The Price of Europe

Sixteen against six, with Germany in the middle

The 2028-2034 EU budget is the decade's real political battle. Almost no one is talking about it

Member states have divided into two broad camps, with a handful of countries still hovering between them. On one side stand the self-styled "friends of cohesion", sixteen countries including Italy, who wish to preserve traditional agricultural and regional funds. On the other are the "frugals", six countries including Germany, who want to shrink the overall budget and redirect resources towards defence and technological competitiveness.

The frugal position has an internal logic: if Europe is to compete with the United States and China in artificial intelligence, renewable energy and advanced defence, it cannot continue spending the bulk of its budget on agricultural subsidies and structural funds designed for an Europe of the 1980s. The difficulty is that this argument, sound in principle, is deployed primarily as a reason to spend less rather than to spend better.

The outcome will almost certainly be the usual European compromise: each side concedes something, nobody wins outright, and the Union emerges with a budget too small to make a real difference yet contested enough to lack even the political legitimacy of a genuinely shared project.

Own resources that are never quite enough

The Commission has proposed five new autonomous sources of revenue: environmental levies, a component drawn from ETS proceeds, a corporate sector contribution, a tax on crypto transactions, and a digital services levy. Together they would cover roughly 20 per cent of the MFF's requirements.

It is a step in the right direction. A Europe that raises its own resources rather than depending entirely on national transfers is a Europe that exists as an autonomous fiscal actor. But the step is a small one, and the new levies will fall once again on the same taxpayers already taxed at national level.

What is missing, and what nobody has the courage to place on the table, is an effective European tax on those who today shop around for the most convenient jurisdiction. The multinationals that have optimised their fiscal structures through Ireland, Luxembourg and the Netherlands continue to do so quite freely. Real fiscal harmonisation, not the OECD agreements on a global minimum tax that apply to a dwindling pool of companies, remains a negotiating taboo. And this is precisely where the Irish presidency reveals its most awkward limitation: Dublin is one of the principal beneficiaries of fiscal competition between member states, with corporate rates that have attracted dozens of American multinationals. Asking Ireland to lead a European tax reform is rather like asking a cab driver to regulate Uber.

The common debt nobody wants to name

There is another question hovering over the negotiations without ever being addressed directly: European common debt. Next Generation EU demonstrated that it is possible to issue debt at European level, raise capital on international markets and distribute resources to member states. It worked. Markets absorbed European bonds without difficulty. The question is why this should not become permanent.

The answer is political, not economic. The frugal countries do not want common debt to become an ordinary instrument, and Germany least of all, notwithstanding the fact that Berlin is rearming in deficit with a nonchalance that would have horrified any German finance minister of the previous generation. The logic is always the same: we do not want to underwrite other countries' debts, we do not want to reduce the pressure on less fiscally virtuous states. Understandable, up to a point. Only that in the meantime Europe remains stuck in an institutional adolescence, with the capacity for large ambitions and the political will for modest ones.

What genuinely concerns me

It is not that the MFF is too small. It is that nobody seems to find the matter particularly urgent. Italian newspapers cover it when the figures are published, then return to domestic trials and political squabbles. European parties fight over the MFF in press releases, then vote according to national interests in the Council chamber.

On the first of July the presidency passes from Cyprus to Ireland. Dublin has six months to advance the negotiating box towards a political agreement by October and a final deal by December, so that the legislative acts can be adopted in 2027 and funds flow without interruption from January 2028. A tight timetable, extraordinarily high stakes, and public attention close to zero.

In all likelihood it will go as it usually does: a below-par agreement will be reached at the last possible moment, somebody will present it as a historic achievement, and Europe will set off again with less than it needed to do what it said it wanted to do. I should very much like to be proved wrong.