EU leaders head into high-stakes budget battle as elections loom

EU leaders on Thursday head for their biggest clash yet over the bloc's next long-term budget, as they race to lock in a deal before next year's French presidential election.

The 27-nation European Union wants an agreement by Christmas, worried that any future dealmaking will be derailed by potential eurosceptic wins in polls taking place across the bloc – most crucially in key power France.

The fears are not unfounded. The frontrunner in the French vote, far-right candidate Marine Le Pen, wants to slash the country's contribution to the EU budget to help cost savings in the bloc's second-biggest economy.

High stakes and looming elections

Putting the screws on the EU, Le Pen said on the eve of the summit that it would be a “democratic scandal” for leaders to adopt a budget before next year's votes.

At stake is the nearly two-trillion-euro budget, which will determine the EU's main priorities for the period between 2028 and 2034, from agriculture to defence, competitiveness to migration.

The leaders must agree on how much to give to farmers, what to spend on defence and how to make the economy more competitive against the United States and China, and whether to pour European money into migrant “return hubs” in Africa.

EU leaders appear to be losing faith in an agreement by December as the latest draft conclusions dated Wednesday referred only to a “timely agreement” rather than “by the end of the year” featured in an earlier version.

A deal by year-end would be challenging in any case as the leaders remain as divided as ever, with three opposing camps unhappy with the latest proposal.

Deep divisions among member states

The sense of urgency is real, with elections looming in Italy, Poland, Greece, Finland and France – and the awareness that eurosceptic new governments could make it much harder to reach a 2027 deal.

Even if Le Pen is just a candidate at this stage, a European diplomat said “she'll be in the room tomorrow” with the leaders, as her potential victory hangs over their talks.

No agreement before France heads to the polls in April and May would mean the fraught negotiations restart in the summer, which a second EU diplomat said would be “an awful exercise”.

Ireland, which holds the rotating EU presidency, presented the latest proposal that will form the basis of the talks with cuts of some 140 billion euros to the budget total.

None of the camps was happy.

On one side is Germany, leading a group known as the “frugals” that includes the Netherlands and Sweden, who demand cuts of several hundred billion euros.

In another corner is France, which opposes massive cuts to the budget and believes the continent needs a larger pot to match the rising challenges it faces.

And in the third camp are the so-called “Friends of Cohesion”, demanding more funding specifically to support agriculture and regional development.

Taxes and compromise

France has made clear it is unhappy with the focus on cuts, with a French official warning there can be no agreement without “substantial” new bloc-wide taxes including on large companies, environmental taxation and levies on tobacco.

Paris wants EU-wide taxes on digital services, crypto-assets and online gambling, which the European Parliament also demands.

Some are still optimistic for December. Ireland's Europe minister Thomas Byrne said on Tuesday it was possible “if compromise can be found”.

Now, European Council President Antonio Costa will lead negotiations, with an extraordinary meeting added in late November to help get the budget over the line.