Merz and net contributors reject two-trillion-euro EU budget draft

German Chancellor Friedrich Merz has met with allied net-contributor nations in Berlin and launched a fierce battle against Brussels over the European Commission’s draft budget, which projects a 60% increase for the next budgetary period.

Appearing before the cameras alongside the heads of government of Austria, Denmark, and Finland at a press conference held at the Chancellery on Thursday, Chancellor Merz, a member of the Christian Democratic Union (CDU), underscored one particular point, saying: “We are not penny-pinchers.”

Merz stated that the elevated financing demands emerging from Brussels were entirely out of step with current realities.

Coming as negotiations for the EU’s next seven-year budget enter their most critical phase, this intervention marks the opening salvo in intensive bargaining over Europe’s future financing and political direction in the coming months. Between October and December alone, four separate EU summits at the leaders’ level are scheduled to take place.

Merz invited the heads of government of three countries to Berlin in preparation for this negotiating marathon, while the prime ministers of the Netherlands and Sweden joined the talks via video conference.

The common denominator uniting the six countries acting together in Berlin is their status as the highest net financial contributors to Brussels. Merz described the coalition by stating: “We are the group of the largest contributors to this budget.” The German Chancellor noted that these six countries single-handedly finance almost 40% of the total budget of the 27 EU member states, while also providing approximately 70% of bilateral aid delivered to Ukraine.

Austrian Chancellor Christian Stocker, of the Austrian People’s Party (ÖVP), joined Merz in rejecting accusations of miserliness, stating: “No one can accuse us of being unwilling to contribute.” However, he noted their insistence on the necessity of greater savings and comprehensive reforms.

Objection to the two-trillion-euro budget proposal

The joint message delivered by the six leaders conflicts directly with the expectations of Brussels and numerous other EU member states. While the European Union’s current seven-year budget covering the 2021–2027 period stands at 1.2 trillion euros, the European Commission is proposing a budget of approximately 2 trillion euros for the 2028–2034 cycle, representing a net 60% increase when the impact of inflation is included.

Emphasising that this proposal is entirely unaffordable at a time when all member states are undertaking fiscal consolidation in their own public finances, Merz assessed: “In this group, we are all of the same opinion: the proposals must be trimmed by hundreds of billions of euros. These cuts must cover all areas without exception.” Merz stated that they demand a realistic and reform-oriented budget, adding: “We cannot meet the challenges of the 21st century with a 20th-century budget.”

Danish Prime Minister Mette Frederiksen adopted a similar stance, saying: “The EU budget may be larger than it is today, but the proposal currently on the table has certainly been set too high.”

The joint declaration adopted by the six heads of government included an additional concrete financial justification: it stressed that an extraordinarily large sum of approximately 300 billion euros in the current budget period had never been requested or utilised by member states. The leaders argued that this figure provides clear proof that excessive funds are being transferred to Brussels.

Bloc divisions and security priorities

Although the Berlin summit was intended to project a message of strength and unity, Merz and his allies remain in a numerical minority across the wider EU. A broad group of member states ranging from the Baltic countries to Poland, Hungary, Italy, and Portugal openly supports the Commission’s 2-trillion-euro draft. As net recipients drawing more resources from the budget than they pay in, these countries demand that the budget’s traditionally largest expenditure lines—agricultural and regional development funds—remain untouched.

In contrast, Merz wants cuts to agricultural and regional funds in order to redirect resources toward Europe’s global competitiveness and defence capabilities.

Defence matters occupied a substantial place in the Berlin discussions. Finnish Prime Minister Petteri Orpo recalled that his country shares a 1,340-kilometre land border with Russia, emphasising that this reality creates very concrete security, infrastructure, and economic challenges in its eastern and northern regions. Orpo stated that the new EU budget must recognise this new reality emerging on the eastern border.

Nevertheless, at the press conference where leaders read solely from prepared statements and took no questions from journalists, a notable divergence of views surfaced among the participants. Austrian Chancellor Stocker explicitly distanced himself from Merz’s call for cuts across all areas, remarking: “From Austria’s perspective, agricultural and regional development funds must never be forgotten.”

Contrasting message from von der Leyen in Paris

Another statement illustrating how arduous the negotiations starting in the autumn will be came from European Commission President Ursula von der Leyen. Speaking in Paris at a meeting of the Movement of the Enterprises of France (MEDEF) nearly simultaneously with the Berlin gathering, von der Leyen said: “The next budget will be the financial backbone of our independence.”

Drawing attention to Europe’s geopolitical standing vis-à-vis China, Russia, and the US, von der Leyen argued that the budget must be increased. The Commission President said: “Europe cannot set new targets for itself without providing the resources to finance them.”

The critical turning point in the trajectory of the negotiations will be the new compromise proposal expected to be submitted in early October by Ireland, which holds the rotating EU presidency.

Merz and his allies hope that the text prepared by the Dublin administration will take their demands for hundreds of billions of euros in cuts against the 2-trillion-euro draft into account as much as possible.

Member states have until the end of the year or early 2027 at the latest to reach a compromise. If an agreement cannot be secured within this timeframe, the French presidential election process threatens to suspend talks for months and plunge negotiations into deadlock.

In France, right-wing populist candidate Marine Le Pen has already announced that, should she win the election, she will slash France’s contributions to the EU budget by half. It is assessed that negotiations would reach a complete impasse if this pledge were realised.

Meanwhile, the subject of France constituted one of the most sensitive background agenda items in Berlin on Thursday. French President Emmanuel Macron, nearing the end of his term in office, did not attend the Berlin meeting despite having recently agreed with Merz to maintain close coordination on budgetary matters.

Macron advocates financing the new budget through new EU own resources, such as a special tax on US technology giants. However, this proposal carries the risk of a new trade war with US President Donald Trump. Merz, for his part, opted not to touch upon this contentious topic at all in his remarks in Berlin.