Key facts
- EU leaders are debating the bloc's 2028-2034 budget, with a €2 trillion proposal facing significant opposition.
- Net contributing countries like Germany and the Netherlands are pushing for spending cuts, while net beneficiaries like Spain want increased funding for agriculture and cohesion.
- A compromise proposal from the Cypriot EU presidency reduced the budget by 2%, but this was deemed insufficient by some and too high by others.
- New revenue streams are being considered to fund the budget, including taxes on CO2 permits, carbon border adjustments, digital services, and crypto assets.
- A deal is sought by the end of 2023 to avoid complications from multiple national elections in 2024.
European Union leaders are heading into difficult negotiations over the bloc's next seven-year budget, set to run from 2028 to 2034. The European Commission has put forward a €2 trillion proposal, but this figure is already drawing criticism from various member states.
Net contributing countries, such as Germany and the Netherlands, are arguing that the proposed budget is too high and that spending needs to be reduced. The Netherlands, in particular, expressed concern that the current proposals focus too much on traditional spending areas and not enough on new challenges like defense and modernization.
Conversely, net beneficiary countries, including Spain, believe the budget is insufficient and that funding for agriculture and cohesion policies should be increased, especially in light of inflation. A compromise proposal from the Cypriot EU presidency suggested a 2% reduction in the Commission's figure, but this has not satisfied either side, with some finding it too much and others too little.
The debate also encompasses how the budget will be financed. Leaders are exploring new revenue streams beyond direct national contributions. Options on the table include a share of revenue from the sale of CO2 emissions permits, a tax on goods imported from countries with weaker climate policies, a levy on e-waste, a portion of tobacco excise duty, contributions from large firms, and taxes on extreme wealth, digital services, online gambling, and crypto asset capital gains.
With several EU member states facing elections in the coming year, there is pressure to reach a budget agreement by the end of 2023 to avoid the negotiations becoming entangled with political campaigning.