Negotiations on the seven-year central budget for 2028-2034 are about to begin, and they are overshadowed by a number of other factors in addition to the traditional controversial issues. Like the repayment of the $300 billion loan, Trump’s tariff war, the urgent need to change defense spending, etc. In all this, is it important for the Member States to think long-term in their decisions and to keep in mind what they are sacrificing what for? Aren’t we paying too high a price for a decision that brings a solution in the short term?
The 27 EU Commissioners started negotiations on the multiannual financial framework for the period 2028-2034 in February. In addition to the disputes that have been fought so far, this will be strongly influenced by the repayment of the joint loan in the amount of 300 billion forints and the reorganization of defense spending.
EU leaders have already agreed to increase military spending and are also trying to fill capability gaps, as US President Trump has once again called on NATO members to increase their defence spending to 5% of GDP. Currently, no Member State is achieving this target, and EU leaders have not mentioned how they intend to finance the spending.
The Draghi report pointed out that in order to maintain the EU’s competitiveness, the EU needs to invest an additional €800 billion through joint borrowing, without which it risks its geopolitical influence.
For this reason, the Commission intends to adapt the budget to the geopolitical challenges of the Union and invest the single currency in innovative systems that can generate returns and in new priority areas such as the defence sector.
The traditional debate between the “thrifty” (Germany) and the “spending” (France) states is more challenging than ever.
Recently, however, two key representatives of both sides have also faced economic difficulties due to their own economic philosophies, which proves each other’s concerns and highlights that the recognition that the EU needs both stability and growth to solve its problems has not been realised.
Meanwhile, Spain, which was the first to present its draft and proposals on the MFF, is loudly calling on governments to jointly take responsibility for huge amounts of loans, and if necessary, to enforce the EU, in violation of one of its biggest taboos.
His other proposal is that the EU postpone the repayment of the 300 billion forint debt and thus improve cash flow. This would also give the Commission more leeway to finance common priorities. That may be a solution, but it is a slippery slope towards fiscal policy.
And what will we pay for a closer integration of fiscal policy and financial resources? With the centralisation of fiscal policy, the interests of member states are increasingly pushed into the background and countries are less able to adjust their budgets to their own priorities, which may not be sustainable in the long term with 27 countries with very different interests and resources.
In addition, the widening of economic inequalities, the potential injustice of common fiscal redistribution, and the introduction of new, common taxes are factors that increase social tensions and deepen the antagonism between “paying” and “favored” countries. At the same time, a strictly centrally regulated economic policy reduces the chances of less wealthy countries to solve location-specific problems and promote development.
In any case, this must be a question that must be decided in an open debate. Although the adoption of the MFF requires a unanimous decision by the Council and then the blessing of the Parliament, the draft is presented by the Commission, which is preceded by individual drafts by the Member States that are being discussed in the Commission.
However, it is regrettable that, according to some EU and diplomatic sources, the issue is once again being decided not in official forums, but in backrooms. The Commission is already negotiating with the representatives of the MFF draft countries, who would push the EU towards a common belief system and thus a fiscal union. According to the sources, the aim of the negotiations is to make this decision easier and faster to get through the Commission, then through the Council and the Parliament, with ready-made plans and proof of unity.
Translated and edited by Alex Kada