The search for common ground within the European Union continues, with the bloc’s budget for the 2028–2034 period — the Multiannual Financial Framework (MFF) — at the center of the dispute. Cyprus’s compromise proposal, put forward shortly before it handed over the Council Presidency to Ireland, which called for cuts to the European Commission’s original draft, appears to have hit a wall. Meanwhile, the “frugal” bloc, led by Germany and the Netherlands, seems not only capable of holding its ground but potentially of growing stronger.
This is partly because Sweden is expected to remain within that group. Euronews reports that Magdalena Andersson, leader of Sweden’s Social Democratic Party and a likely next prime minister following the September 13 elections, would maintain the country’s hardline stance. As a Swedish official told the outlet, “in parliamentary hearings, they constantly ask why the current government isn’t doing more to oppose the budget proposal.” This suggests that a Social Democrat-led government would not signal any shift in position — a dynamic that is also creating a rift within the European Parliament, where Swedish Social Democrats are clashing with the Socialists and Democrats group, which supports increased funding.
The two “blocs” clashing over the EU budget
Sweden, the Netherlands, and Germany are among the leading members of the so-called “frugal” or “moderniser” bloc — net contributors to the EU budget who pay in more than they receive. Their core argument is that the MFF should be cut to reduce the burden on taxpayers. On the opposing side, a group of at least 16 member states — including Italy, Spain, and Poland — known as the “Friends of Cohesion,” are pushing for an ambitious European budget that preserves Cohesion Policy and the Common Agricultural Policy. Both Nicosia and Athens align with this position.
Cyprus’s proposal that hit a wall
Cyprus put forward a compromise proposal calling for an overall reduction of approximately 2%, or around €32.8 billion, compared to the Commission’s original €2 trillion proposal. The core point of contention is how resources should be distributed across the main spending categories.
The so-called “nego box” (negotiating package) includes:
• €942 billion for agriculture, fisheries, cohesion, migration management, and security
• €502 billion for competitiveness, research, innovation, defence, and space
• €182 billion for development aid, humanitarian assistance, and enlargement
• €104 billion for administrative expenditure
• €134 billion for repaying the Recovery Fund established in the wake of the pandemic
A compromise, however, is proving difficult to reach. The Netherlands responded immediately and negatively, with Finance Minister Ilko Heinen pointedly calling it a “no-go box” rather than a “nego box.” German Chancellor Friedrich Merz has also remained firmly opposed, stating at a late-July press conference with the Irish Taoiseach that the Commission’s proposal requires “deep cuts” and must be reduced by several hundred billion euros.
The “own resources” question
Also on the negotiating table is the European Commission’s proposal to create new “own resources” — new pan-European revenue streams to fund the bloc’s growing needs in areas such as defence and competitiveness.
Proposals include higher taxes on tobacco products and a new corporate tax across the EU. Germany, however, categorically rejects the corporate tax, even with potential exemptions for small and medium-sized enterprises.
Ireland has also expressed opposition to the idea of a digital tax, despite support from the European Parliament and French President Emmanuel Macron. According to Taoiseach Micheál Martin, such a move could jeopardize the “Turnberry” trade agreement signed last year between the European Union and the United States.
MEPs push for a larger budget
It is worth noting that member states are not the only actors in the search for a golden compromise on the MFF. For the budget to be approved, both the Council — which must first reach a common position — and the Parliament must give their consent. MEPs are on an entirely different wavelength from the frugal bloc, calling for a 10% increase in funding compared to the Commission’s proposal.
Against this backdrop, European Council President António Costa is expected to begin a tour of all EU member states starting August 25, seeking a compromise and aiming to reach a political agreement before the end of 2026.
That timeline is looking increasingly tight, as 2027 will see elections in several member states, with the prospect of nationalist forces gaining ground — and the potential complications they could bring to the approval of the EU’s 2028–2034 budget — appearing very real.
