€750 billion debt crowds out EU priorities

The EU wants to rearm, keep Ukraine afloat and start paying back its pandemic borrowing. The budget available for that work is still roughly the size agreed before those pressures existed. For Malta, as for every member state, this is not an argument about Brussels bookkeeping. It is a fight over which EU money survives, which priorities get squeezed, and who pays.

The Multiannual Financial Framework, or MFF, is the EU's seven-year spending ceiling, agreed unanimously by all member states. It sets the outer limit of what Brussels can spend (EUR-Lex). The current framework, covering 2021–2027, totals about €1.074 trillion in 2018 prices (European Commission).

The next one carries a burden earlier budgets did not. During the pandemic, the EU borrowed roughly €750 billion through NextGenerationEU, its emergency recovery fund (Council of the EU). Repayments on the principal start in 2028. That money is taken before new spending is considered. So the next MFF has to make space for defence, Ukraine and competitiveness while also servicing a debt that was not there when the current ceiling was set.

Where the Money Sits

Two older programmes still dominate the budget. Cohesion policy, which funds regional investment to narrow the gap between richer and poorer parts of Europe, accounts for €426.7 billion. Agriculture takes another €401 billion. Together, they make up roughly two thirds of the total. Security and defence gets €14.9 billion, about 1.2% (EUR-Lex).

The new demands sit on top of that structure. Ukraine has a confirmed €50 billion EU facility for 2024–2027, with no agreed successor yet (European Commission). The EU's Strategic Agenda puts competitiveness, defence, Ukraine support and security at the centre of the next political cycle (European Council). The European Parliament has voted to demand nearly €200 billion more than the Commission proposed for the next framework (Euronews).

Four Options, Four Blocking Coalitions

There are only four ways to close the gap: raise the ceiling, create new EU-level revenues, cut existing programmes, or borrow again. Each route runs into a different coalition of governments with something to lose.

The Netherlands is treating the talks as a net-contributor issue. Its payments to Brussels come mainly through GNI-based contributions, a levy linked to national income, which rise when other EU revenues are not enough (Rijksoverheid, European Commission). Germany has usually taken the same line. Both argue that new spending should first be found inside the existing ceiling before higher national payments are discussed.

Poland is on the other side of the argument. Warsaw spends among the most on defence as a share of GDP within NATO (NATO), but it also depends heavily on cohesion and farm payments. That position only holds if the budget grows. A group of 16 member states, including Italy, Poland and Romania, has pushed back against the Commission's draft and demanded stronger protection for cohesion and agriculture (EUNews).

France treats the Common Agricultural Policy, the EU system of farm subsidies and rural support, as a political red line (European Commission). Paris therefore needs either a larger budget or new revenue streams. Without one of those, its own priorities collide inside the same ceiling.

Romania shows the risk hidden by the headline numbers. If money moves from formula-based cohesion grants, allocated by region according to income levels, towards funds awarded to the strongest projects, poorer states with weaker institutions would have to win money rather than receive it by entitlement (Cohesion Data). The overall budget could grow while leaving those countries worse off.

Revenue That Doesn't Exist Yet

The Commission has proposed new "own resources", meaning revenue streams paid directly into the EU budget. These include proceeds from the Emissions Trading System, the EU's carbon market; the Carbon Border Adjustment Mechanism, a charge on carbon-intensive imports; and a statistical levy on company profits (European Commission). None has been enacted.

ETS and CBAM revenues could fall on importers and consumers, creating another fight over who carries the cost. If those revenues disappoint, national contributions remain the backstop (EUR-Lex).

The budget that will shape EU spending for seven years is being negotiated while every capital protects its own line items. The real test is whether any government is prepared to name the programme it is willing to lose.