Political uncertainty surrounding German Chancellor Friedrich Merz is raising doubts about the European Union’s ability to finalize its proposed €2 trillion budget for 2028-2034 by the end of the year. The budget, a seven-year financial framework aimed at funding priorities such as defence, competitiveness, and farm subsidies, requires firm backing from Germany, the EU’s largest member state, to secure a timely agreement.
Recent electoral setbacks for Merz’s Christian Democrats in two eastern German states, both captured by the far-right Alternative for Germany (AfD), have significantly weakened his political standing. Merz has publicly affirmed his intention to remain as chancellor and CDU leader despite the losses, emphasizing his ongoing involvement in crucial EU budget negotiations. However, several EU officials indicate that his diminished influence complicates efforts to broker a deal.
A senior EU official noted the challenges posed by Merz’s precarious position, describing the situation as a choice between relying on a weakened incumbent or an as-yet-unknown successor in Germany—neither option offering clear stability. One diplomat highlighted Germany’s traditional role as a mediator capable of “greasing the wheels” of EU negotiations, a role currently difficult for Merz to fulfill given his political difficulties.
Merz has spearheaded a coalition of fiscally conservative member states seeking substantial reductions—amounting to several hundred billion euros—in the European Commission’s initial €2 trillion budget proposal. The intense negotiation over spending priorities underscores the broader political tension within the bloc.
Compounding the uncertainty is the rise of far-right and Eurosceptic parties across several EU countries. France is expected to hold a presidential election in April that could bring a far-right candidate to power, while similar political forces are gaining momentum ahead of parliamentary elections in Italy, Spain, and Poland. EU leaders have warned that failure to reach a budget agreement by December could leave the bloc without a finalized financial plan before payments are scheduled to commence in January 2028, potentially affecting beneficiaries and undermining the EU’s credibility.
Thomas Byrne, Ireland’s EU affairs minister, emphasized the urgency of agreement irrespective of which government holds power in Germany or other key member states. He cautioned that a failure to conclude negotiations this year would disappoint stakeholders relying on the upcoming budget and risk damaging the reputation of the European Union.
As Brussels braces for months of negotiation and uncertainty, much depends on whether Germany can provide the required leadership to resolve the budget stalemate amid Merz’s political challenges. The outcome will have significant implications for the EU’s fiscal policies in the coming years.