGenerationEU is opposed by some member states.
European Union leaders are heading into complex negotiations over the bloc's long-term budget for 2028-2034, with deep divisions emerging between member states. The European Commission has proposed a €2 trillion budget, but a significant portion of this is contested. A group of "frugal" net-contributing countries, including Germany and the Netherlands, are advocating for spending cuts, particularly targeting agriculture and regional development funds. Conversely, a bloc of 16 nations, calling themselves the "Friends of Cohesion," are pushing to preserve or increase funding for these sectors, fearing they will be sacrificed in favor of increased defense spending.
A compromise proposal from the Cypriot EU presidency suggests reducing the overall budget by €32.8 billion, aiming to bridge the gap between these opposing factions. However, this proposal has already been rejected by the European Parliament, which deems it insufficient, especially for agriculture and regional policies.
The debate also extends to how the budget will be financed. While the Commission's initial proposal included revenue streams from the EU Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM), among others, new ideas are surfacing. The European Parliament has suggested a gambling tax, a digital levy, and a tax on crypto assets. Meanwhile, a proposal from Italy, France, and Greece to repay NextGenerationEU through common debt issuance is strongly opposed by Germany and the Netherlands, who reject any form of new common borrowing.