The new EU budget: Why Germany’s cost-cutting stance is weakening Europe

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By Sophie Pornschlegel

The EU faces historic challenges, from competitiveness to security. Yet, at this critical moment, Germany wants to cut the already small EU budget.

The EU’s to-do list grows longer every year. It must strengthen the continent’s competitiveness to withstand pressure from the US and China. This requires large-scale investment in the single market, supply chains, energy infrastructure, and technological innovation. At the same time, the EU is asked to fund defence, security, and to continue its unwavering support for Ukraine. Not to mention all the other issues which it needs to deal with, such as energy, climate and agriculture.

But instead of providing the necessary resources, the next EU budget is likely to be cut in the negotiation process. In other words, the EU is expected to deliver results without incurring costs. This is the position adopted by the German government, alongside several other member states.

A drop in the ocean

Yet the EU budget is already rather small compared to the national budgets of its member states. The European Commission has proposed €1.7 trillion for the next seven-year financial framework (2028–2034). While this figure sounds substantial in absolute terms, it is a drop in the ocean in relative terms: The 27 member states allocate only around 1% of their gross national income to the EU. For comparison, Germany spends over 10% of its gross national income on its federal budget, with total public spending (including federal states, local authorities, and social security) reaching around 47%. In France, this figure is as high as 57%.

In addition, most EU money flows directly back to member states in the form of agricultural subsidies and cohesion funds, directly managed by the member states. Most of the EU budget is therefore not available to fund the EU’s new priorities.

Keeping pace with the challenges

To add to this already tight budgetary situation, there will be even less space to respond to the challenges in the coming years. A significant portion of the next budget is earmarked for repaying COVID-19 loans – around €23 billion annually. These repayments could consume up to 10% of the total EU budget. Adding to this is inflation: as it rises, the budget shrinks in real terms, leaving even less for the EU’s priorities. The next EU budget is likely to be similar in size as the current one, despite the growing challenges – and could even end up being smaller.

The EU thus faces an ever-growing list of tasks without the resources to address them. This sets the stage for a weakening of the EU. Since there is little public scrutiny of the EU budget negotiations, it becomes easy to blame the EU for failing to meet these challenges while portraying national governments as more effective – even though it is the national governments that do not give the EU the necessary (budgetary) tools to respond to the challenges effectively. It is no surprise that nationalist and far-right parties benefit from this situation.

Investing in the future must be doable

Compared to other international organisations, such as the United Nations, the EU still retains a much bigger “capacity to act”. The single market, trade policy, regulation in the tech sector, and consumer protection all make Europe stronger. Yet this capacity is now at risk – the less member states invest in the EU, the less the EU can do and the stronger the belief gets that individual nation states can better solve the problems.

But Germany cannot support Ukraine alone, nor does it have sufficient influence to assert its interests against the US or China. With an EU of 27 member states, the balance of power on the international stage shifts significantly.

So what should be done? Rather than advocating for cuts, Germany should support the European Parliament’s proposal to increase the EU budget by at least 10%. This increase is roughly equivalent to the amount earmarked for repaying COVID-19 loans – funds that cannot be actively used in the next EU budget.

New sources of revenue

Additionally, the German government should push for the EU to develop additional revenue sources, such as new taxes. Proposals under discussion include levies on emissions trading (EU ETS), the Carbon Border Adjustment Mechanism (CBAM), electronic waste, tobacco, new corporate levies for large companies with a net turnover of €100 million or more, as well as levies on online gambling and capital gains from cryptocurrencies. These measures would allow the EU to boost its budget without relying solely on member states.

The EU could also generate more revenue by rigorously enforcing existing regulations, particularly the Digital Services Act (DSA), the Digital Markets Act (DMA), and the AI Act. Companies that violate these regulations must face adequate sanctions. The billions generated could then be reinvested in Europe’s digital sovereignty. Yet, instead, member states – led by Germany – are pushing for deregulation. This is a strategic error that weakens the digital rights of EU citizens, reduces legal certainty, and eliminates an essential source of revenues.

Democratic infrastructure is non-negotiable

Should the German government remain committed to its spending cuts, it should at least ensure that programmes protecting the democratic foundations of our societies are not cut. The next EU budget allocates approximately 0.5% of its total – approximately €8.7 billion – to the AgoraEU programme, which aims to strengthen independent civil society, media, and culture.

By comparison, planned agricultural subsidies across the EU amount to €300 billion, around 35 times as much. The savings from cutting the AgoraEU programme would be marginal, but the damage would be immense. Resilient societies are less vulnerable to disinformation, hybrid attacks, and interference in elections and public discourse – a highly relevant issue, as demonstrated by Elon Musk’s interference in the 2025 German Bundestag elections.

The EU needs funding to deliver on its promises, and there are numerous options for where that funding can come from. Whether the EU can act effectively depends solely on the political will of its member states – and, to a large extent, the German federal government. Cutting the next EU budget would be a fatal mistake. Ultimately, Germany will decide whether the EU remains a global player or becomes a pawn of other major powers.

Sophie Pornschlegel is a Senior Adviser at the European Policy Centre in Brussels and conducts research at Maastricht University on European sovereignty in defence and digital policy.

Images: Piggy bank: Braňo [Unsplash license], via Unsplash; portrait Sophie Pornschlegel: private [all rights reserved].