German Chancellor Friedrich Merz (Republican) and European Council President Antonio Costa speak at a press conference at the Chancellery in Berlin, September 9, 2026.
John McDougall | AFP | Getty Images
German Chancellor Friedrich Merz and the leaders of five other major European countries have called for cuts worth “hundreds of billions” of dollars in the next EU budget as part of an effort to fund the continent’s defence.
The European Union’s next long-term budget will cover the period from 2028 to 2034, with officials aiming to reach agreement on spending priorities and limits by the end of this year.
Over the summer, the European Commission presented its next budget, known as the Multiannual Financial Framework (MFF), amounting to around 2 trillion euros ($2.3 trillion).
In a letter to Ireland’s Michael Martin and European Council President Antonio Costa, the leaders of Germany, Denmark, the Netherlands, Austria, Finland and Sweden said the proposal would “require savings of hundreds of billions of euros”.
Ireland currently holds the rotating Presidency of the Council of the European Union.
Passing the EU’s MFF requires unanimity among the 27 member states.
The signatories of Monday’s letter, seen by CNBC, noted that the six member states fund nearly 40% of all member states’ budgetary contributions.
“Although a minority of net contributors overall, they bear approximately three-quarters of the total funding burden,” they said.
But they write that the impending negotiations are “about more than money.”
European rearmament drive
“It is about political priorities and whether we can achieve the goal we have set together: a strong and sovereign Europe in an uncertain world,” they said. “To achieve this, we need to radically reform the MFF. We have to make a choice.”
Leaders advocated focusing resources on defense spending, competitiveness, technological innovation and “the fight against illegal immigration.”
Europe is under pressure to increase defense spending following Russia’s full-scale invasion of Ukraine in 2022, and US President Donald Trump has also called for the continent to take a more active role in its own defense.
Members of the NATO military alliance, most of them European, have already committed to raising defense spending to 5% of gross domestic product (GDP) by 2035, while the European Commission has proposed a significant increase in funding for regional security.
Germany itself revised its historic “debt brake” rules last year to pave the way for increased defense spending.
Earlier this year, the International Monetary Fund warned that a new era of strengthened security budgets means governments will soon face tough dilemmas about where to cut defense funding. This phenomenon is known as the “guns and butter” trade-off.
The joint letter also comes against a backdrop of concerns over rising government borrowing costs, spiraling inflation and slowing growth in much of the continent, as well as rising budget deficits in various EU countries.
France, for example, has been tasked with slashing spending to bring its 5.1% national deficit closer to the EU guideline of 3%. Concerns about France’s fiscal policy have pushed the country’s yields lower. national debtInterest rates, known as OAT, have soared to multi-decade highs this year, leaving France with the highest borrowing costs in the Group of Seven developed economies.
Government deficit in focus
The letter’s signatories, Austria and Finland, are currently subject to the EU’s excessive fiscal measures, a mechanism designed to ensure member states “regain or maintain government budget discipline.” Austria’s deficit in 2025 was 4.2% of gross domestic product (GDP), while Finland’s deficit was 3.4% of GDP.
Other countries under EDP include Italy, France, Poland, and Belgium.
The signatories of the letter stressed that the EU budget is “ultimately paid for by the European people” and said the sources of funding would remain the same “no matter what financing mechanisms or resources we invent”.
“General borrowing is not the solution,” they said. This means that the difficult issue of overall volume cannot be avoided.
The leaders of the six countries added: “Almost all EU member states are making painstaking efforts to improve their fiscal health. Without sound public finances, there is no European sovereignty.”
“We are not calling for cuts compared to the existing MFF,” the official said, noting that the next long-term budget will be larger than the current budget until 2027, but added that European governments “need to be realistic.”
“The European Commission is proposing a nominal increase of around 60%, which is completely unrealistic,” they wrote. “Economically, politically. And certainly not at a time when the finances of some member states are a serious concern.”
