Can the EU Agree on a Budget Before Election Crunch?

Hello! Today is 29 June, 2026, and here is your EU news summary for the week. Feel free to share this newsletter with friends and colleagues, and follow us on LinkedIn.

This week’s expert: Matthieu Benoist is a Director in the Public Affairs & Media Relations department at FTI Consulting in Brussels, which he joined after working at Brunswick and Deloitte. The views expressing in this piece are solely his own.

The European Union has kicked off negotiations for its 2028-2034 long-term budget. Divisions over the size of the pot, debt repayments, and new taxes risk paralyzing Brussels ahead of a perilous election cycle in late 2026 and 2027 across several Member States.

The European Union’s next long-term budget, the Multiannual Financial Framework (MFF), has entered its political phase, and the battle lines are drawn. With the European Commission proposing a sprawling package of nearly €2 trillion (€1.76 trillion in 2025 prices), Commissioner Valdis Dombrovskis admitted this week that reaching an agreement “is not going to be easy”.

A “No-Go Box”

The MFF involves :

• The Commission, which proposes the draft MFF.
• Member States sitting around the table of Council of the European Union, who adopt it, but only acting unanimously.
• The Parliament, which must give its consent beforehand, approving or rejecting the package as a whole without the power to amend it.

In practice the overall package is negotiated and politically signed off at European Council level (heads of state and government) given its significance.

The traditional budget clash between net budget contributors and beneficiaries has reignited. Cyprus, which currently holds the rotating presidency of the Council of the EU, attempted a compromise this month with a “negobox” proposal that would shave 2% off the overall budget. It went down in flames.

Swedish Prime Minister Ulf Kristersson declared the proposed budget volume “simply unacceptable”, whilst Dutch Finance Minister Eelco Heinen branded it a “no-go box” that finances “the priorities of yesterday.” German Chancellor Friedrich Merz remains adamantly opposed to the proposed funding level, ruling out new common debt or corporate taxes.

Meanwhile, the European Parliament is pulling in the opposite direction. MEPs are demanding a 10% increase and are blocking negotiations on sectoral legislation until Member States agree on the top-line figures. This could delay formal negotiations until 2027. MEPs are also against the new National Partnership Plans, a cash-for-reforms model the Parliament warns risks a “renationalization” of the budget and a loss of democratic control.

The Competitiveness Clash

At the heart of the new MFF is a €400 billion power struggle over the bloc’s innovation agenda. The Commission wants to merge various instruments into a new European Competitiveness Fund (ECF), which would operate alongside the Horizon Europe research programme.

However, the proposed ECF faces a rebellion from 13 Southern and Eastern Member States. These countries fear the fund will disproportionately benefit French and German industrial giants, and are demanding a “pan-EU dimension” to ensure geographic equity.

France, conversely, sees the ECF as vital to supporting strategic sectors like nuclear, AI, and defence—all while fiercely defending its €9.5 billion annual allocation from the Common Agricultural Policy (CAP).

Debt Rollovers and Tax Threats

Finding the money is proving as contentious as spending it. From 2028, the EU must start repaying the €25 billion annual cost of its post-Covid NextGenerationEU debt.

A coalition led by France, Italy, and Spain, with the backing of European Council President António Costa, is pushing to roll over the debt to free up fiscal space for defense and competitiveness. Banque de France Governor Emmanuel Moulin even floated the idea of a single European treasury to challenge the U.S. dollar. Fiscal conservatives, naturally, oppose deferring the repayment timeline.

Commission President Ursula von der Leyen has also warned that without new EU own resources (i.e., new revenue streams such as EU-level taxes), the budget could face a 40% cut—a statement some diplomats dismissed as “propaganda”. Yet Costa has tasked the incoming Irish Council presidency of the Council of the EU with accelerating work on levies targeting crypto, digital services, and gambling, with a view to reaching agreement by October.

BORDER CHAOS • Aeroporti di Roma chief executive Marco Troncone warned the Financial Times that Rome’s airports will have to suspend the EU’s new biometric border checks to avert a summer “disaster”, putting his level of concern at “eight or nine” out of 10.

The Entry/Exit System (EES) — fully operational since 10 April 2026 — registers non-EU travellers’ fingerprints, facial images and entry/exit dates, replacing manual passport stamps. Airports complain that automated kiosks malfunction and that returning travellers are re-enrolled from scratch, lengthening queues.

The Commission insists the EES “works well” and notes that member states may suspend biometric capture for up to six hours at a time through the summer. Even so, airline body Iata warns waits could reach six hours.

DASSAULT • The EU General Court annulled on 24 June 2026 the exclusion of business-aircraft manufacturing from the bloc’s green taxonomy, handing French planemaker Dassault Aviation a notable win in Case T-77/24.

The taxonomy — the EU’s classification system for environmentally sustainable activities — steers investors towards green assets, so exclusion can harm a sector’s access to finance.

The Court held that the Commission’s 2023 exclusion (i) relied on a CO₂-per-passenger-kilometre test not provided for in the regulation and tied to aircraft operation rather than manufacture, and (ii) ignored relevant factors such as the planes’ ability to run on sustainable aviation fuels.

The Commission has roughly two months and 10 days to appeal to the Court of Justice. It says it is weighing its options.

MONTAIGNE MEETS DRAGHI • French Think-tank Institut Montaigne published on 25 June 2026 a stocktake of the Draghi report, finding that roughly 30 per cent of its 567 recommendations have been implemented since September 2024.

For context, former ECB chief Mario Draghi’s September 2024 report warned that without radical reform the EU’s economy risked a slow decline against US and Asian rivals.

Drawing on an original database tracking each recommendation against EU and national measures adopted to 1 May 2026, the note classes progress as fully, partially, in progress, or not started. Fewer than 5 per cent of the most substantial reforms have been delivered, so the heavy lifting remains to be done.

On the upside, Institut Montaigne reckons the EU could cross the symbolic 50 per cent threshold within the next 12 months as pending files advance.

• In a review for Engelsberg Ideas, Sean McGlynn revisits three recent books on Brexit to argue that Britain’s troubled relationship with Europe reflects decades of unresolved political tensions.
• In War on the Rocks, Roderich Kiesewetter contends that Germany’s first-ever national military strategy marks an important strategic shift but will fall short unless Berlin translates its ambitions into rapid military reform and structural change within the Bundeswehr.