Germany and Five Other Capitals Demand Hundreds of Billions in Cuts to the EU Budget

Germany and five other governments have told the European Commission to remove hundreds of billions of euros from its proposed long-term budget, the Financial Times reported. Austria, Denmark, Finland, the Netherlands and Sweden joined Berlin in a joint statement demanding reductions of several hundred billion euros, and German officials have floated a figure as high as 400 billion euros.

The Commission's framework for 2028 to 2034 is worth roughly 2 trillion euros, more than 60 percent larger in nominal terms than the current one. Chancellor Friedrich Merz has argued the plan is unaffordable while Germany imposes restraint at home, has said cuts should fall across all policy areas, and has ruled out closing the gap through additional joint European Union (EU) borrowing. He wants remaining spending directed toward competitiveness and defence. European Council President António Costa and Merz both say they want agreement by the end of 2026.

The dispute is unfolding at a moment of tight bond market conditions. Euro-area governments are financing higher defence budgets while global long-term yields sit at multi-decade highs, which narrows the room for the kind of collective borrowing that funded the pandemic recovery program.