Budget deadlock splits the EU

EU leaders gather in Brussels from Thursday for a two-day summit. Germany leads a group pushing for a smaller budget, while France resists cuts to the approximately two trillion euro multiannual financial framework.

Macron and Merz hold the key

Breaking the impasse requires the heads of the EU's two largest countries to overcome their differences. Getting Emmanuel Macron and Friedrich Merz to agree would be a massive step toward a final deal.

Both leaders face domestic pressure

Macron leaves office next year and Merz faces severe domestic pressure. Officials and diplomats in Brussels, Paris and Berlin are playing down hopes of a Franco-German breakthrough this week.

Macron fears campaign backlash

The French president worries that making big concessions like accepting Berlin's demanded cuts could be weaponized by presidential candidates vying to replace him, including Marine Le Pen and Jean-Luc Mélenchon.

“Macron should not appear too conciliatory in budget talks. It would backfire in the presidential campaign.”

Merz wary of Brussels spending

Following humiliating state election defeats to the far-right Alternative for Germany party, the Chancellor is wary of concessions framed as sending more taxpayer money to Brussels.

Positions may be closer than stated

France's Europe minister Benjamin Haddad said discussions should focus on raising money via taxes or own resources such as online gambling levies rather than massive cuts. Paris also wants to stabilize national contributions.

German industry pushes for ambition

France is betting that when push comes to shove, Merz will give in to pressure from other countries and German captains of industry to abandon demands for far-reaching cuts.

Broader disagreements remain unresolved

Macron and Merz showed unity earlier this month on China policy but still struggle to agree on a major deal first reported by POLITICO in July involving Made in Europe rules, car emission targets and…