Nicosia has tabled a compromise proposal for the European Union's next long-term budget, suggesting a 2% reduction — equivalent to €32.8 billion — from the European Commission's draft of nearly €2 trillion for the 2028–2034 period. The move, announced on Thursday by Cyprus's deputy minister for European affairs, Marilena Raouna, is intended to bridge the deep divide between member states that want to keep spending high and those demanding significant cuts.
“Our cut is the compromise that addresses all voices in the Council,” Raouna said. “We believe this is a balanced text that reflects the position of all member states.”
The proposal marks the first time explicit numbers have been attached to the expenditure programs in the budget negotiations, which have so far focused on structure rather than figures. Diplomats involved say this shift forces member states to make concrete choices about priorities.
Balancing Act Between Rival Camps
The Cypriot presidency is walking a tightrope between two opposing groups. On one side, the so-called “frugals” — now styling themselves as “modernists” — have pushed for deep cuts across the board. Sweden, one of the loudest voices, initially demanded a reduction of up to 20%, a figure dismissed by others as unrealistic. On the other side, the “Friends of Cohesion,” a bloc of 16 Southern and Eastern European countries, have fought to preserve agricultural and cohesion funds, which they see as vital for economic convergence.
The proposal allocates €942 billion for agriculture, fisheries, cohesion, migration management, and security — a relatively minor reduction that the Friends of Cohesion consider a victory. It also introduces a reallocation mechanism favoring 15 member states whose Gross National Income (GNI) is below 90% of the EU average.
By contrast, the modernisers saw the deepest cuts applied to what they view as the EU's new strategic priorities, such as climate action and cutting-edge technologies. The Netherlands was among the first to react negatively, with Finance Minister Eelco Heinen calling the proposal a “no-go box.” He said: “It is unaffordable, unbalanced, and with the wrong focus. The overall volume remains far too high at a time when fiscal space is limited across Europe, and difficult choices are unavoidable.”
Other spending lines include €502 billion for competitiveness, research, innovation, defence, and space; €182 billion for development aid, humanitarian assistance, and enlargement; €104 billion for administrative costs; and €134 billion for repaying the COVID-19 recovery fund, Next Generation EU.
Key Issues Left Unresolved
Perhaps as significant as what is in the proposal is what Cyprus chose to leave out. The presidency decided not to touch the contentious issues of rebates (correction mechanisms), own resources (EU-level taxes), or the principle of making budget disbursements conditional on the rule of law. On these, Nicosia stuck with the European Commission's original proposals.
The own resources question has proven particularly divisive. The European Parliament has suggested new taxes that the Commission estimates could yield up to €11 billion per year, but member states remain split. The repayment of Next Generation EU debt — a common borrowing instrument launched in 2020 — is also untouched for now. The Cypriot proposal maintains the Commission's plan to start repayment in 2028, despite calls from France, Spain, and Greece to delay or refinance the debt, effectively making it permanent.
The proposal would set the EU budget at 1.23% of the bloc's GNI, dropping to 1.13% when excluding recovery fund repayments. Member states face pressure to reach an agreement by the end of the year, as several key countries — including France, Italy, and Poland — have national elections in 2027, and the budget could become a campaign issue.
The figures will now serve as the starting point for discussions at the General Affairs Council and the European Council, both scheduled for next week. The outcome will shape the EU's spending priorities for the next seven years, from agricultural subsidies to defence and climate action.
