Von der Leyen defends 1.26% EU budget plan as Germany demands spending cuts

Commission defends seven-year budget ceiling

Speaking at the European Parliament in Strasbourg on Tuesday, European Commission President Ursula von der Leyen urged member states to protect the proposed budget for 2028–2034. The Commission designed the multi-year framework at 1.26% of EU gross national income, describing it as a moderate adjustment compared to the current seven-year budget period. While von der Leyen previously described the draft as the most ambitious in EU history, her tone turned cautious as talks approached a critical phase. She warned that national fiscal constraints must not derail agreed investments in defense, artificial intelligence development, energy infrastructure, raw materials acquisition, and economic competitiveness. The draft framework also maintains current funding levels for agricultural subsidies and regional cohesion policies. To limit increases in direct member state contributions, the Commission proposed a package of new EU own resources to establish dedicated central revenue streams.

I would like to caution against large cuts. It would risk cutting deep into critical priorities that we all together have agreed on.

Member states split between austerity and cohesion

The spending proposal has divided national capitals as negotiations enter a decisive phase. Germany, supported by several northern European governments, is demanding spending cuts measured in hundreds of billions of euros to ease domestic budgetary strains. German Chancellor Friedrich Merz stated on Monday that operating without an agreed multi-year budget would be the most financially advantageous outcome for Germany, though he conceded that such a scenario would diminish the European Union's operational capacity. In response, a coalition of 17 southern and eastern European nations, led by Italy and Romania and including Poland, submitted a joint letter last week demanding the preservation of cohesion funds and farm subsidies. Portuguese Prime Minister Luís Montenegro also addressed the European Parliament, defending joint investments in competitiveness.

If we want to preserve our priorities and the level of ambition we have for Europe, we must do the hard work on the revenue side.

Energy price shocks drive fossil fuel costs

In the second part of her address, von der Leyen evaluated the direct financial strains affecting European citizens and commercial enterprises. She attributed rising costs to external geopolitical shocks, specifically highlighting the conflict involving the United States, Israel, and Iran. European natural gas prices increased by 140% since the end of February, while diesel fuel prices doubled over the same timeframe. In total, higher fossil fuel import costs added €100 billion to European expenditures since the outbreak of hostilities. The Commission recommended that member governments phase out blanket energy subsidies and transition toward targeted financial assistance for vulnerable consumers and businesses.

Negotiation timetable ahead of 2027 elections

The Irish presidency of the Council of the EU is preparing a revised negotiating proposal for national leaders ahead of an October summit. European leaders have scheduled a dedicated European Council summit on 26 and 27 November, followed by a December summit intended to produce a final political agreement. Negotiators are seeking an accord before 2027, when scheduled parliamentary and presidential elections in France, Italy, and Poland could alter political alignments and complicate ratification.