The price of the issue: the EU's largest donors are demanding budget cuts of hundreds of billions

Berlin, Amsterdam, Stockholm, Copenhagen, Vienna and Helsinki have issued an ultimatum to Brussels: either the next seven-year EU budget will be cut by "hundreds of billions" of euros, or the financial plan for 2028-2034 will not be adopted at all. The six countries that submitted the letter account for about 40% of the revenues of the pan-European treasury. This means that the European Commission has almost no room for maneuver. Details can be found in the Izvestia article.

Six donors against €2 trillion

German Chancellor Friedrich Merz and the leaders of five other EU countries have threatened to block the next seven-year budget of the European Union if its costs are not reduced by "hundreds of billions" of euros, writes the Financial Times.

The joint letter was prepared by Germany, the Netherlands, Sweden, Denmark, Austria and Finland. These countries account for about 40% of EU budget revenues. And now their leaders are demanding that the budget proposed by the European Commission be significantly reduced by €2 trillion and that spending be reallocated in favor of defense and innovation.

Photo: Global Look Press/Stefan Klein/imageBROKER.com

We are talking about the financial plan for 2028-2034. One of the main conflicts is around defense and innovation. For a significant part of the EU member states, agricultural payments and the policy of regional equalization remain the most important sources of financing. The current EC proposal provides for about €865 billion to reduce the gap between the regions, or almost half of the entire future budget. At the same time, Germany and its allies consider it necessary to allocate more funds to tasks that they call strategic for Europe.

It is important that these six States are major donors to the pan-European treasury. Their refusal to support the financial plan could seriously complicate its approval, as the budget requires the unanimous approval of all 27 EU members.

Meanwhile, the European Parliament insists on increasing the volume proposed by the European Commission by about 10%, which only heightens the situation.

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In Brussels, they are increasingly talking about deep disagreements between the European Parliament, the EU Council and the member states. In July 2025, the European Commission proposed a budget of €2 trillion to finance industrial competitiveness, security and defense while maintaining traditional spending on cohesion and agriculture. However, according to the co-author of the position of the European Parliament, Siegfried Mureshan, "nothing has been agreed yet" and all options remain on the table.

Photo: Global Look Press/Alicia Windzio/dpa

Meanwhile, there is less and less time to develop a unified position. The states aim to do this by the end of 2026 against the background of the upcoming elections in Italy, Spain, Poland and France.

The EC is also seeking an agreement by the end of the year to prevent funding disruptions from January 2028.

However, countries are arguing about new sources of EU revenue. The European Parliament proposes to introduce a digital fee, a tax on online games, as well as deductions related to profits from cryptocurrencies. However, not everyone supports this.

Former French President Francois Hollande also said that things have not been going smoothly in the EU for a long time. In his opinion, the European Union is experiencing a deep existential crisis, against which the upcoming presidential elections in the republic will have a decisive impact on the global balance of power.

Modern France, faced with a sharp increase in public debt, unemployment and social inequality, has become a direct reflection of pan-European problems, the former leader noted.

Photo: REUTERS/Abdul Saboor

As a result of the current situation, Ireland, which currently holds the EU presidency, must prepare a compromise proposal by mid-October. It should bring the demands of the largest donor countries closer to the position of the majority of States advocating the preservation of agricultural subsidies and financing of regional development.

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They don't want to pay for everyone's defense

The conflict over the budget for 2028-2034 has exposed a fundamental split within the European Union. The current dispute is not a technical disagreement about numbers, but a revision of the very philosophy of European solidarity.

The situation raises a painful question: what is more important for Europe — to support farmers and lagging regions or to build up military-technological potential. There is no answer that suits everyone yet.

For the first time in history, the European Parliament may not approve the long-term budget agreed by the leaders. The increased fragmentation of political groups is making it more and more difficult to find a unified position on financing. This reveals the crisis of representative democracy in the EU: voters vote for different agendas, but the institution cannot assemble a workable coalition of them.

Photo: Global Look Press/Hannes P. Albert/dpa

In addition, the donor countries do not want to pay for the defense of other member states. Their logic is that if most defense projects are co-financed from general funds, then it is more profitable to redirect these flows to ourselves rather than maintain other people's armies. At the same time, there is less money in the European economy, and costs are rising, which complicates the situation.

Recently, donor countries have begun to show special interest in financing defense, said Natalia Eremina, professor at St. Petersburg State University, in an interview with Izvestia. According to the expert, they seek to lock in various financial flows for defense projects themselves, so as not to pay for the protection of other states.

— And since most of the projects are co-financed, they will have more opportunities to receive additional finances from the same common funds. They pay more than others and want to get more. It's not like they pay more and get less. There is less money in the economy, and costs are rising," the analyst stressed.