News

Costa: EU Needs New Own Resources to Avoid Major Spending Cuts

EU member states are likely to support new EU-level taxes needed to finance the bloc’s next seven-year budget if they generate revenues from areas that national governments do not currently tax. European Council President António Costa said this in an interview with Politico after visiting 25 EU countries in recent weeks to discuss the Multiannual Financial Framework for 2028 to 2034. According to Costa, introducing new EU own resources is essential if the bloc wants to avoid major spending cuts while keeping national contributions stable.

New Revenue Sources Could Reduce Pressure on Member States

“If we do not create new own resources, we will have to ask member states for more money,” Costa said. “We know that we need to keep national contributions within reasonable limits. That is why we need a credible set of new own resources,” he added. Some options under discussion, such as a tobacco tax, are opposed by governments because they could reduce revenues already collected at national level. Tobacco is taxed in all EU countries, Costa noted, while newer products such as vaping devices and electronic cigarettes are still untaxed in several states. “It depends on whether you are taxing the same thing or something different,” he said. If it is something different, “then it is genuinely new money. And then it is easier to reach an agreement.” European Commission President Ursula von der Leyen said in July that without new own resources or higher contributions from member states, the proposed EU budget would have to be reduced by 40%.

Member states currently contribute to the EU budget primarily according to the size of their economies, measured by gross national income. The European Commission has proposed five new own resources: revenues from the EU Emissions Trading System, income from the Carbon Border Adjustment Mechanism, a levy on uncollected electronic waste, a tobacco-based resource and a contribution from large companies operating in the EU single market known as CORE. The Commission estimates that together with other adjustments, these sources could generate around €58.5 billion per year. The European Parliament has also proposed a digital services tax, a tax on online gambling and taxation of capital gains from crypto-assets.

Member States Remain Divided Over the Revenue Plan

EU governments must now agree on which of the proposed sources they are willing to support. Ambassadors of the member states have also discussed the issue in recent days, but according to information from the Czech News Agency, national positions have not shifted significantly. Germany, for example, strongly opposes the CORE contribution for large companies, while Central and Eastern European countries are against using emissions trading revenues and Malta opposes a tax on online gambling. The debate over new revenue sources is closely linked to the broader dispute over the overall size of the budget. Ireland, which took over the rotating presidency of the Council of the EU on July 1, is expected to present another revised negotiating framework at the October summit. Germany, Austria, the Netherlands, Sweden, Denmark and Finland are pushing for the proposed budget to be reduced by hundreds of billions of euros.

Costa nevertheless warned that large cuts to key EU priorities could face strong resistance from member states. “Who wants to cut defence? Nobody. Who wants to cut competitiveness? Nobody. Who wants to cut agriculture? Nobody,” he said. Governments generally agree that administrative spending can be reduced, but according to Costa this would cover only a small part of the funding gap. He added that all the leaders he has spoken to in recent weeks remain committed to reaching an agreement by the end of this year so that the new budget can take effect on January 1, 2028. Without an agreement, the EU could face lower funding for farmers, businesses, researchers and students.