Key facts
- EU leaders aim for a preliminary deal on the €2 trillion long-term budget by October.
- Deep divisions exist between member states regarding spending on agriculture, regional funding, and defense.
- Cyprus proposed a €32.8 billion cut to the budget as a compromise, which the European Parliament rejected.
- Debate continues over budget financing, with proposals including taxes on gambling, digital services, and crypto assets.
- Germany and the Netherlands oppose new common borrowing for recovery funds, while Italy, France, and Greece support it.
European Union leaders are engaged in complex negotiations over the bloc's next seven-year budget, with a preliminary deal targeted for October. Deep divisions persist between member states, primarily between 'Frugal' countries like Germany and the Netherlands, who advocate for reduced spending, and 'Friends of Cohesion' nations in southern and eastern Europe, who seek increased funding for agriculture and regional development.
European Council President António Costa and European Commission President Ursula von der Leyen have urged member states to reach an agreement on the €2 trillion budget, proposed by the Commission in July 2025, by the end of the year. The incoming Irish presidency will chair discussions from July 1 and is expected to present a new negotiating text in October, which will cover expenditure and revenues, referred to as 'own resources'.
Cyprus, currently chairing the member state talks, has proposed a compromise cut of €32.8 billion to the overall budget, but this has been deemed insufficient by the European Parliament. The financing of the budget remains a contentious issue, with proposals including revenue streams from the Emissions Trading System, Carbon Border Adjustment Mechanism, and new taxes on gambling, digital services, and crypto assets. Frugal countries, particularly Sweden, are hesitant about new 'own resources', fearing a disproportionate financial burden. Meanwhile, the idea of 'rolling debt' for repaying NextGenerationEU funds, proposed by countries like Italy and France, is opposed by Germany and others.
Leaders are keen to finalize an agreement by the end of 2026 to avoid extending negotiations into 2027, a significant election year across Europe. Any agreement requires unanimous support from all 27 member states and consent from the European Parliament.