Wealthy EU Nations No Longer Have the Funds to Subsidize the Poorer Markets Within the Bloc, and a Tug-of-War Over Resources Has Begun: six EU states have issued an ultimatum regarding the EU budget.

 

Germany, the Netherlands, Sweden, Denmark, Austria, and Finland have issued a stern ultimatum concerning the European Union (EU) budget for 2028–2034. These six wealthy nations—known as the "frugal" states—which themselves fund nearly 40% of the EU budget's revenue, threatened in an official letter to block the seven-year financial plan unless the European Commission's proposed €2 trillion budget is reduced by hundreds of billions of euros.

This move signals a deep rift in EU internal politics and the onset of a battle over spending priorities:

•           Reasons at the national level: Leaders of the donor nations emphasize that it is becoming impossible to justify high spending at the EU level when their own citizens are facing austerity measures and strictly curtailed national expenditure.

•           Shifting priorities: The group of six demands a fundamental reform of the EU budget—specifically, redirecting funds toward security, defense, innovation, industrial competitiveness (to counter pressure from the US and China), and the fight against illegal migration. •            A blow to poorer regions and agriculture: To fund new objectives, wealthy nations are demanding drastic cuts to funding for the Common Agricultural Policy (CAP) and regional development (cohesion funds). Traditionally, these two areas have accounted for about two-thirds of the total EU budget, with poorer EU regions and farmers deriving the most benefit from them.

What is the current situation?

Since the EU’s multiannual budget requires the unanimous approval of all 27 member states, this bloc of countries issuing the ultimatum holds the real power to completely paralyze the process. Opposing them is another camp—a group of at least 17 countries (including Italy and Spain)—which, conversely, demands a larger budget and the maintenance of support for farmers and regions.

This conflict of interest directly threatens the pledge made by EU leaders to reach an agreement before the end of the year, aiming to prevent upcoming election campaigns in major European nations from further complicating the negotiations. Friedrich Merz, the German Chancellor, and leaders from five other EU countries have threatened to withhold approval for the bloc’s next seven-year budget unless an agreement is reached to cut spending by hundreds of billions of euros.

 

“This ultimatum highlights disagreements over new EU spending priorities—including defense and efforts to bolster struggling industries facing competition from China and the US—while maintaining support for farmers and poorer regions, which traditionally receive the lion's share of the budget.

 

The EU budget "must be fundamentally reformed. We have to make choices," states a letter signed by the leaders of Germany, the Netherlands, Sweden, Denmark, Austria, and Finland, seen by the *Financial Times*.

 

"If the budget isn't cut by hundreds of billions, there will be no agreement this year," said a diplomat from one of the signatory countries.

 

These nations want to direct more resources toward defense and innovative companies in light of mounting economic and security challenges, while reducing funding for farmers and poorer regions, which traditionally account for roughly two-thirds of the EU budget.

 

Regarding the European Commission’s proposal for a total of €2 trillion for the 2028–2034 period all 27 member states must reach a unanimous agreement on the budget. The threat by six countries to withhold their consent runs counter to the commitment made by EU leaders in June to reach an agreement this year, before elections in France, Italy, Spain, and Poland complicate the negotiations.

 

The bloc’s budget is funded primarily through contributions from member states, and the six countries that signed the letter account for approximately 40% of EU budget revenue.”