The battle over Europe’s billions is heating up. While countries such as Italy and Spain have rallied behind Cyprus’s compromise proposal for the EU’s next long-term budget, the Netherlands, Germany and Sweden dismiss it as not pared back enough and built around the wrong priorities.
The first attempt to broker a compromise on the EU’s next long-term budget has exposed a deep divide between member states over what the bloc should spend money on in the years ahead.
On Thursday, Cyprus, which currently holds the rotating presidency of the Council of the EU, presented its first negotiating proposal for the 2028–2034 Multiannual Financial Framework (MFF). The compromise would trim just 2 per cent, or roughly €33 billion, from the European Commission’s nearly €2 trillion proposal.
This proposal finances yesterday’s priorities at the expense of tomorrow’s challenges. The only positive thing about this proposal is that it shows how not to proceed. — Eelco Heinen, Minister of Finance of the Netherlands
Instead of easing tensions, the proposal immediately triggered a backlash from a group of northern member states led by the Netherlands, Germany and Sweden. They argue that the cuts are too small and target the wrong parts of the budget.
“This proposal is not acceptable for the Netherlands. It is unaffordable, unbalanced and chooses the wrong priorities,” Dutch Finance Minister Eelco Heinen said after the proposal was published.
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“The overall volume remains far too high at a time when fiscal space is limited across Europe and difficult choices are unavoidable. This proposal finances yesterday’s priorities at the expense of tomorrow’s challenges. The only positive thing about this proposal is that it shows how not to proceed,” he added.
Pragmatic approach?
The proposal marks the first time concrete numbers have been presented since the Commission unveiled its budget plans last summer. Cyprus hopes the document can serve as a basis for negotiations among the 27 member states ahead of a final agreement. EU leaders want to conclude it by the end of the year.
“These are the first figures put on the table,” Cyprus’ Deputy Minister for European Affairs Marilena Raouna said. “We have been very pragmatic and very realistic as to what that means, but it is a basis for negotiations.”
Old priorities versus new ones
The fight is not only about the overall size of the budget. It is increasingly becoming a debate about what the EU should prioritise.
The so-called “modernisers” (the Netherlands, Germany, Sweden, Denmark, Austria and Finland) argue that more money should be redirected towards defence, security, innovation and competitiveness. They have long maintained that the Commission proposal remains too focused on traditional spending programmes.
Under the Cypriot compromise, however, agriculture and regional development spending are largely shielded from further reductions. Instead, the biggest cuts would fall on the European Competitiveness Fund and external action programmes.
That approach has angered countries that believe the EU should use the next budget cycle to respond to growing geopolitical and economic challenges.
Swedish EU Affairs Minister Jessica Rosencrantz said she was “equally surprised and disappointed” by the proposal. “The cuts are barely visible and entirely insufficient,” she said. “Sweden has been clear all along that the volume needs to come down, big time.”
Political reality?
For supporters of the Cypriot proposal, however, protecting traditional spending reflects political reality.
A coalition of southern and eastern member states, including Italy, Spain and Poland, has consistently argued that cohesion funding and agricultural subsidies remain essential. These programmes still account for a large share of EU spending and are particularly important for countries that receive more from the budget than they contribute.
We have been very pragmatic and very realistic as to what that means, but it is a basis for negotiations. — Marilena Raouna, Cyprus’ Deputy Minister for European Affairs
While the Commission had already reduced the relative weight of these programmes in its original proposal, many governments opposed further cuts.
According to Cyprus, the proposal reflects that balance. “It is indeed true that some member states made it very clear that they wanted an extensive cut to the budget,” Raouna said. “But there were other groups of member states that advocated for maintaining this level or at some points increasing it.”
A battle over money
The current disagreement reflects a broader problem hanging over the entire MFF negotiation.
The Commission argues that the larger budget is necessary because the EU is being asked to do more. Alongside traditional spending, Brussels wants to invest heavily in competitiveness, defence, digitalisation and clean technologies. On top of that, the EU must start repaying around €170 billion in borrowing linked to the pandemic recovery fund.
Parliament would like to see an even larger MFF, with debt repayments excluded from the budget. Yet governments remain deeply divided over how to finance those ambitions.
Northern contributors have repeatedly rejected major increases in national contributions. New EU-level taxes face resistance across the political spectrum. Joint borrowing remains politically toxic in countries such as the Netherlands and Germany.
That leaves negotiators searching for a compromise between competing demands: maintaining support for farmers and poorer regions, financing new priorities, repaying existing debts and keeping contributions under control.
The discussion now moves to EU leaders, who will debate the budget at next week’s European Council summit. Ireland, which takes over the Council presidency from Cyprus on 1 July, will inherit the task of finding a landing zone between two increasingly entrenched camps.
Given that every member state has a veto over the final deal, and with governments still disagreeing on both the size and priorities of the budget, the hardest negotiations are likely still ahead.
