Governments brace for €100B cut to EU budget proposal

BRUSSELS — EU governments are preparing for the upcoming proposal on the bloc’s next long-term budget to include spending cuts of over €100 billion, four EU diplomats with knowledge of the discussions told POLITICO.

Some countries are worried that funding for their pet projects, including farmers’ subsidies and regional payouts, will be slashed by the Irish presidency of the Council of the EU, which is set to present a negotiating document with new figures next week.

With three months to go until an informal deadline to end negotiations, countries remain far away from an agreement. Germany and the cost-cutting faction it leads demanded on Tuesday a reduction of several hundred billion euros to the European Commission’s original near-€2 trillion proposal.

“If the Irish negotiating box [the next budget proposal] is to serve as the basis for further discussions, it must set out an overall volume that can realistically be financed by those who carry the main financial burden,” the leaders of Germany, Denmark, the Netherlands, Austria, Sweden and Finland wrote in a letter to Irish Prime Minister Micheál Martin.

Such a reduction is opposed by a camp of 17 countries known as the “Friends of Cohesion,” including Italy, Spain and Poland, that favors a bigger budget. The group is working on a joint statement to warn against the potential cuts and respond to the letter by Berlin and its allies.

“I expect that there will be cuts that will make Friends of Cohesion unhappy,” said one of the diplomats. They were granted anonymity, like others, to discuss the sensitive negotiations.

In its role as a neutral broker in the discussions, Ireland hasn’t publicly revealed its intentions. “We haven’t even come to any considerations about cuts or increases,” Ireland’s Europe minister Thomas Byrne said last week.

Parliament’s budget mess

In a further challenge to the budget talks, the European Parliament’s parallel negotiations risk being delayed by turf wars and political fighting among different political groups.

“We’re so far behind that we won’t even have a Parliament position by the end of next year if we continue at the same pace,” Damian Boeselager, one of the Greens’ negotiators on the budget, told POLITICO.

Parliament and Council are under pressure to finalize negotiations before 2027’s elections in France, Italy, Spain and Poland threaten to derail talks and delay payouts.

A protracted standoff in Strasbourg risks damaging its standing in the talks and prolonging negotiations, leaving them exposed to last-minute interventions. France’s far-right National Rally — which says it wants to halve Paris’s contribution to the EU budget — is currently leading the polls in France.

“We have to move fast. With the upcoming elections in France, the EU budget could become very vulnerable if we don’t set clear guardrails now,” Boeselager said.

The Parliament pledged to agree its position on the budget by November, to be ready to start negotiations with governments as early as January 2027. MEPs have limited power over the size of the budget, but they negotiate on an equal footing with governments over the rules and structure of the cash pot.

The leaders of Parliament’s biggest parties will meet on Wednesday to suggest ways to break the deadlock in the negotiations.

Officials taking part in the talks complain that the involvement of three different committees — covering budget, agriculture, regional policy — is creating overlaps and delays in the talks over the National and Regional Partnership Plans (NRPPs) which include farmers’ subsidies and regional payouts.

Lawmakers in the agriculture committee are conducting a rearguard push to strengthen the Common Agricultural Policy, which governs farmers’ subsidies worth over €300 billion, by carving it out from the NRPPs. The move is controversial with the other committees who agreed to preserve the basic framework of the Commission’s proposal to facilitate a deal by the end of the year.

“Everyone knows that CAP cannot be deleted out of the architecture without a new Commission proposal and an impossible one-year delay of negotiations,” Boeselager said.