How von der Leyen’s next EU budget is caught between party and country

Good morning. Donald Trump has called for Iran’s “unconditional surrender” as he considers whether to join Israel’s military campaign against Tehran — something EU leaders have begged him not to do. Here’s our insider story on why the US president bailed on the G7, and the role France’s Emmanuel Macron played in irritating him.

Today, our finance correspondent reveals how the EU’s most powerful member and its biggest political party are clashing over the bloc’s budget. And we reveal a bid to strip Israel of its Council of Europe status.

Is Europe prepared for a future without US support, in an era of insecurity and economic strain? Join me and top EU and US speakers tomorrow at the FT Global Affairs and Business Council in Berlin, and follow the live stream here.

Infighting

As the proposal for the EU’s next multiyear budget looms, European Commission president Ursula von der Leyen is increasingly stuck between the lavish demands of her political group and her frugal compatriots, writes Paola Tamma.

Context: Brussels will unveil plans for the EU’s long-term budget in July. The common fund is financed by member states and has historically hovered at around 1 per cent of the bloc’s economic output.

German von der Leyen is widely expected to call for a larger budget for the next cycle, starting in 2028. But the Berlin government has said it wouldn’t contribute more, setting out tough negotiating lines.

Yet the European People’s Party (EPP) — the European political group she belongs to — is asking the commission to “move away from the historically restrictive, self-imposed level of 1 per cent,” according to a position paper seen by the Financial Times to be published today. 

“If we expect the union to do more, it’s clear we’ll need a higher budget,” Siegfried Mureșan, a European lawmaker for the EPP who negotiated the budget last time around, told the FT.

The EPP-Berlin divide is also awkward for German chancellor and party powerbroker Friedrich Merz. And size is only one of the issues where they are pulled in various directions.

The commission wants to tie payouts from the budget to concrete reforms, as with the funds from the Covid-19 recovery fund. But the EPP says this model “should not be replicated” as it would centralise control in the hands of capitals, as opposed to regional authorities who “know better the needs and specificities on the ground”.

Berlin on the other hand is a fan of conditional payouts, arguing that regional development funds in particular should provide “stronger incentives for reforms”.

But everyone agrees on one thing: more defence financing.

“This is what we expect the EU to deliver, keep people safe and keep the economy going,” Mureșan said.

Chart du jour: Dirty habit

Ten years after the Paris climate accord was signed, demand for coal shows no signs of peaking.

Fallout

Israel’s status as an observer in the Council of Europe, the Strasbourg-based human rights organisation, is under scrutiny over the humanitarian situation in Gaza, writes Barbara Moens.

Context: The catastrophic suffering in Gaza caused by Israel’s onslaught has led to renewed scrutiny of the EU’s relations with the country. The bloc is currently reviewing its association agreement over grave human rights concerns, and is expected to announce the results on Monday.

King Abdullah II of Jordan yesterday called on members of the European parliament to act, saying that “a shameful version of our humanity is unfolding before our eyes in real time (. . .) Nowhere is that clearer than in Gaza”.

Israel currently has observer status in the parliamentary assembly of the Council of Europe. In total, the Council of Europe, which includes the European Court of Human Rights, has 46 official members and six observer countries.

Benjamin Dalle, a Belgian member of the parliamentary assembly, will today table a motion for a resolution to suspend Israel’s observer status until “its authorities comply with international humanitarian law”.

“It is unacceptable that a country which systematically blocks humanitarian aid and violates international law in Gaza still has the privilege of participating in human rights discussions in Strasbourg,” said Dalle. “If the Council of Europe wants to be taken seriously, it must act.”

While acknowledging the “grave violations” committed by Hamas, including the October 7 2023 attacks and continued detention of hostages, the text stressed that Israel as a sovereign state and observer to the parliamentary assembly bears a “distinct and primary responsibility under international law” to uphold the core values of the Council of Europe.

The parliamentary assembly is set to vote on the resolution next week. An Israeli representative in Paris declined to comment.

What to watch today

1. European parliament holds a debate ahead of Nato summit next week.

2. German foreign minister Johann Wadephul receives his Jordanian counterpart Ayman Safadi in Berlin.

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