Proposals have been put forth by the Commission.
In a significant development, Germany's Finance Minister Lars Klingbeil has rejected the proposed €2 trillion EU budget for the period 2028-2034, putting the European Union in a challenging position as it seeks to finalise its long-term budget framework.
The rejection, made during a meeting of G20 finance ministers in Durban, South Africa, is primarily due to concerns about staying in proportion with finances and the implications of the proposed budget on member states already struggling with their own budgets.
Ursula von der Leyen, EU Commission President, has presented a budget plan that includes a significant increase from the current €1.2 trillion, amounting to approximately €700 billion. The plan also proposes new revenue sources, such as taxes on electronic waste, tobacco products, large companies, and mechanisms tied to climate policies like the Emissions Trading System and Carbon Border Adjustment Mechanism.
Klingbeil and Germany are particularly opposed to the introduction of new EU taxes and the increase in member states' contributions from 1.1% to 1.23% of GDP. They argue that these measures could send the wrong economic signal and exacerbate financial challenges for members.
Another point of contention is the fivefold increase in defense funding to €131 billion, part of the broader strategic investment ambitions. While defense investment is considered important for geopolitical reasons, Germany remains wary of the overall scale of the budget and its impact.
The proposed budget also includes a levy on large companies with an annual turnover of more than 100 million euros and a redirection of 15 percent of revenues from national tobacco taxes to Brussels. Klingbeil has criticised these proposals, emphasising Germany's opposition to the EU Commission's plan.
The German government aims to secure jobs in the country and attract investments. These objectives could be impacted by the proposed budget, which Germany believes could impose too heavy a financial burden on member states.
This dispute reflects a clash between the Commission’s ambitious plans to enhance EU fiscal autonomy and strategic investment and Germany’s insistence on fiscal caution and limiting the financial burdens on member states. The deadlock complicates the final agreement on the EU’s long-term budget framework for 2028-2034, as key members must consent to the proposed funding mechanisms and spending levels.
- The German Finance Minister, Lars Klingbeil, has rejected the proposed EU budget due to concerns about staying in proportion with finances and the implications of the budget on member states, particularly in terms of employment policy, as the budget could impose too heavy a financial burden.
- The European Commission's budget plan includes new revenue sources, such as taxes on electronic waste, tobacco products, large companies, and mechanisms tied to climate policies like the Emissions Trading System and Carbon Border Adjustment Mechanism, which are contentious points in the policy-and-legislation discussion, especially for Germany.
- In a broader business context, the German government aims to secure jobs in the country and attract investments, but these objectives could be impacted by the proposed EU budget, and the potential increase in contributions from member states could send the wrong economic signal according to Germany's employment policy.
