On August 27, German Chancellor Friedrich Merz hosted a luncheon in Berlin for the leaders of Denmark, Austria, and Finland, while their counterparts from the Netherlands and Sweden participated online, in an effort to rein in the European Union’s next seven-year budget.
The six countries are calling for a reduction of several hundred billion euros in the European Commission’s proposed budget of 2 trillion euros for the period 2028–2034. Specifically, Germany has proposed a reduction of approximately 400 billion euros. At the same time, they are calling for higher spending on defense, competitiveness, and migration control, while opposing the transformation of the EU’s common debt into a permanent fiscal tool, according to Petar Ganev, a senior researcher at the Institute for Market Economics (IME), in an analysis published on the Institute’s website on August 28.
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At the same time, Ganev notes that European Council President António Costa has embarked on a tour of the capitals of EU member states. By the time the analysis was published, Costa had held meetings in Slovakia, Estonia, Latvia, Lithuania, and the Czech Republic, with the aim of reaching consensus on the EU budget. Bulgaria is included in his itinerary, with a visit to Sofia on September 3.
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The analysis focuses on Europe’s priorities and the question of who will foot the bill and how. As the analyst points out, this is not simply another episode in the dispute between the “frugal North” and the countries that receive more from the EU budget. The debate also concerns the future of the Union’s fiscal functioning, as strengthening the EU’s tax powers and going beyond the limits of the EU budget could significantly change the way it operates.
Therefore, Bulgaria cannot approach the negotiations solely from the perspective of how much money it can receive, Ganev argues.
Bulgaria’s Position
So far, Bulgaria’s position on the next Multiannual Financial Framework is that it can hardly be described as an issue that has been the subject of broad public debate, Ganev notes.
The country has joined the “Friends of Cohesion,” which advocates for a sufficiently large EU budget and the maintenance of strong funding for traditional policies, with an emphasis on cohesion policy. Bulgaria has also advocated a similar position in the Council of the EU, including through recent statements by Deputy Prime Minister Atanas Pekanov.
This is understandable, but it is not enough, the expert notes. Bulgaria is among the countries that have much to gain from cohesion policy, as a significant portion of public investment in the regions—such as in infrastructure, the urban environment, water supply projects, and human capital, has been based on European funding.
However, this does not mean that it is in Bulgaria’s interest for the EU to have the largest possible budget. The country must also consider how a record-breaking budget would be financed, Ganev notes.
Costa’s “Trilemma”
Antonio Costa’s team has described the issue of the EU budget as a “trilemma” between three key parameters: the ambition for a record-breaking budget, the level of national contributions, and the proposed new EU own resources.
The latter issue—namely, the willingness of member states to cede tax powers to the EU—is at the heart of Costa’s tour. Bulgaria’s position on the matter remains unclear.
Proposals for new own resources include, among other things, new revenue from large corporations, the sharing of revenue from taxes on tobacco products, and various mechanisms linked to climate policy.
The key issue is that increased EU spending entails expanded fiscal powers for the EU. If we add to this the ongoing debate over new shared debt, the EU is potentially headed toward a significant change in the way it operates.
This model has already become evident in the implementation of Bulgaria’s Recovery and Resilience Plan, which is funded by the EU’s Recovery and Resilience Facility, Ganev notes.
The country received funding for investments and reforms, while simultaneously assuming part of the EU’s common debt, which will take decades to repay, he notes.
Source: KYPE
