EU spending must be modernised to focus on investment in defence and competitiveness with cuts to traditional farming or regional subsidies, according to Friedrich Merz, the German chancellor.

Germany – Europe’s largest economy and biggest contributor to Brussels’ budget – has laid down red lines as debate over the EU’s next long-term spending plans kicks off.

“The content and structure of the EU budget have remained virtually unchanged over the past few decades,” he said on Thursday, adding that “more than two-thirds of European funds still go toward redistribution and subsidies.”

As negotiations over the European Commission’s proposed 2028-2034 €1.8 trillion spending plan gather pace, pressure is mounting on capitals to decide how to finance the bloc’s new priorities while repaying the Covid-era debt dating back to the last budget settlement.

Merz argued that the EU should focus its spending for the cycle on strategic priorities and investment to lift the budget into a new geopolitical era.

“Slimmed-down structure, investment in competitiveness and defence, a focus on European resources for European politics. All of this is needed because resources are limited,” the German conservative said, adding that Germany was “strongly supporting” the Commission’s effort to reform the next budget.

The EU executive’s proposal includes a major overhaul of the budget structure, including merging 52 programmes into 16 and folding social, agricultural and cohesion funds into 27 national plans.

Traditionally, agriculture and cohesion made up roughly a third of the bloc’s budget each, though the new proposal allocates a combined share of around 44%.

Merz’ remarks reinforced Germany’s long-standing opposition to further joint debt at the EU level and the need for the budget’s new priorities to be financed through reallocation rather than expanding the overall budget.

In contrast, Emmanuel Macron and Kyriakos Mitsotakis, the French and Greek leaders, have in recent weeks backed the idea of new common borrowing and a rollover of pandemic debt to finance the bloc’s shared priorities.

EU leaders are set to meet on 18-19 June in Brussels for a summit, expected to mark a key step in the MFF negotiations, with the Cypriot Council presidency aiming to present indicative figures on the size of the budget for the first time.

MEPs, meanwhile, have pushed for a larger budget, voting in April to raise the overall size of the MFF by 10% compared to the Commission proposal.

(bw)