Wealthy Northern EU Nations Revolt Against Minimal Budget Cut Proposal

BRUSSELS — A group of wealthy northern EU countries has launched a revolt against a proposal for only minimal cuts to the bloc’s €2 trillion budget.

The plan for a 2 percent (€32.8 billion) cut to the European Commission’s proposal for 2028 to 2034, put forward by the Cypriot government in its role at the six-month helm of the presidency of the Council of the EU, falls short of the demands by fiscally conservative countries, including Germany and Netherlands.

"It is unaffordable, unbalanced, and with the wrong focus. The overall volume remains far too high at a time when fiscal space is limited across Europe and difficult choices are unavoidable,” Dutch Finance Minister Eelco Heinen wrote in a statement on Thursday after the Cypriot negotiating document — known as a "negobox" — was published. “For the Netherlands, this is a no-go box, " he said.

The EU’s 27 countries are racing to finalize a budget agreement between themselves by December, in case French elections slated for April 2027 usher in a far-right president who might want to scupper any deal. The budget, known as the multiannual financial framework, governs the bloc's central spending, from agricultural subsidies to road-building to cultural projects.

“These are the first figures put on the table, we have been very pragmatic and very realistic as to what that means, but it is a basis for negotiations,” said Marilena Raouna, Cyprus’ deputy minister for European affairs.

Cyprus' amendments sparked an opposition campaign by a group of northern European countries that favor a substantially smaller cashpot.

But a rival bloc of southern and eastern countries supporting a bigger budget led by Italy, Spain and Poland have broadly welcomed Nicosia’s changes — especially the shielding of farmers’ subsidies and regional payouts from cuts.

This sets up tensions ahead of a summit of EU leaders next Friday that will focus on the size of the budget. While the Cypriot proposal will guide the next phase of the negotiations, there is still plenty of time for critical countries to overhaul the plan. Ireland takes over the presidency from July until the end of the year and will be tasked with bringing the EU's 27 countries close to a landing zone.

Cyprus’ balancing act

The Commission proposal is worth nearly €2 trillion, including €166 billion in Covid-era debt repayments that have not been amended in the negobox.

The Cyprus Council presidency — which brokers the talks between EU countries and drafts amendments — walked a tightrope to satisfy a coalition of sixteen countries pushing for more money for agriculture and regional payouts, and a rival camp demanding drastic cuts.

Nicosia’s ambassador to the EU, Christina Rafti, held bilateral meetings with all her 26 counterparts this week to seek political buy-in for the negobox.

But that wasn’t enough to stem an outpouring of anger by Germany and its frugal allies.

“We are very far. We wanted a 20 percent cut, and we got 2 percent,” said an EU diplomat who, like others quoted in this story, was granted anonymity to speak freely.

In a further setback, Cyprus applied its biggest cuts — 3.9 percent — to the European Competitiveness Fund, a €410 billion money pot which finances innovative firms, and the Global Europe Fund, which channels development aid.

This triggered a backlash among northern countries, which support shifting money away from policy areas traditionally viewed as most important towards new challenges like defense and industrial competitiveness.

“The proposal finances yesterday’s priorities at the expense of tomorrow’s challenges. This shows exactly how not to proceed,” the Netherlands' Heinen wrote in the statement.

Farmers’ subsidies and regional payments — which mostly benefit southern and eastern countries and make up just under half of the overall budget — have been spared from the cuts.

Supporters of the Cypriot proposal claim that there was no appetite to cut these policy areas, as they have already been downsized in the Commission’s proposal. The combined share of agriculture and regional payments has shrunk from 60 percent in the current budget from 2021 to 2027 to 41.4 percent in the revised negobox.

“It is indeed true that some member states made it very clear, that they wanted an extensive cut to the budget (but) there were other groups of member states that advocated for maintaining this level or at some points, increasing [the budget],” Cyprus’ Raouna added.

Proponents of the changes also argue that there will be a stronger link between EU payouts and democratic reforms, a key demand of northern countries.

But this explanation didn’t wash with the frugals. “All the changes are going in one direction,” said a second EU diplomat. “That is what is worrying for the dynamic in the room.”