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Germany will seek to prioritise defence spending in the next EU budget while opposing any increase in national contributions to the common pot, according to a position paper.
Berlin, the biggest net contributor, in a position paper seen by the Financial Times, calls for the EU budget to fund joint procurement and help scale up orders for European arms manufacturers.
Its focus on defence spending mirrors Berlin’s recent pivot to increase its domestic military expenditure and invest in the arms industry in the face of Russia’s continued threat to Europe and in line with US President Donald Trump’s calls for the continent to do more for its own security.
While the EU treaties specifically prohibit the common budget from being used for “expenditure arising from operations having military or defence implications”, the bloc has increasingly made use of joint borrowing and reallocated some funds to help Ukraine fend off the Russian aggression and scale up its defence sector.
Dual-use technologies, which have both civilian and military applications, as well as military transport corridors should also be eligible for EU support, the German paper argues.
But Berlin proposes spending cuts, notably by reducing administrative costs, to fund the priority shift.
“For the foreseeable future, member states’ financial leeway will remain limited,” the paper reads, adding that there is “no basis for increasing” national contributions to the bloc’s budget, which currently stands at 1 per cent of the EU’s GDP.
The paper comes ahead of a much-awaited proposal by the European Commission due mid-July, in which it is expected to call for a budget increase to cover the bloc’s growing spending needs.
But Berlin made clear it would oppose any increase in the national contributions which make up most of the revenues of the common budget and are based on gross national income.
The rest comes from customs duties and a share of VAT revenues. Germany, the bloc’s largest economy, contributes nearly a quarter of all the funds.
The German government calls for “fair burden sharing” and insists that “persistent disproportionate net burdens” in member state contributions be addressed.
It wants to seek to redirect resources towards “future, innovation and transformation-oriented spending”, particularly in areas with European added value, in the seven-year budget.
These include cross-border infrastructure, digitalisation, energy security, and strategic technologies — seen as essential for boosting the EU’s competitiveness.
To free up money, Germany is pushing for a big simplification of the EU budget’s structure. It proposes reducing the number of programmes, creating leaner administrative frameworks, and giving the commission greater flexibility to shift funds between policy areas depending on needs.
However, Germany is adamant that the budget must continue to support core programmes that account for more than half of the current spending, namely, the Common Agricultural Policy (CAP) of farm subsidies and the bloc’s cohesion policy which channels funds to poorer areas.
The commission had earlier proposed to pool those two policies into national pots allocated by governments. Berlin however says the CAP should “remain an independent policy area”, stressing the importance of food security and using nature to tackle climate change.
Cohesion funding should be maintained but refocused through performance-based mechanisms that incentivise reforms and improve targeted spending, according to the German government. Linking EU funds to respect of the rule of law should be “consistently applied, further developed and expanded”, it added.
Brussels is currently withholding billions of euros from Hungary for its breaches of such conditions and has done so in the past with the Polish government.
Germany also rejects any extension of the joint borrowing programme launched in response to the Covid-19 pandemic. Repayments for the €800bn fund must begin in 2028 as planned. “An extension is legally excluded,” the document says.
The commission estimates that those fund repayments will eat up €30bn per year, or a fifth of the budget.
Still, Berlin signalled it is open to negotiations on new “own resources” — new EU-level revenue such as minimum corporate taxes and a carbon border levy — to avoid minimise the impact of debt repayments on the EU budget.
But EU leaders have stalled progress on EU levies, wary of giving Brussels revenue raising powers.
