By Adam Bartha, Director of EPICENTER, the network of leading European free-market think tanks.
Bigger is not always better. But Brussels has convinced itself that Europe’s problems can only be solved by throwing more money at them. One would think that the runaway inflation post-pandemic and the stagnating economic growth in a high-tax, high-regulation environment has already proven this theory wrong. But alas, the Commission proposed its largest ever Multiannual Financial Framework (MFF) for 2028-2034 at 1,76 trillion euros, and the Parliament, not wishing to be outshone, wants to top it up to 2 trillion.
The desire to spend more is dressed up as a response to competitiveness pressures, the green transition and a more dangerous world. In practice, it is the same instinct in a newer language: when in doubt, spend more.
The Commission should have engaged in what the private sector regularly does: applying zero-based budgeting, in which all expenses are justified and approved in each new budget period. Such a large sum should be driven by principles first – what the EU actually needs to do in order to ensure the single market’s functioning – rather than the path-dependent way of continuing to subsidise farmers and poor regions, just because we have always done so.
But rather than just complaining about a flawed Commission proposal, EPICENTER did the homework. Together with ten leading research institutes across Europe, we have built a line-by-line Alternative MFF anchored in a single principle: the EU budget should be capped at 1% of EU gross national income (GNI). If the European economy grows, the Union has more to spend. If it stalls, the Union should tighten its belt like everyone else. That puts Brussels and the capitals on the same side of one question: how do we grow the European economy faster?
– CHECK OUT THE ALTERNATIVE EU BUDGET HERE –
A 1% GNI ceiling would force the EU to concentrate on what only it can do. External border protection. The functioning of the single market. Transnational energy infrastructure development.
Two spending lines fail the above test most obviously. The Common Agricultural Policy, ring-fenced at €295.7 billion under the new framework, is income support paid per hectare, divorced from any single-market rationale. It distorts land prices, keeps marginal structures and shields producers from competitive pressure. Being afraid of loud farmers’ protests outside the windows of policymakers in Brussels and Paris is not a good enough reason to keep these massive subsidies.
But if the Commission has its way, farmers would not be the only beneficiaries of massive EU subsidies. Brussels has been ablaze with discussions about economic competitiveness for over two years, but some of the tried-and-tested, yet failed, ideas to achieve this noble goal are still as popular as ever. Take the example of the Competitiveness Fund, which is nothing but industrial policy under a friendlier name. The EU and national governments have proven time and again how bad they are at picking winners. Instead of completing the single market in services, capital and energy, which would do far more for European productivity than any subsidy line, the Commission wants to create a huge pot of cash that can be used for favoured firms to achieve growth.
Spending more on budget lines that we should not exist at all makes it more difficult to allocate money to the things that actually matter – like defence. Higher EU-level spending on capabilities and military mobility, alongside continued non-military support for Ukraine, has a defensible cross-border rationale. Schengen presupposes a common external frontier. A war on the EU’s eastern border concerns every member state. Restraint elsewhere would make serious defence spending more affordable and credible.
If the EU does not need to spend more, it does not need to raise more. Most of the Commission’s proposed own resources are bad ideas. CORE, the new tax on large companies, would tax scale rather than profitability. Just like corporate tax in general, it would fall on workers and consumers through wage and price effects. It’s the last thing that European companies need when they are already struggling to attract capital and scale to compete globally.
The e-waste levy would charge €2 per kilogramme of uncollected electrical waste, penalising a structural collection deficit that the levy itself does nothing to fix. TEDOR, the Tobacco Excise Duty Own Resource, is the least indefensible of the bunch, with some harmonisation rationale, provided minimum rates do not punish lower-income member states and clearly differentiate taxation levels based on harm so the EU does not end up accidentally encouraging smoking over alternative nicotine consumption.
The compromise is plain: any EU-level revenue increase must be matched by an equivalent cut at the national level. Total tax burdens on European households and firms cannot keep climbing while the Commission searches for new revenue sources to fund farmers and companies that could compete without subsidies, if their regulatory burdens were reduced.
Europeans deserve a budget where spending delivers genuine cross-border benefit, revenues withstand scrutiny, and the ceiling reflects the size of the economy that funds it. Anything else is confusing political ambition with public good.
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