European regional and local leaders have warned that the EU’s next long-term budget risks transferring control over investment programmes to national governments, potentially increasing economic disparities and reducing the ability of poorer regions to shape their own development.

The warning was delivered in Brussels on 12 October by Kata Tüttő, President of the European Committee of the Regions, during the opening of the European Week of Regions and Cities.

Her intervention comes as EU leaders prepare to negotiate the 2028–2034 budget, with disagreements over agricultural funding, regional development, defence, industrial competitiveness and the distribution of financial responsibilities among member states.

The Committee of the Regions warned that greater centralisation could concentrate economic opportunities in already prosperous areas while limiting other territories’ capacity to attract investment and develop essential infrastructure.

The concern goes beyond money allocated to regional development. It addresses who controls spending decisions and whether local authorities retain a meaningful role in determining how European funds are used.

Regional governments resist centralisation

EU cohesion policy has traditionally sought to reduce disparities between richer and poorer regions through investment in transport, infrastructure, education, business development and public services. While national governments administer considerable funds, regional and local authorities are frequently involved in identifying priorities and delivering projects.

The Committee argues that restructuring which concentrates decision-making at national level could weaken this arrangement. National governments may favour country-wide industrial or infrastructure programmes, while regional authorities identify specific problems arising from local conditions.

A national infrastructure strategy could prioritise major transport routes and industrial centres. Regional administrations might instead emphasise connecting smaller communities, maintaining local services or developing specialised economic activities.

The dispute concerns whether the next EU budget will maintain flexibility for regional priorities. In Belgium, Germany, Spain and Italy, regional institutions possess important responsibilities across economic development, education and infrastructure. Changes to EU spending governance could alter established relations between European, national and regional institutions.

The budget negotiations intensify the dispute

Ireland’s rotating Council presidency has proposed reducing the Commission’s original seven-year budget plans by approximately €141 billion while largely protecting agriculture and cohesion compared with other expenditure categories.

The proposed financial framework would nevertheless remain substantially larger than the current budget. The distribution of resources remains contentious, and an overall cut does not necessarily translate into the same reduction for every region.

Effects will depend on allocation formulas, national spending plans and programme governance. Meanwhile, European institutions face demands for stronger investment in defence production, digital infrastructure, competitiveness and support for Ukraine while maintaining agricultural and regional commitments.

Economic disparities remain a European problem

The Committee presented its seventh annual assessment of Europe’s regions and cities during the European Week of Regions and Cities, held in Brussels from 12 to 14 October.

The assessment examines competitiveness, resilience, public services, democratic governance and financial conditions. Regional disparities remain a significant feature of the EU economy despite decades of common investment programmes.

Large metropolitan areas often benefit from concentrations of universities, research institutions, advanced industries and capital. Less densely populated territories may struggle with demographic decline, shortages of skilled workers and the cost of maintaining infrastructure.

These differences can reinforce themselves over time. Businesses invest where suitable workers, transport networks and customers are already concentrated. Younger workers moving towards metropolitan economies may further reduce the economic prospects of communities they leave behind.

Defence spending creates new pressures

The increase in European defence expenditure introduces another dimension. Regions containing defence manufacturers, engineering firms, research institutions and military installations could benefit substantially from new spending, while others may receive little direct economic advantage.

If industrial investment concentrates in already advanced manufacturing centres, geographical disparities could widen. Conversely, procurement programmes and infrastructure investment could bring opportunities to weaker regional economies with suitable facilities and labour.

A question of political authority

The Committee of the Regions has limited formal authority over the EU’s long-term budget. National governments will negotiate the framework, and the European Parliament must consent to the final agreement.

Regional leaders are seeking to influence those negotiations before political compromises are established. Their central argument is that aggregate European economic growth alone does not capture the distribution of investment, employment and public services across the Union.

The approaching European Council negotiations will indicate whether governments intend to preserve regional influence over EU spending or concentrate greater authority over investment decisions at national level.

European Union governments are entering a critical round of budget negotiations after the Irish presidency of the Council proposed cutting €141 billion from the European Commission’s long-term spending plans, exposing deep disagreements over how the bloc intends to finance its expanding responsibilities.

The revised proposal, circulated ahead of the European Council meeting scheduled for 15–16 October, would reduce the planned 2028–2034 financial framework by approximately eight per cent to around €1.6 trillion, calculated in constant prices.

Despite the reduction, the proposed budget remains approximately 30 per cent larger than the current seven-year framework. Germany, Sweden, the Netherlands and other governments concerned about national contributions have nevertheless argued that further restraint is necessary.

The compromise, detailed in negotiations over the EU’s next financial framework, reduces proposed spending across several areas while largely protecting the Union’s established agricultural and regional development programmes. The distribution of those cuts is becoming as contentious as the overall size of the budget.

Europe’s new priorities face the deepest reductions

Under the Irish proposal, agricultural and regional development allocations would decline by approximately three per cent compared with the Commission’s initial plans. By contrast, funding intended for competitiveness and security would be reduced by around 13 per cent, while external action and development cooperation face cuts of approximately 17 per cent.

The difference raises questions about whether the next EU budget can support the strategic ambitions repeatedly endorsed by European leaders.

The Commission has presented industrial competitiveness, technological development, defence readiness and economic resilience as central priorities for the remainder of the decade. Yet these sectors would absorb proportionately larger reductions under the revised framework than agricultural and cohesion programmes.

The consequences could extend to investments in advanced technologies, European industrial supply chains, research programmes and cross-border defence cooperation. They could also constrain the Union’s capacity to fund external partnerships and development initiatives.

The debate is particularly sensitive because the EU’s responsibilities have changed considerably since the previous budget was negotiated. Russia’s invasion of Ukraine has increased defence requirements, while competition with China and the United States has intensified demands for industrial investment.

Germany and the net contributors demand restraint

The central disagreement concerns how much additional expenditure European governments are willing to finance through the common budget. Germany and other major net contributors face domestic fiscal constraints, rising borrowing costs and demands to increase national defence spending.

For these governments, accepting a substantially larger EU budget would add to financial commitments already being made through national budgets.

The Irish compromise therefore faces opposition from two directions. Some governments consider the reductions insufficient, while others fear that the remaining cuts will weaken programmes essential to their national economies.

Traditional recipients of agricultural and regional funding have an interest in protecting established expenditure. Governments seeking stronger European investment in defence, innovation and industrial competitiveness have different priorities.

The European Parliament is another obstacle. Its consent will be required before the final financial framework can enter into force, giving MEPs considerable leverage in negotiations with national governments.

New EU revenues remain controversial

The proposal also envisages approximately €55 billion in additional annual financing through new or revised EU revenue sources, including customs revenues, emissions-related income and corporate contributions.

The Commission’s framework for the next long-term budget reflects a broader debate over the extent to which the Union should develop independent financing mechanisms rather than rely predominantly on national contributions.

Such mechanisms would potentially give Brussels a more predictable revenue base. However, they also raise questions about fiscal sovereignty, the distribution of costs among member states and the political accountability of European taxation.

National governments remain reluctant to surrender substantial authority over revenue collection, particularly when proposed resources could impose costs on domestic industries or consumers.

Ukraine, enlargement and Europe’s strategic ambitions

The negotiations will influence the Union’s ability to respond to future enlargement. Ukraine and several Western Balkan countries are pursuing accession, but the financial implications of bringing additional members into the Union remain substantial.

Existing arrangements for agricultural subsidies and regional development assistance would require reconsideration if large new beneficiaries entered the budgetary system.

At the same time, the EU faces pressure to support Ukraine financially and strengthen defence production without depending indefinitely on extraordinary borrowing or ad hoc national contributions. These responsibilities cannot be addressed simply by preserving the structure of earlier budgets.

European Council President António Costa will seek to narrow the divisions among the 27 leaders, but agreement on the financial framework requires unanimity. Any government can withhold its consent if it considers the final distribution of costs unacceptable.

The forthcoming summit is therefore likely to establish the parameters of further negotiations rather than eliminate the underlying disagreements. The immediate political question is whether member states can reconcile their commitment to greater European strategic capacity with their reluctance to finance it collectively.

Seventeen EU governments have joined forces to defend agricultural and regional funding in the bloc’s next seven-year budget, setting up a confrontation with Germany and five other countries demanding substantial reductions to the European Commission’s proposed €2 trillion spending plan.

Seventeen European Union countries have called for agriculture and cohesion funding to be protected from further cuts as negotiations over the bloc’s 2028–2034 budget enter a decisive phase.

In a letter dated 2 October to Irish Taoiseach Micheál Martin, whose government currently holds the rotating presidency of the Council of the EU, the countries said the overall financing of Cohesion Policy and the Common Agricultural Policy should be maintained in the next Multiannual Financial Framework.

The signatories are Bulgaria, Croatia, Cyprus, Czechia, Estonia, Greece, Hungary, Italy, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia and Spain.

The initiative follows months of coordination by the so-called Friends of Cohesion. In an earlier joint position published by the Spanish government, members argued that cohesion, agriculture and fisheries remained central EU policies and called for new EU revenue sources to be “genuine, fair, simple and non-regressive”.

Italian Prime Minister Giorgia Meloni and Romanian President Nicușor Dan have been coordinating the group at leaders’ level. They are expected to convene another informal meeting alongside the European Council on 15–16 October. The two leaders previously brought the group together ahead of the June European Council as governments sought to coordinate their positions on the budget.

The intervention places the group in direct opposition to Germany, Denmark, the Netherlands, Austria, Finland and Sweden.

Those six governments have argued that the Commission’s near-€2 trillion proposal should be reduced by several hundred billion euros. In their joint statement on the 2028–2034 budget, they said national governments were already undertaking fiscal consolidation and that the EU budget could not be exempt from similar pressure. They called for reductions across all spending headings while giving greater weight to security, defence, competitiveness, migration and sovereignty.

EU Today previously reported on the growing pressure from net-contributor countries for deep reductions to the Commission proposal as negotiations moved towards the Irish presidency’s attempt to secure an agreement before the end of the year.

The Commission’s original proposal for the 2028–2034 Multiannual Financial Framework amounts to almost €2 trillion in current prices, equivalent to 1.26 per cent of the EU’s average gross national income over the seven-year period. It substantially restructures the budget, bringing agriculture, cohesion, fisheries, migration and internal security into national and regional partnership plans while allocating more money to competitiveness, research, defence and other emerging priorities.

Agriculture and regional development have consequently become two of the most sensitive parts of the negotiations.

The Council has already backed the principle of the new national and regional plans, but financial allocations remain unresolved. Its negotiating position specifically leaves the money to be settled as part of the overall MFF talks.

EU Today has followed the dispute since the Cyprus presidency produced a negotiating framework in June that proposed reducing the Commission’s plan by about €32.8bn. The disagreement has since widened as governments attempt to reconcile traditional spending on farmers and poorer regions with growing demands for defence, industrial competitiveness and security.

Revenue is another source of disagreement.

The Commission has proposed five new EU own resources, including revenue connected to the Emissions Trading System and Carbon Border Adjustment Mechanism, a contribution based on uncollected electronic waste, a tobacco excise resource and a contribution from large companies operating in the EU. The proposals are intended partly to reduce reliance on national contributions and help finance repayment of pandemic-era borrowing.

EU Today previously examined the dispute over new sources of EU revenue after leaders asked the Irish presidency to develop financing options alongside negotiations over expenditure.

The Friends of Cohesion have also called for a more gradual repayment schedule for NextGenerationEU borrowing and oppose retaining contribution rebates for wealthier member states. Under the Commission proposal, repayments of principal and interest would amount to a fixed €24bn annually between 2028 and 2034, or €168bn across the seven-year budget period.

Ireland now faces the task of narrowing the gap.

The Council’s timetable for the negotiations envisages the Irish presidency advancing the next negotiating framework ahead of the October European Council, with governments seeking a political agreement before the end of 2026. That would leave 2027 for adoption of the legislation required before the new budget takes effect on 1 January 2028.

An agreement among governments will require unanimity. The European Parliament must then give its consent, while the separate decision governing the EU’s own resources also requires unanimous approval by member states and ratification according to their national constitutional procedures.

With 17 governments now explicitly defending agriculture and cohesion spending and six major contributors demanding substantial reductions, the October summit will bring the central budget dispute directly before EU leaders.