Budget blues: The fiscal fault lines shaping Europe’s next decade

Last week’s ECOFIN meeting left little room for optimism. The showdown highlighted divisions over EU “own resources” clashing over the Commission’s ambitious €2 trillion budget for 2028–2034, writes Cristian Gherasim.

ECOFIN, the EU’s Economic and Financial Affairs Council, brings together the ministers responsible for coordinating economic policy, taxation, and financial regulation. As the European Commission prepares to fund its vision for the next seven years, consensus ran thin among EU member states on how best to make it work.

A budget under fire

Germany was first to voice opposition. Finance minister Lars Klingbeil criticized the multiannual budget is simply too high and raised alarms about the Commission’s plan to raise new revenues—so-called “own resources”—from the EU Emissions Trading System, a Carbon Border Adjustment Mechanism, e-waste charges, tobacco duties, and corporate contributions.

Germany is far from alone in voicing out concern over the EC’s budget and its taxation approach. Finland rejected the plan outright, the Netherlands called it unacceptable, and Sweden dismissed every proposal for direct EU revenues as unnecessary. The Swedish minister who rejected every proposal for direct revenues said bluntly that “ we see no reason for new own resources”.

The Polish, Irish, Czech ministers of finance have equally been unable to see exactly how the “own resources” strategy –raising revenue from raising taxes on things such as uncollected e-waste, large companies and tobacco products – would work.

Even countries supportive of EU integration voiced concerns about specific measures. Romania and Bulgaria called for gradual, flexible approaches to new tobacco excise duties, warning that sharp increases could destabilize markets or fuel illegal trade. The Romanian Finance Minister Alexandru Nazare said that the proposed minimum levels are excessive. In this regard, Romania’s position supported a gradual and flexible approach to protect market stability and budget revenues. The Bulgarian Finance Minister Lyudmila Petkova expressed concerns about the proposed minimum excise rates for traditional tobacco products and the indexation of rates over time. Petkova said that her country, as an external EU border, faces a high risk of increased illegal trade in tobacco products if excise duty levels are raised.

Croatia, Greece, Luxembourg, Malta, the Czech Republic, Slovakia, and Hungary also contested the increase of the minimum excise thresholds on tobacco products, considered “too high”. Italy’s finance minister said that “we have to examine the interaction between the increase of the tax thresholds and the trafficking of illegal cigarettes.” Rome fears an increase in smuggling sales, while Hungary, Finland, and Sweden flagged potential harm to niche products such as cigarillos and snus. The result: 11 member states in total expressed opposition to the European Commission’s proposal to raise minimum excise rates and to expand the scope of the tobacco taxation directive to new tobacco and nicotine products.

When it came to the topic of higher taxes on e-waste to help extract more revenue for the multi-annual budget is was again Italy’s turn to speak against the proposal, calling the method “unconvincing”.

Finding common grounds

One thing is certain. The EU is in dire need for more consensus. With a raging war next-door, instability in the middle east and an unpredictable administration in Washington cannot afford internal discord. Fiscal coordination, political cohesion, and strategic foresight are essential.

Why consensus matters

Europe is at a crossroads. It is striving to re-arm, catch up with the U.S. and China in technology and AI, and assert its voice on the global stage. Much of the next multiannual budget will go toward these strategic priorities. But without consensus among its members, Europe risks sending mixed signals to both its citizens and the markets. If the EU can overcome these divisions, it will not only face challenges head-on—it will transform them into opportunities for growth, innovation, and geopolitical influence. The message is clear: Europe’s strength lies in unity. Its credibility—and its future—depends on it.

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