Pavlos Xanthoulis
The European Commission has placed the 27 member states before what it calls a “fiscal trilemma,” centered on the new European budget under discussion for the seven-year period 2028–2034, which is dividing partners during the energy crisis. An EU note obtained by “K” talks about both the trilemma the Commission has presented to the 27 member states, effectively warning of a budget gap of about €500 billion, and the disagreements among partners. These disagreements were expressed in the Committee of Permanent Representatives (Coreper) and span the entire EU budget, starting with its overall size. Differences also emerged over the issuance of joint debt, with a group of four key countries, Germany, the Netherlands, Austria, and Hungary, firmly rejecting any idea of common European debt. Their opposition applies both to defense, given the clear distancing of the United States from Europe’s security umbrella, and to energy, which has regained urgency in discussions due to the war in the Middle East.
According to the EU note, the Commission stressed that the EU is facing a fiscal “trilemma” and sought to push the 27 member states to take responsibility for key decisions regarding the proposed Multiannual Financial Framework, meaning the EU budget for 2028–2034. At the same time, the Cypriot Presidency of the Council is preparing to introduce certain technical adjustments to the negotiating framework, likely on April 17. Within this context, the Commission laid out the trilemma as follows. The new Multiannual Financial Framework for 2028–2034 must deliver more funding for new priorities, including defense, security, and competitiveness. It must also continue supporting long-standing priorities such as cohesion policy and the Common Agricultural Policy. At the same time, it must repay the debt created under NextGenerationEU, all within limited fiscal space.
The trilemma took on greater political and economic weight when the Commission presented the three choices effectively available to member states, prompting lively discussion and disagreement. In practice, the Commission indicated there are two main options and one major risk when it comes to funding new priorities, maintaining long-term commitments, and repaying debt. One option is to introduce new funding sources identified in the Commission’s proposal, including new own resources and adjustments to existing ones. Another is to increase national contributions through Gross National Income and Value Added Tax. The risk is that the budget could be reduced, creating a fiscal gap of €459 billion.
According to information available to “K,” the Commission also outlined alternative scenarios for the proposed budget if no new own resources are introduced and if national contributions from the 27 member states remain unchanged at current GNI and VAT levels. Under this scenario, the Commission warned that cuts would exceed half a trillion euros, resulting in a severely weakened budget for 2028–2034.
Disagreements over size
As expected, the Commission’s position triggered disagreements, initially focused on the size of the budget. Sweden reportedly called for the MFF to be set at 1 percent of Gross National Income, while Spain pushed for the opposite approach, advocating for a highly ambitious model at 2 percent of GNI.
A large group of member states expressed support for a broadly ambitious budget. According to “K,” this group includes Greece, Portugal, Italy, Romania, Bulgaria, Latvia, Slovakia, Slovenia, Lithuania, Estonia, and Croatia.
On the other side are Sweden, the Netherlands, and Austria. Austria argued that the Commission’s proposed budget amounts not to 1.13 percent of GNI but closer to 1.02 percent, a difference the Commission attributed to inflation and the need for a strong deflator. Germany has consistently called for budget restraint, while Finland appears willing to show flexibility if clear priorities such as defense and competitiveness are defined.
Disagreements also emerged over how funds should be allocated across policy areas. Slovakia, Hungary, Malta, Croatia, Portugal, and Slovenia sought to ensure that spending under heading one, which focuses on cohesion policy and the Common Agricultural Policy, would not face further cuts. This position was opposed by Germany, the Netherlands, Sweden, and Austria, which called for across-the-board reductions.
Joint debt
The issue of issuing joint debt also became a point of contention among member states. Greece, Spain, Portugal, Italy, and Lithuania supported the idea of common European debt as a way to finance defense, security, and energy. In contrast, Germany, Hungary, and Austria rejected the proposal outright, while the Netherlands went even further, describing it as a red line.
Disagreements were also recorded over new own resources, particularly from Sweden and Hungary, as well as over contributions based on Gross National Income. Slovakia, Estonia, Spain, Greece, Malta, and Latvia appeared open to increasing contributions. Meanwhile, Germany, France, the Netherlands, and Sweden argued that their contributions are already too high and opposed any further increases.
Nicosia prepares
Following these discussions, the Cypriot Presidency, which does not take formal positions during its term, is preparing to move forward with technical adjustments to the MFF 2028–2034 negotiating framework on April 17. This comes about a week before a scheduled informal European Council meeting on April 23–24, where leaders are expected to discuss the issue. In the meantime, and given the ongoing disagreements, bilateral meetings are expected to begin this week, immediately after EU ambassadors return to Brussels from the Catholic Easter break.
The Commission believes that, despite the disagreements, there is broad support for an ambitious budget and unanimous agreement on the need to evaluate both revenues and expenditures. Summarizing the discussions so far, the Commission noted that all member states agree on the need to better leverage the budget and questioned why the option of joint debt is not being explored more fully. However, this idea faces strong resistance from a group of member states, which, according to an EU source, currently appears impossible to overcome.
