Costa steps up pressure to break EU budget deadlock

BRUSSELS — European Council President António Costa is pressing EU leaders to make progress on the bloc’s next €1.8 trillion budget at a summit in Cyprus on Friday.

As Europe wrestles with how to bring down energy prices and shore up its economy amid conflict in the Middle East, leaders arriving in Nicosia are unlikely to have the finer points of the EU’s next long-term budget at the top of their minds.

But Costa is seeking a deal by the end of the year — and has carved out two hours for discussion to try to inject momentum into one of the most politically fraught issues in the negotiations: whether to introduce new EU-wide taxes to raise fresh revenue.

The EU is due to start repaying €25 billion a year from 2028 on the joint debt it issued to cushion the economic fallout from the Covid pandemic. Nine months into the budget negotiations, it remains unclear where that money will come from.

Making progress on the budget has “only become more urgent” since talks were postponed in March, Costa wrote to leaders ahead of the summit.

Costa’s push is also being shaped by the political calendar. Officials want to wrap up the talks before France’s April 2027 presidential election amid fears a victory for the far-right National Rally — which currently tops the polls — could derail the negotiations.

Securing a deal on that timetable would be unusually fast by EU standards and would bolster Costa’s reputation as a dealmaker. But any breakthrough will depend on how far governments are willing to compromise — and so far there’s little sign of movement.

Talks among budget experts in Brussels have been bogged down by technical disputes and brinkmanship over the most sensitive areas. Costa now wants leaders to step in and give the negotiations some political direction.

“We need to go to the highest political level to get guidance,” said a senior EU official, granted anonymity to discuss the closed-door negotiations.

Deadlock in Brussels

Talks on the EU’s common cashpot for the 2028 to 2034 period — which will govern EU spending on anything from farmers’ subsidies to defense procurements — are politically tortuous.

Wealthier governments in Northern Europe are reluctant to pay more into the budget and remain skeptical about handing the European Commission more taxing powers.

Less-developed countries in Southern and Eastern Europe, by contrast, back a bigger budget and broadly oppose cuts to farm subsidies and regional funding, which together account for nearly half the total.

German Chancellor Friedrich Merz, who said the budget talks “should, if possible, be finalized by the end of the year”. | Michael Kappeler/picture alliance via Getty Images

The Commission’s proposal last July tried to square those competing priorities while steering more spending toward newer goals such as defense and strategic technologies.

Budget experts from the EU’s 27 governments have spent the past nine months combing through the fine print. But national vetoes have stalled progress on the most politically sensitive issues.

Opposition has been building in particular to new levies on tobacco products, non-recycled electric waste and corporate revenues.

“We need a political steer from leaders as there is only so much we can do at a technical level,” said an EU diplomat. “It is no longer [the] time for leaders to read their pre-written notes during the summit.”

The discussion in Nicosia is expected to help the Cyprus presidency of the Council of the EU propose a budget negotiating document with new figures in June.

French vote looming

Europe’s electoral calendars have created a narrow window of opportunity for Costa to advance talks, according to several officials following the negotiations.

The victory of Hungary’s conservative Péter Magyar over incumbent Viktor Orbán — who opposed funding for Ukraine and links between payouts and rule-of-law criteria, two priorities for most capitals — has given leaders an opportunity to move discussions forward.

Orbán, who is set to remain Hungary’s caretaker leader until mid-May, won’t attend the summit. Governments are now eyeing their chance to conclude the budget talks before the French election.

There are lingering fears in Brussels that the National Rally’s platform — including cutting France’s contributions to the EU budget and scaling back military aid to Ukraine — could throw a wrench in the Council negotiations.

Adding to the pressure, Spain and Italy are also due to go to the polls in 2027, creating another layer of uncertainty around the talks.

It “should, if possible, be finalized by the end of the year,” German Chancellor Friedrich Merz said last week.

Even so, fiscally conservative countries pushing for a smaller budget, including the Netherlands and Sweden, might be reluctant to make concessions simply to secure an early deal.

“We prefer a good EU budget that takes longer as opposed to rushing a bad deal,” a second EU diplomat said.

The European Parliament wants to start budget negotiations with the Council after governments reach an agreement.