The EU's €2 Trillion Budget Fight Is Getting Ugly Before It Even Starts

A fierce budget battle is brewing in Brussels. The European Parliament is pushing for nearly €200 billion more in the EU's next long-term budget, setting up a potential clash with Ursula von der Leyen and fiscally conservative member states over how to fund Europe's ambitious priorities.

The Parliament's demand directly challenges von der Leyen's strict 1.26 percent GNI spending cap — the mechanism that limits a government's spending to a percentage of its total Gross National Income. Net contributors like Germany and the Netherlands already argue that 1.26 percent is too high. The Commission, for its part, wants to fund new defence and artificial intelligence priorities by streamlining existing funds. Parliament insists that these new needs must not come at the expense of farmers or regional aid.

Following a vote of 370 to 201 on 28 April, Parliament is demanding a 10 percent budget increase, seeking 1.27 percent of GNI. Crucially, this excludes the massive costs of repaying pandemic debt. MEPs argue those repayments should be accounted for separately to avoid "suffocating" future investment.

For those unfamiliar with the EU's budget machinery, the Multiannual Financial Framework (MFF) defines how much money flows into specific policy areas. It funds programmes across research, climate, agriculture, culture, defence, and the environment. The Commission proposes the budget, while the Council and Parliament examine and amend it together before adoption. Unlike national governments, the EU does not directly tax citizens or businesses. It finances its expenses through so-called "own resources": GNI contributions, consumption tax (VAT), import taxes, and non-recycled plastic packaging waste. To meet its more ambitious proposal, the Commission has suggested "new own resources" estimated at €58.2 billion annually (at 2025 prices), starting from 1 January 2028.

The proposed 2028-2034 budget amounts to €1,816.89 billion in current prices. The Commission has called it "larger, smarter, and sharper" than the current one. It reduces the number of programmes from 52 to 16, aiming to respond more effectively and focus on core EU priorities. Parliament supports the budget's flexibility and simplification, but its MFF rapporteur, Carla Tavares, a Portuguese MEP from the Socialists and Democrats group, said Parliament rejects power cuts to regional and municipal authorities.

Marie-Antoinette Maupertuis, President of the European Alliance Group at the European Committee of the Regions, President of the Corsican Assembly, and President of the CPMR Islands Commission, said she is in favour of simplification of course, but simplification cannot mean recentralisation and bypassing territories.

So where is all this money going? The 2028–2034 budget proposal pivots toward "hard power," with increases for industrial and military security. The MFF's first pillar, accounting for 44 percent of the total budget, allocates €409 billion to National and Regional Partnership Plans (NRPPs). These merge previously separate funds, including Cohesion Policy and the Common Agricultural Policy, into a single framework. Funding is conditional on meeting targets and respecting the rule of law.

The second pillar accounts for 21 percent of the budget, allocating €409 billion to the European Competitiveness Fund (ECF) — €234 billion — and Horizon Europe — €175 billion. The ECF aims to reduce reliance on foreign fossil fuels and secure green energy supply chains, leveraging up to €350 billion in investment through a mix of EU and private funding.

Defence is another major winner. The European Defence Fund and military mobility projects are receiving what has been described as a "tenfold increase" in response to Russian aggression. Funding would rise from around €1.7 billion to more than €17 billion to improve the rapid movement of troops and equipment across Europe. Artificial intelligence and high-tech innovation would also benefit from a planned €200 billion research allocation aimed at keeping the EU competitive with the US and China. Much of this would support the "AI Factories" initiative, giving European start-ups access to supercomputers to train large-scale AI models.

The third pillar allocates €200 billion to Global Europe, linking external action spending with internal interests and covering enlargement, neighbourhood partnerships, migration management, and international aid — including support for Ukraine.

Not everyone is happy. Funding for civil society and independent journalism is being squeezed into broader, rigid National Partnership Plans. Some €200 billion — 10 percent of the budget — is split between Erasmus+ and AgoraEU. The remaining €293 billion flows into various projects, including the Connecting Europe Facility, Civil Protection and Health, and the Single Market and Customs Programme. Maupertuis warned that if governance becomes too concentrated at national level, there is a real risk that local realities, smaller territories, and civil society actors progressively lose visibility and influence within the decision-making process.

The geographic split is also sharp. Eastern European states, led by Poland and the Baltics, are aggressively lobbying for a security-first budget that maintains high levels of cohesion funding to bridge the economic gap with the West. The "frugal" countries — Germany, Sweden, Austria, and the Netherlands — are demanding fiscal restraint and a budget cap closer to 1.1 percent of GNI. To the East, the budget is seen as an existential shield against Russia, though the EU must "live within its means" and prioritise private investment over public debt. At the April EU Council summit in Cyprus, Germany and the Netherlands warned that a €2 trillion budget is "unrealistic" given national fiscal constraints. Under the current draft, net contributors like Germany and the Netherlands are arguably left with nothing in direct benefits, facing higher contributions without past rebate protections. Southern states like Italy and Spain, and smaller member states like Bulgaria and Romania, also risk being sidelined, as the proposed merger of regional funds into national plans could bypass local authorities.

Parliament wants an increase of €175.11 billion at 2025 prices (or €197.30 in current prices) beyond von der Leyen's 2025 proposal. It warns that the budget should remain an "investment tool" for Europe and its citizens, rejecting a performance-driven model that downsizes regional and local authorities. Tavares said the Commission needs to double down on investments to ensure Europe maintains a geopolitical and strategic position in today's international landscape.

Maupertuis criticised the Commission's NRPPs proposal to draw on the Recovery and Resilience Facility (RRF) tool, arguing it would make national plans overwhelmingly state-centred while territorial specificities progressively disappear from the programming logic. She proposed a "European Partnership Pact based on multilevel governance, territorial impact assessments, active subsidiarity, and the direct involvement of local and regional authorities from the very start."

MEPs are asking for €888.86 billion (2025 prices) for the first pillar, compared to the Commission's €797.1 billion, with a reinforced Common Agricultural Policy of €385.12 billion and €274.34 billion for cohesion policy. Tavares emphasised that Parliament has difficulty accepting a shift in funding from traditional policies towards defence and competition. Maupertuis warned about the Commission's underestimation of these policies, arguing they are not simply budgetary instruments but essential political tools ensuring territorial balance, economic resilience, and equal opportunities across Europe.

Parliament agrees on a total increase of €62.08 billion for competitiveness, including €26.6 billion for the ECF. For Global Europe, an additional €21.24 billion beyond the Commission's proposal (€190 billion) would strengthen enlargement, aid for Ukraine, multilateral cooperation, and humanitarian support. Parliament also warns that the Commission's simplified structure undermines transparency and accountability, calling for greater participation with a broader scope for its budgetary and discharge functions. "We are the budgetary authority," Tavares said, warning that the current budget proposal should be more transparent for all parties involved, including final beneficiaries.

On revenue, MEPs back the Commission's plan for a "basket" of different "new own resources," including taxes on large corporations and tobacco imports and exports. Tavares said a strong budget needs a solid base. The proposed new own resources are a good beginning, she said, but additional revenue streams are needed to reach €60 billion in annual revenues. Parliament suggests extending the carbon border adjustment mechanism, a digital services levy, an online gambling levy, and a levy on crypto-asset capital gains. Increasing new own resources is the only way to finance a more ambitious budget, as reducing the number of EU-financed policies is not an option.

Major disagreements with the Commission arose over NextGenerationEU, the bloc's €800 billion post-COVID recovery instrument. While the Commission integrates the €168 billion NGEU grant repayment into the 2028-2034 budget, Parliament wants to keep those costs outside the budget ceilings.

At the April plenary in Strasbourg, Budget Commissioner Piotr Serafin said the Commission "stands ready to act as an honest broker." But clashes among member states over budget size, who pays, and where the money is spent threaten to delay adoption. Tavares said Parliament's position is to work together with the Council. But Parliament's firm stance sets a clear red line ahead of negotiations, signalling MEPs' readiness to push budgetary ambitions without trade-offs, forcing the Council into a more accommodating position ahead of the 18-19 June summit.