Meet the camps fighting over the EU’s €2 trillion cash pot 

The fight for the next EU budget is entering a new phase now that some numbers are finally on the table.

The spending figures, put forward by the Cyprus presidency in a “nego box”, have given capitals the clearest indication to date how a plan for nearly €2 trillion budget could be divided up.

But the figures are highly unlikely to survive intact, as securing the budget deal for 2028 to 2034 is routinely described as the EU’s most difficult political bargain, requiring, as senior officials put it, “blood on the floor”.

The battles ahead pit fiscal hawks, keen to cut their national contributions to the EU, against those countries that benefit from spending as well as defenders of traditional funding programmes, such as farm subsidies, against others pressing for new priorities such as defence, competitiveness, and strategic autonomy.

When EU leaders meet in Brussels on Friday, they are expected to reaffirm their ambition to strike a deal before the end of the year, even though the road ahead is hard and long.

Negotiations cannot be closed until every single one of the EU’s 27 leaders agree – and each has a veto – to a deal with hundreds of billions at stake.

Who are the main camps, and what exactly are they fighting for?

The ‘modernisers’ club

Germany, the Netherlands, Austria, Finland, and Sweden (known as the “frugals”) are pushing for a significantly smaller EU budget.

As net contributors – countries that put more money into the EU coffers than they get back – they want spending focused on new priorities such as defence, competitiveness, and strategic autonomy, rather than expanding traditional programmes.

The group is also staunchly against the idea of new common borrowing or shared debt and of rolling over the existing Covid-era debt, which is currently due to be repaid from 2028 onwards and would stand at €168 billion over the seven-year cycle.

They are in favour of the European Commission’s proposed new budget structure, including cash-for-reforms national plans under which cohesion, funds for poorer regions and agricultural policy are proposed to sit and an overall slimming down in the number of programmes. 

Under the current budget cycle, Denmark, the Netherlands, Austria, Sweden, and Germany benefit from so-called rebates, a controversial mechanism that reduces their high contributions to the EU budget.

The discounts have long been a source of friction with poorer countries, which argue they are unfair and have repeatedly called for their abolition.

The Commission initially proposed scrapping the rebate system altogether in the next budget cycle, but it reappeared in the text that Denmark, then holder of the Council presidency, put forward in December.

It promptly triggered an outcry among cohesion-friendly countries and reopened one of the most politically sensitive battles in the budget talks.

The ‘Friends of Cohesion’ group

A loose alliance of 16 countries, mainly from southern and eastern Europe, is pushing for a larger spending plan, firmly rejecting cuts to traditional policies like agriculture and cohesion funds.

The policies have accounted for about a third of the current budget each, but are proposed to be cut to less than 50% in total in the next spending cycle. 

“Cohesion Policy, CAP [Common Agriculture Policy] and the CFP [Common Fisheries Policy] are the only policies facing reductions in real terms, despite the overall increase in the size of the new MFF,” a recent joint declaration said, arguing for an increase of “the most visible” policies for citizens. 

The group includes Bulgaria, Czechia, Estonia, Greece, Croatia, Hungary, Lithuania, Latvia, Malta, Poland, Portugal, Romania, Slovenia, Slovakia, Spain and Italy. Cyprus is expected to join the club once its time at the helm of the Council of the EU’s six-month rotating presidency is over at the end of June.  

The alliance is also pushing for a “more gradual repayment scheme” for the EU’s post-pandemic recovery fund and “new joint borrowing for loan support”.

On top of that, the countries are pushing for the complete abolition of the rebate system, arguing that there is neither a political nor an economic justification for bringing it back.

Italy, which has traditionally opposed the mechanism, has recently stepped up its criticism. Giorgia Meloni, the prime minister, publicly described the system as “anachronistic” and warned that if other capitals insist on preserving their discounts, Rome will ask for the same as well.

The holdout

France’s preferred negotiating tactic may be the oldest one in Brussels: run down the clock.

With the 2027 presidential election approaching, Paris is wary of locking itself into a budget deal that could become domestic political ammunition.

Delaying the showdown would leave the bill for the next administration – potentially one led by the far-right firebrand Jordan Bardella, who has argued France should drastically cut its contribution to the EU budget.

Paris, also a net contributor to the budget, presses for an “ambitious” budget and wants to see agricultural spending protected. Hardly a surprise, as France receives the largest chunk of CAP funds.

Emmanuel Macron, the French president, has also come out in favour of rolling over the Covid-era debt and new joint borrowing and is adamant that new ‘own resources’, EU-wide levies, must be part of any MFF deal.

Frontline defenders 

One of the biggest changes compared to the last budget negotiations has been Russia’s full-scale invasion of Ukraine in 2022. 

While defence and security are shared new priorities for the bloc, a group of countries – mainly along the so-called Eastern flank, those bordering Russia, Belarus and Ukraine – have been demanding higher defence spending. This group includes the Baltic states, Finland, Denmark, and Poland.

The administrative minimalists

The Commission’s plans to spend more than €100 billion on administration over the next seven-year budget cycle – including funding for 2,500 additional staff – have sparked a backlash from a coalition of member states.

They argue that Brussels should not expand its bureaucracy, while national governments are being asked to tighten spending under EU fiscal rules policed by the Commission.

Led by Austria, a group of nine countries – Czechia, Denmark, Germany, Estonia, Latvia, Finland, Sweden, and the Netherlands – is pushing back against an increase in administrative costs.

The coalition has also found an unlikely ally in Italy.

Meloni criticised the Commission’s proposal to raise spending on pensions, buildings, and EU institutions by more than 20%, arguing the Commission should not be exempt from the budget discipline it expects from EU capitals.

Meloni also repeatedly criticised plans to spend around €1 billion of taxpayers’ money refurbishing the Council of the EU’s headquarters in Brussels.

The honest broker

The Irish are going to shepherd the budget talks through the second half of the year, as they’re taking on the rotating presidency in July.

They are expected to present a second revised ‘nego box’ with numbers by October, ahead of an EU summit the same month. Negotiations are expected to go to the wire in December.

(mm,bw,sma)