Federal government blocks EU budget proposal: What now for Germany?

Federal government blocks EU budget proposal: What now for Germany?

The future of the European Union is currently hanging in the balance because the federal government has sharply rejected the European Commission's new budget proposal. Government spokesman Stefan Kornelius explains that the EU is facing major challenges and that there is much more going on than just juggling numbers. The issues that need to be mastered are numerous: from competitiveness to defense capability to the EU's ability to act globally. While the next multiannual financial framework (MFF) is intended to provide an answer to these complex issues, the federal government is skeptical about the plan presented by Ursula von der Leyen.

“A comprehensive increase in the EU budget cannot be achieved,” said Kornelius. Given the strained budget situation in the member states, an additional financial burden is not acceptable. Particularly controversial are the new EU taxes proposed by the Commission, which are intended to primarily affect companies with a turnover of over 100 million euros. But despite this critical stance, the federal government supports the Commission's fundamental reform course, as a readjustment of the budget to future-oriented issues is considered necessary in order to strengthen the EU in the long term.

The new budget in detail

The planned budget framework for the years 2028 to 2034 envisages spending of 2 trillion euros, an increase of 800 billion euros compared to the previous period. According to the information from Süddeutsche.de The budget share is to increase to 1.2% of gross national income (GNI) in Europe. This expansion of the budget will be used to address geopolitical challenges, such as the conflicts with Russia and China and the unpredictability of the USA.

A large part of the budget is already committed, which means that 90% of the budget is tied up in existing programs. The largest budget items relate to agriculture and regional funding, which together make up almost 70% of the budget. A proposal to combine these pots to allow more flexibility is met with resistance, not least from the German Agriculture Minister Alois Rainer. He emphasizes the relevance of the Common Agricultural Policy for food supply and warns of disadvantages for agriculture.

Financing questions and resistance from Germany

A crucial question remains how the new budget should be financed. The EU plans to repay 800 billion euros from the Corona reconstruction fund. From 2028, the annual burden will be between 20 and 30 billion euros. There will also be a discussion about new sources of revenue at EU level in order to adequately finance the challenges. Tagesschau.de reports that in addition to higher membership fees, a levy on non-recycled electronic waste and tobacco taxes are also under discussion.

Negotiations on the draft budget are expected to take two years, meaning there will be a lot of water flowing down the Rhine before an agreement is reached. Unity within the ranks of member states is necessary, as unanimous consent and an absolute majority in the European Parliament are required. But Germany in particular, as the EU's largest donor, is resisting a comprehensive budget increase and is calling for national budgets to be consolidated, which is further fueling the mood in Europe.

So the question remains whether the EU can and wants to undertake the necessary reforms in order to remain strong and competitive. It is clear that many discussions and intensive negotiations will be necessary in the near future in order to find the right path for the future of the EU.