Berlin Targets EU Cohesion Funds

Germany will vote against the European Commission's proposed €1.76 trillion seven-year budget unless it is reduced by "several hundred billion euros", Chancellor Friedrich Merz said on 28 July (Handelsblatt, European Parliament). Under the treaties, this budget, known as the MFF or Multiannual Financial Framework, needs the approval of all 27 governments. It is the seven-year plan that decides how much EU money goes into farms, roads, research, borders and regional development (EUR-Lex). Every member state has a veto. Germany, the EU's largest net contributor, is now putting that veto on the table.

For Malta, this is not a distant Brussels argument. EU budgets pay for the kind of infrastructure that small states and poorer regions cannot always finance comfortably on their own: water treatment, port upgrades, rural broadband, training schemes, farm support and startup grants. When that pot is cut, the loss is felt in actual projects, not in an accounting column.

The scale of the demand

A leaked German government document, first reported by Reuters, put Berlin's demanded cut at about €400 billion, roughly a fifth of the Commission proposal (Euractiv). Germany's Europe minister Gunther Krichbaum repeated the figure publicly on 22 July, arguing that agricultural and regional funds should be merged to release money for defence, AI and competitiveness.

Merz's calculation starts at home. Germany is cutting its own spending, and he says voters will not accept a larger EU bill while Berlin is tightening its national budget. Austria, Sweden and the Netherlands are in the same camp. A June 2026 Council negotiating text already brought the Commission's figure down to about €1,730 billion, around 2% below the original proposal (Eucrim). That is nowhere near the reduction Germany wants.

The European Parliament is pulling in the opposite direction. It wants a larger budget, funded partly through new EU-level taxes, including a levy on large companies (European Parliament). Germany rejects that route as well.

Where the money goes, and who loses it

The Commission wants to fold regional development grants, farm payments and fisheries funding into single national plans for each country (Commission). The stated aim is simplification. The political effect is centralisation: national governments would control more of the money before it reaches regions, councils and sectoral programmes.

That is why regions are nervous. Polish local governments warned that the model shifts power away from regional programmes (Wspólnota). Bruegel, the Brussels think tank, raised the same concern across the EU (Bruegel). In Maltese terms, it is the difference between a programme shaped around local needs and one filtered through Castille, ministries and the usual national bargaining.

Even before a German-sized cut, the Italian Institute for International Affairs estimates that the combined regional-and-farm envelope would be about 14% lower in real terms than in the current period (IAI). The current Cohesion Fund can cover up to 85% of eligible project costs in countries whose national income is below 90% of the EU average. Poland received €10.75 billion in the current cycle, Romania €4.09 billion (European Parliament). When that fund shrinks, a municipality does not just lose a line in the budget. It may lose the water-treatment plant attached to it.

Romania is already being squeezed. It is struggling to pass reforms needed to unlock about €4.5 billion in pandemic-recovery money before an August deadline (To Brief). A tighter post-2027 budget would hit a country that has limited room to borrow its way around missing EU grants.

Berlin's frugality stops at its own border

Germany is not wrong to question waste. The European Court of Auditors has repeatedly flagged absorption problems, meaning EU money that is allocated but never actually spent, often because projects stall or local administrations cannot move quickly enough (ECA). More EU money does not automatically mean better EU spending.

But Merz also rejected a proposed €100,000 cap on per-farm subsidies because it would hurt large farms in northern and eastern Germany (n-tv). Fiscal discipline, in this version, travels more easily across borders than into German constituencies.

The argument also sits awkwardly beside the EU's own recent choices. Member states approved €150 billion in common borrowing for defence through the SAFE instrument, meaning all 27 countries raise money together on capital markets, with stronger borrowers helping lower the cost for weaker ones (Commission). The next budget must also absorb €149.3 billion in debt repayments for the pandemic-era NextGenerationEU recovery fund (European Parliament).

If Europe can borrow together for weapons, then cutting grants for sewage systems, broadband and poorer regions is not simply a fiscal necessity. It is a distributional choice. The real fight is over who carries the squeeze: farmers, kunsilli lokali and municipalities, poorer member states, or the national treasuries Germany wants to shield.