The Battle for EU Billions: Can the EU Strike a Budget Deal by the end of the year
Croatia's prime minister had a busy start to the new political season. He opened a new kindergarten. He attended the signing of a contract to build a railway line. He was at the opening of a restored castle. He toured the renovated buildings of several university faculties. He opened a geothermal leisure park. Last week alone, he visited a refurbished museum, a faculty building, a restored spa resort, a hotel, and a botanical garden.Andrej Plenković's schedule has indeed been packed in recent weeks. But by the standards of Croatian politics, there is nothing unusual about it. Contract-signing ceremonies and ribbon-cuttings have long been a staple of government PR here, largely thanks to European money.
Nearly all of these projects – the geothermal pools, the spa, the railway, the castle – were co-financed by the European Union through either the Recovery and Resilience Facility or the European Structural and Investment Funds.
EU money matters to the Croatian government for at least two reasons. The first is political: much of its PR is built on EU-funded projects. The second, and more important, is economic: Croatia is one of the member states whose development – especially in poorer regions such as Slavonia, in the east of the country – still depends almost entirely on European money. By the government's own estimates, around 70 percent of public investment in Croatia is funded from the EU budget.
Without EU funds, public investment in kindergartens, schools, swimming pools, railways, and water and sewage networks would not disappear, but it would be far smaller, and the state would probably have to borrow to pay for it. That is why the negotiations on the EU's next Multiannual Financial Framework (MFF), for the period 2028-2034, the bloc's long-term budget, matter so much to Croatia.
Talks about money in the EU are always long, bruising, and unpredictable, and these are no exception. Member states have split into two broad camps. On one side are the 17 so-called Friends of Cohesion, who want to protect funding for the EU's traditional spending policies: cohesion, which aims to narrow development gaps between regions, and agriculture. The group includes Italy, Spain, Portugal, Greece, Poland, Hungary, the Czech Republic… – as well as Croatia.
The other camp is smaller but carries significant economic and political weight. Led by Germany, its members are net contributors: they pay more into the EU budget than they get back. They argue that the proposed budget is too large and are pushing for deep cuts.
October's EU summit brought little progress and did little to narrow the gap between the two sides. European Council President António Costa has since taken personal charge of the talks and will present a new negotiating proposal ahead of an extraordinary summit on November 26–27.
Nearly every key question remains open. How much will the EU have to spend between 2028 and 2034? What will the money go on? How will it be split between "old" and "new" priorities? Does the EU really spend too much on cohesion and farming, or do these two traditional policies still deserve a large slice of the pie?
Has the time come to shift common funds decisively toward new priorities such as competitiveness, defense, and security? If so, should the overall budget be bigger, so that there is enough for everything? And finally, where will the money come from – which new "own resources," on top of existing revenue streams, are member states prepared to accept?
In this newsletter, and in this week's podcast, we try to answer some of these questions from the perspectives of Austria, Poland, Latvia, and Croatia.
But with the EU budget, it is not only the big picture that counts. The details matter too – details that attract little attention now but could have profound, long-term consequences for member states, their development, and their ability to catch up with richer, more competitive economies.
Chief among them is the proposed European Competitiveness Fund, a new instrument in the next long-term budget designed to help the EU invest more strategically and keep pace with global rivals such as China and the United States.
As currently proposed, the fund would have no national envelopes – sums reserved in advance for each member state, as under the structural and investment funds. Croatia is among the countries worried that its companies, start-ups, and research institutes would struggle to compete in such EU-wide tenders, and that most of the money would end up in regions that are already strong in innovation, science, and industry.
For the EU's less developed regions, the consequences could be devastating. Areas that have yet to catch up with wealthier parts of the Union could fall even further behind, and cohesion funds, earmarked for poorer regions, would simply not be enough to close a new and even wider development gap.
Although the loudest arguments are about spending, revenues matter at least as much. There can be no political deal on the next budget without agreement on new sources of income – the so-called "own resources."
Several proposals are on the table, including resources linked to the EU Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM), tobacco excise duties, uncollected electronic waste, and large companies operating in the single market. Here, too, there is no consensus.
Time, meanwhile, is running short. There is strong pressure to strike a deal by the end of this year, before a busy 2027 election calendar – including votes in France, Italy, and Poland – complicates the talks or turns the budget into a campaign issue. Not everyone, however, accepts this self-imposed deadline.
"Whether we will succeed [in reaching an agreement] by the end of the year is a big political question. Croatia's position is that the quality of the final agreement matters far more to us than a fixed timetable designed to avoid major political challenges next year," Plenković said.
If the November summit narrows the gaps, a deal could be sealed at the regular European Council in December. But positions remain so far apart that there is a real chance agreement will slip into 2027.
Irena Frlan Gašparović, journalist, Telegram.hr
Link : What's at stake in Europe's next budget ?