San Francisco Frontiers - Battle lines drawn over EU's next big budget

The European Commission last year proposed a budget of two trillion euros ($2.3 trillion) to pay for the bloc's operations, from farm subsidies to research funding, for the 2028-2034 period.

European Union leaders took stock of their own position on Friday during talks in Cyprus, as they scramble to approve the final budget by the end of 2026.

Many EU countries which have to chip in most of the money have made it clear they oppose what would represent a sizable increase on the current budget, paving the way for difficult talks.

The leaders of Germany and the Netherlands, countries belonging to the so-called "frugals", offered a stark message before heading into discussions with their EU counterparts in Nicosia.

German Chancellor Friedrich Merz ruled out higher debt -- pushed by France -- and said it was time for the EU to choose its battles.

"We will be setting new priorities. This means that we will also have to reduce spending in the European budget in other areas," he told reporters.

He was echoed by Dutch Prime Minister Rob Jetten, who said the budget amount proposed by the commission "needs to be significantly reduced".

It was "unacceptable" for the Netherlands, one of the largest contributors to the EU budget, to see its contribution "really explode", Jetten added.

- 'Compromise' needed -

Any final agreement on the long-term budget will come after what are expected to be tense talks between the EU parliament and member states.

With critical elections next year including in France, the EU wants to get a deal before 2027 to avoid among others, the possible risk of a far-right French government causing a bigger headache in getting a deal over the line.

The next EU budget proposed that the bloc start paying off tens of billions of euros a year of its coronavirus-era debts, but some EU lawmakers oppose this and would like a rollover.

They also want an EU-wide tax on the world's biggest tech companies.

"We cannot solve all the crises and the difficulties we are facing. We need new money to service old debt, and that is something that we will ask the member states to look at," parliament chief Roberta Metsola said in Nicosia.

Commission chief Ursula von der Leyen said it was "indispensable" for the EU to develop new tax-based revenue sources.

"Without them, the choice is stark. It's either higher national contributions or it's lower spending capacity," she told a press conference after talks.

Irish Prime Minister Micheal Martin, whose country will hold the rotating EU presidency from July after Cyprus, said he expected challenging negotiations.

"There will have to be compromise," he said. "Some think the budget is too high as it is. Others think it's not high enough."

But the clock is ticking, European Council President Antonio Costa warned.

"We have a collective responsibility to reach an agreement by the end of the year," Costa said after talks in Nicosia ended.

C.Diaz--SFF