Germany roared about the EU’s giant budget and the additional tax on large companies: “We cannot accept”

On Friday, the EU leaders gave political guidance on how the preparation of the EU’s future multi-year budget should proceed in the coming months.

As usual, the central dividing line between the countries was between net payers and net recipients of the budget. In addition, the member states argue about how much the EU budget should be reformed to reflect the current geopolitical situation.

Those countries that pay more into the EU budget than they get back from it require strict consideration and limitations. Net recipient countries, on the other hand, are more receptive to a high overall level of the budget and defend funding for those policy areas from which they benefit the most.

Too big a budget

The European Commission’s budget proposal would be about 1.26 percent of the Union’s gross national income, which would correspond to about 1.8 trillion euros at constant 2025 prices.

Many countries considered the Commission’s opening too high. For example, the Prime Minister of Sweden Ulf Kristersson strongly rejected the idea of ​​a significantly growing EU budget.

“Sweden strongly opposes a significant increase in the EU budget. Net payer countries cannot bear an unreasonably large responsibility for the EU budget,” said Kristersson.

According to Kristersson, the models presented now could increase Sweden’s contribution by up to 80 percent. He emphasized that Sweden is ready to discuss reforming the priorities of the budget, but does not accept large increases in the payment share, which he considers unsustainable for taxpayers.

Germany, the EU’s largest net payer, took a hard line in the negotiations. Chancellor Friedrich Merz emphasized in Cyprus that the EU’s political priorities must be reflected in funding, but increasing the overall budget will not do.

“We need to be able to finance the budget at a time when almost all member states are making huge efforts to stabilize public finances. At such a time, a massive increase in the EU budget would not be realistic.”

According to Merz, this means cuts in several policy areas. He emphasized that the EU must make choices in which competitiveness and defense must be the central priorities of the upcoming financial period.

No joint debt

Germany strongly opposes increasing the EU’s collective debt.

“As I told my colleagues just before Christmas, we in Germany believe that further indebtedness, borrowing or issuing Eurobonds is not something we can agree to,” Merz said.

The Chancellor said that he explained to his colleagues that Germany’s line is also based on legal restrictions, because the German government is bound by the decisions of the Federal Constitutional Court.

According to Merz, the budget disputes of the member countries will concern both expenses and income.

The Commission has proposed several own funds to the EU, such as emissions trading revenues, a carbon limit mechanism and a fee to be collected from large companies.

Germany is particularly critical of the Commission’s proposal for an additional fee to be imposed on large companies in order to increase the EU’s own funds.

“There is no legal basis for it in the European Union,” Merz said and also questioned the financial logic of the proposal.

Germany hopes that the Commission will withdraw the proposal.

EU money as a guarantee of growth

Croatia is one example of a net recipient country for which a high EU budget level is a key goal. The country has been a clear net recipient throughout its EU membership.

Prime Minister of Croatia Andrej Plenković emphasized in Cyprus the importance of the EU’s multi-annual financial framework for the economic convergence of the member states. According to him, EU funding has played a key role in Croatia’s economic development: the country’s gross domestic product per inhabitant has risen from around 61% to 78% of the EU average.

According to Croatia, the total budget must be large enough so that development differences between member countries can be narrowed in the future.

“Croatia supports a strong multiannual financial framework and emphasizes the preservation of cohesion and agricultural policy,” said Plenković.

Croatia supports the modernization of the budget on the condition that investments in competitiveness, security and defense can be made without it happening at the expense of cohesion and agricultural funding.

According to Plenković, the most difficult question in the financial framework negotiations is not so much related to what EU funds are used for, but how the funding is organized.

Orphan line

Prime Minister of Finland Petteri Orpo (co.) emphasized in Cyprus, accompanying Germany, that the budget must invest especially in European defense and competitiveness.

According to Orpo, the overall level of the budget is also too high. He also collected concrete numbers in Cyprus so that the negotiations can be properly started.

According to Orpo, Finland has reservations about the EU’s own funds, especially if they reduce the national right to tax.

“Finland is not ready to transfer the right to tax to the EU level, but is open to reasoned solutions,” Orpo said.

Finland also opposes loan-financed investment instruments based on joint debt. In addition, Finland considers that strong conditionality must be applied to the financial framework.

Fast schedule

President of the European Council Antonio Costa emphasized in Cyprus that the EU must still agree on the financial framework within the current year so that the new budget can be fully implemented from the beginning of 2028.

According to EU sources, rapid progress is wanted for political reasons, because in some key EU countries, such as France, power may change to politicians who are more critical of the Union.

However, German Chancellor Merz foresees difficult and protracted negotiations.

According to Costa, Friday’s discussion confirmed the perception that financing the EU budget will have to rely even more on new own funds.

He reminded that the Commission’s presentation of new own funds forms the basis for further negotiations, but there are also other options on the table.

Negotiations will continue next in June, when the European Council will return to the financial framework based on the first presentation specified in figures.