Berlin demands €400 billion EU budget cut

Germany will vote no on the European Commission's proposed €1.76 trillion seven-year budget unless it is cut by "several hundred billion euros," Chancellor Friedrich Merz said on 28 July (Handelsblatt, European Parliament). Under EU treaty rules, this spending plan (the MFF, or Multiannual Financial Framework, the seven-year blueprint that sets how much money goes where) needs unanimous approval from all 27 governments (EUR-Lex). Every country has a veto. Germany, the EU's largest net payer, is openly using that leverage.

The money at stake pays for water-treatment plants, rural broadband, farm income and startup grants across Europe's poorer regions. If the budget shrinks by the scale Germany demands, those regions cannot easily replace the lost grants with their own borrowing.

The scale of the demand

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

Berlin's reasoning is domestic. Germany is cutting its own spending, and Merz says voters will not accept a larger EU bill at the same time. Austria, Sweden and the Netherlands share that instinct. A June 2026 Council negotiating text already trimmed the Commission figure to about €1,730 billion, roughly 2% below the proposal (Eucrim). That is still far from what Germany wants.

The European Parliament is pushing the other way, calling for a higher budget funded partly by new taxes collected at EU level, including a levy on large companies (European Parliament). Germany rejects those too.

Where the money goes, and who loses it

The Commission wants to roll regional development grants, farm payments and fisheries money into single national plans per country (Commission). That worries regions, because national governments would control more of the pot. Polish local governments warned the new model shifts power away from regional programmes (Wspólnota). Bruegel, the Brussels think tank, raised similar concerns EU-wide (Bruegel).

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

Romania faces pressure from two sides: it is already struggling to pass reforms needed to unlock roughly €4.5 billion in pandemic-recovery money before an August deadline (To Brief). A tighter post-2027 budget would hit a country that cannot easily borrow to fill the gap.

Berlin's frugality stops at its own border

Germany has a point about waste. The European Court of Auditors has flagged persistent absorption problems, meaning EU money that gets allocated but never spent, often because projects stall or local administrations cannot move fast enough (ECA). More money is not automatically better-spent money.

But Merz rejected a proposed €100,000 cap on per-farm subsidies because it would hurt large farms in northern and eastern Germany (n-tv). The discipline is for everyone else.

The argument also runs into the EU's own recent choices. Member states approved €150 billion in common borrowing (all 27 countries jointly raising money on capital markets, so stronger borrowers share the cost with weaker ones) for defence through the SAFE instrument (Commission). The budget must also absorb €149.3 billion in debt repayment for the pandemic-era NextGenerationEU recovery fund (European Parliament). If Europe can borrow collectively for weapons, refusing to maintain grants for sewage systems and rural broadband is a political choice, not a fiscal limit. The real fight is over who absorbs the squeeze: farmers, municipalities, poorer member states, or the national treasuries Germany wants to protect.