By the Lithuanian Free Market Institute (LFMI). LFMI is a member of EPICENTER, an independent network of European free-market think tanks bringing together 12 organisations from across Europe. The network works to advance the principles of a free society, competitiveness and limited government in European policymaking.
Six EU member states are calling for the European Commission’s proposed 2028–2034 budget to be reduced by several hundred billion euros. With Lithuania’s Presidency of the Council of the EU approaching, the country has an opportunity to help shape a budget that places greater emphasis on competitiveness, security and European added value.
An analysis by the Lithuanian Free Market Institute (LFMI) and its partners in EPICENTER, a network of European free-market think tanks, shows that the EU budget could be brought down to around €1.54 trillion while directing more resources towards areas that strengthen Europe’s competitiveness.
At the end of August, Germany, Denmark, the Netherlands, Austria, Finland and Sweden issued a joint statement calling for a reassessment of EU spending priorities. Their message was clear: if member states are expected to consolidate their own public finances, the EU budget should be subject to the same discipline. New priorities, they argued, should be financed primarily by reallocating existing expenditure rather than through additional common EU borrowing.
German Chancellor Friedrich Merz has likewise argued that the Commission’s proposal should be reduced by several hundred billion euros, with more funding directed towards competitiveness and defence. He has also criticised the current structure of EU spending as increasingly out of step with Europe’s present challenges.
According to LFMI expert Edas Matulaitis, the position taken by the six member states marks an important shift in the debate over the next Multiannual Financial Framework.
“Europe’s new priorities – competitiveness, security and defence – do not automatically require a larger budget. The more important question is how the existing budget is used: which tasks genuinely require action at EU level, and which are better left to member states,” says Matulaitis.
Six EU net-contributor countries threaten to block the next 7-year budget unless it's cut by "hundreds of billions."
Germany, Netherlands, Sweden, Denmark, Austria, and Finland — who finance ~40% of member-state contributions — called the Commission's proposed €2 trillion… pic.twitter.com/uCruCZUCBE
— Clash Report (@clashreport) September 29, 2026
A Smaller Budget Does Not Mean Smaller Ambitions
The European Commission proposes a €1.763 trillion EU budget for 2028–2034. Excluding temporary expenditure related to the repayment of NextGenerationEU debt, this would amount to 1.15% of the EU’s gross national income (GNI).
EPICENTER’s alternative model would keep the core budget close to the EU’s historical benchmark of around 1% of GNI. This would result in an overall budget of approximately €1.54 trillion over seven years – around €223 billion less than the Commission’s proposal.
The difference would not come from uniform cuts across all programmes. Instead, the proposal focuses on reassessing what should be done at EU level, reducing duplication and administrative costs, scaling back sector-specific subsidies, and concentrating resources where joint European action creates clear added value.
Matulaitis argues that EU funding should prioritise areas that underpin the Single Market, such as cross-border infrastructure, energy interconnections and research cooperation. The aim, in other words, is not simply to spend less, but to make clearer choices about what the EU budget is for.
“Budget discipline is not an end in itself. It creates pressure to distinguish between what is essential and what is duplicated, outdated or better handled elsewhere. That allows more resources to be focused on the priorities that matter most for Europe’s Single Market, security and competitiveness,” says Matulaitis.
A Larger Budget Should Not Be Financed by New Burdens
Alongside a larger budget, the European Commission is proposing around €58 billion in new EU revenues each year. The proposed sources include the Corporate Resource for Europe (CORE), contributions linked to electronic waste and tobacco excise revenues, and a larger share of revenues from the EU Emissions Trading System (ETS) and the Carbon Border Adjustment Mechanism (CBAM).
EPICENTER argues that new revenue streams should not become a substitute for reviewing expenditure. Its alternative proposes dropping CORE, rejecting a contribution based on tobacco excise revenues, and assessing any other new revenue source against its impact on European competitiveness.
“Europe cannot strengthen competitiveness by subsidising it on one side while adding new costs for businesses on the other. If companies still face barriers to investment, capital and cross-border activity within the Single Market, more subsidies will not solve the underlying problem. Removing those barriers should come first,” says Matulaitis.
Lithuania’s upcoming Presidency of the Council of the EU gives the country an opportunity to contribute to this debate at a particularly important moment.
“For Lithuania, the question is not only how much we receive from the EU budget today, but what kind of European budget we will be expected to finance in the future. As Lithuania’s economy grows and the EU potentially expands, our contribution will also rise. That makes it all the more important to ensure that the budget remains focused on Europe’s most important common priorities – above all security and competitiveness,” says Matulaitis.
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