The upcoming European budget battle… divisions dominate the Brussels summit, revealing different visions about the future of the union

Brussels, June 17 / WAM / The eyes of European capitals are turning to Brussels, where European Union leaders will meet on June 18 and 19 in the first high-level political discussion on the multiannual financial framework for the period 2028-2034, in light of increasing disagreements between member states, the European Parliament, and the European Commission regarding the volume of spending, financing priorities, and mechanisms for sharing financial burdens.

These negotiations are of exceptional importance because they are not only related to the distribution of about two trillion euros over the next seven years, but they also represent a test of the European Union’s ability to reconcile the requirements of security, defense, and economic competitiveness on the one hand, and maintain traditional support policies for agriculture and regional development on the other hand, at a time when Europe faces unprecedented financial and geopolitical pressures.

The European Union is seeking to reach an early agreement before the start of the next European electoral cycle, and before the possibility of political changes in France, as the head of the French National Rally party, Jordan Bardella, a potential presidential candidate, pledged to reduce France’s contribution to the Union’s budget by half if he comes to power.

This factor explains the accelerating pace of negotiations and the attempt of the current Cypriot presidency of the Council of the European Union to present the first negotiating document (“Negobox”) that includes possible settlement options between the various parties.

The first European dispute revolves around the size of the budget. The European Parliament is demanding a budget of about 1.79 trillion euros, which is equivalent to 1.27% of the Union’s gross national income, excluding debt repayment installments for the European Recovery Fund from spending ceilings. As for the European Commission, it proposes a slightly smaller budget of 1.76 trillion euros, which represents about 1.15% of the gross national income.

On the other hand, the Cypriot presidency presented a more conservative proposal amounting to about 1.73 trillion euros, including debt installments, or the equivalent of 1.13% of gross national income, which reflects the position of economical countries that seek to limit the increase in their national contributions.

This discrepancy reveals a fundamental division between two different visions for the future of the Union: a vision that considers that new challenges, from defense to cybersecurity and industrial competitiveness, require a tangible increase in joint European spending… and another vision led by the major net contributor countries that believes that national financial pressures do not allow the expansion of the European budget.

Germany, the Netherlands, Sweden, Denmark, and Austria are leading a front demanding control of European spending and not increasing national contributions. On the other hand, a wide group of southern and eastern European countries, led by Italy, Spain, and Poland, are defending the levels of support allocated to agriculture, cohesion policies, and regional development.

A sensitive political dispute arises here regarding the continuation of the system of rebates or “discounts” from which some countries that contribute net to the Union’s budget benefit.

Italian Prime Minister Giorgia Meloni raised this issue when she described these discounts as “outdated,” demanding that they be canceled or that other countries be given the same treatment.

The dispute is not limited to the size of the funds, but rather extends to the way they are managed. The European Commission proposes creating “national and regional partnership plans” that collect most of the European funding within a unified framework at the national level, similar to the mechanism that was used in the recovery fund after the Corona pandemic.

Member States consider that this model provides greater flexibility and links financing to the required reforms.

But the European Parliament fears the concentration of powers in the hands of national governments and the European Commission at the expense of regions and local authorities, and demands the maintenance of independent and protected financing lines for the Common Agricultural Policy, regional development funds and the cohesion policy.

This disagreement reflects a deeper debate about the nature of European governance and the limits of centralization in the management of financial resources.

Spending priorities constitute one of the most controversial points, as the European Commission seeks to direct greater resources towards defence, strategic industries, innovation and competitiveness, in response to growing security challenges, the Ukrainian crisis, and competition with the United States and China.

But the Cypriot presidency chose to largely protect allocations for agriculture and regional development, directing most of the proposed cuts to defense and competitiveness programmes.

This approach succeeded in avoiding a direct confrontation with the countries of southern and eastern Europe, but it raised strong objection from Sweden, Denmark, and countries that support enhancing defense spending.

The file of scientific research and education reveals the extent of the discrepancies between European institutions. The European Parliament calls for the allocation of 200 billion euros to the “Horizon Europe” program for research and innovation, while the Commission proposed 175 billion euros, and the Cypriot presidency reduced the number to only 167 billion euros.

Parliament also calls for increasing funding for the “Erasmus+” student exchange program to about 48 billion euros, compared to 40.8 billion proposed by the Commission and only 39.1 billion in the Cypriot presidency’s proposal.

Parliament considers that reducing these programs contradicts the European discourse calling for enhancing competitiveness and innovation.

Perhaps the most complex dispute is how to finance the budget. The European Parliament is strongly pushing towards expanding what is known as “own resources”, that is, the European Union’s direct revenue sources away from national contributions.

Among the most prominent proposals are the imposition of a European tax on major digital companies, revenues from the carbon emissions trading system, revenues from the carbon border adjustment mechanism, taxes on tobacco, fees on electronic waste, and new resources linked to crypto-assets, in addition to fees on gambling and electronic gaming activities.

Parliament believes that imposing a contribution on giant technology companies has become necessary to avoid reducing spending on citizens, farmers, and European security.

However, this trend may open a new front of tension with the US administration led by President Donald Trump, which has for years opposed European taxes directed against major American technology companies.

The June 18 and 19 summit is not expected to witness any final agreements, but rather will provide the first real political test of the positions of European leaders. Discussions will focus on defining general negotiating lines before the file moves to a more detailed stage during the next Irish presidency of the Council of the European Union in the first half of 2027.

However, current indicators show that the gap is still wide between the European Parliament and member states, and between the “ambitious spending” and “fiscal discipline” camps.

The upcoming European financial framework negotiations reveal a strategic conflict that goes beyond financial numbers. The fundamental issue facing European leaders is determining the nature of the union during the next decade. Will it be a more ambitious union and more willing to invest jointly in defense, technology, and economic sovereignty, or will it remain restricted by national budget accounts and traditional differences between contributing countries and beneficiary countries?

The Brussels summit will constitute the political starting point for this long battle, which may last until 2027, but will largely determine the European Union’s ability to confront the mounting geopolitical and economic challenges in the coming years.

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