Germany's Merz wants cuts to next 'far too high' EU budget

German Chancellor Friedrich Merz has called for a new, smaller proposal for the European Union's next long-term budget for the period from 2028 until 2034.

"The proposal on the table is far too high. The figures need to be reduced," Merz said on Friday in Brussels on the margins of consultations with fellow EU leaders. "A new proposal must be put forward," he said.

A recent compromise proposal foresees a 2% reduction in the European Commission’s proposed budget of €1.76 trillion ($2.02 trillion).

The EU faces the challenge of financing its ever-growing financial and investment needs while many capitals are constrained by tight budgets after years of successive crises.

The upcoming joint budget is expected to cover traditional expenses for agriculture subsidies and support for less affluent regions, but also emerging priorities, including increased investments in competitiveness and defence.

The EU's funds are largely filled with national contributions based on the economic power of the individual member countries and some customs duties.

Wealthy EU countries, including Germany, which contribute the largest share of the joint budget, have urged to drastically reduce its volume.

Merz also insisted that the EU will not take on additional joint debt and that EU leaders debate the bloc's revenues.

The European Parliament has previously suggested levies on digital services, online gambling and crypto-asset transactions, as well as an extension of the EU's carbon border tax as additional sources of revenue for the EU.

Competitiveness and security as pressing needs

Austrian Chancellor Christian Stocker and Dutch Prime Minister Rob Jetten have also criticized the compromise proposal.

"It's very important that we focus on the priorities - security, more competitiveness - and that the budget also fits those modernizations," Jetten said.

Latvian Prime Minister Andris Kulbergs said his country was striving to become an EU member that contributes more to the joint funds than it receives.

Representing a country bordering Russia, Kulbergs said that special attention should be given to supporting schools, health care and housing in the eastern border region.

"We cannot allow people leaving the area because of geopolitics. That makes our borders weaker," Kulbergs said.

Tight schedule for "highly controversial" talks

EU member states and the European Parliament are under pressure to reach an agreement by the end of this year to allow sufficient time for the budget’s implementation.

"It's going to be very, very difficult to resolve that fundamental question as to the size of the budget, and is it enough to meet all the competing demands," said Irish Prime Minister Micheál Martin, whose country will chair the budget negotiations in the second half of 2026.

Despite the issue being "highly controversial," Merz said he hopes the EU will agree on a new budget by the end of the year.

Jetten urged caution, saying the substance of the talks was more important than their speed.