Cyprus to rebuff calls from Northern frugals to slash EU budget

BRUSSELS — Cyprus’ Council presidency is set to turn down Germany’s demands to slash the EU’s next seven-year budget, four EU diplomats told POLITICO.

Nicosia, which is set to unveil new budget figures by June 10, is resisting pressure from the EU’s wealthier countries to cut spending on farmers’ subsidies and payments to poorer regions — a move that would irk frugal Northern EU members.

However, if the plan goes ahead, it would be a win for Southern and Eastern European countries, which are pushing back against downsizing these key areas in the bloc’s common cash pot from 2028 to 2034.

Nicosia’s diplomats recently ended weeks of bilateral consultations with EU ambassadors and are finalizing the “negobox” — a budget breakdown with concrete numbers and spending allocations.

Wealthier EU countries like Germany and the Netherlands — which receive less from the EU budget than what they contribute — have pressured Nicosia to make major cuts from the Commission’s proposal from last July.

They argue that they cannot afford to send more money to Brussels at a time of low growth and squeezed domestic budgets.

However, an opposing camp of 16 countries — including heavyweights such as Italy, Spain and Poland — is pushing in the opposite direction, demanding a rise in subsidies to farmers and fishermen, as well as payments to poorer regions. These items are worth almost half of the total budget and are handed directly to national governments.

This sets the scene for fraught discussions during an upcoming summit on June 18 and 19, where EU leaders will weigh in on the Cypriot negotiating document.

The country’s Deputy Minister for European Affairs Marilena Raouna told reporters last week that she saw “landing zones” on the most sensitive issues, but she did not provide more details.

Cyprus’ balancing act

As holder of the rotating presidency of the Council of the EU, Cyprus is required to make changes to the European Commission’s proposal, which envisages €1.8 trillion in expenditure between 2028 and 2034.

Including repayments for Covid-era debt, total spending would come to nearly €2 trillion, or 1.26 percent of the combined gross national income of all EU countries.

That would be an increase from the current EU budget, which amounts to 1.1 percent of member countries’ cumulative gross national income.

In a major change, the Commission’s proposal from last July steered resources from traditional policies, such as agriculture and regional payouts, toward new goals like defense and competitiveness.

This was a setback for the 16 countries — also known as the “friends of cohesion” — which backed a budget top-up in farmers’ subsidies and regional spending in a joint statement last week.

“Cohesion Policy (regional payments), CAP (agriculture subsidies) and the CFP (fishing policy) are the only policies facing reductions in real terms, despite the overall increase in the size of the new MFF,” read the joint text.

Separately, Nicosia signaled its intention to make minor cuts — estimated around 2 to 3 percent — to the European Competitiveness Fund, which helps finance innovative firms, and the Global Europe Fund, which covers aid to developing countries, said three of the diplomats. The two items are worth over €600 billion in total.

This speculation has sparked unrest among frugal countries, which favor cutting agriculture and regional funding. “Cuts cannot fall disproportionately on headings 2 [competitiveness] and 3 [Global Europe Fund] alone,” said an EU diplomat. 

“If we all agree with Mr. Draghi that Europe has a competitiveness challenge, the next MFF should help close that gap, not deepen it,” they added.

A spokesperson for the Cyprus embassy did not reply to POLITICO’s request for comment.