“A comprehensive increase in the EU budget is unacceptable at a time when all member states are making considerable efforts to consolidate their national budgets,” the German government chief spokesman said in a statement. “We will therefore not be able to accept the commission’s proposal.”

The statement by the EU’s largest member state points to the battle ahead for the bloc’s executive arm as it tries to get buy-in for the next seven-year budget which begins in 2028.

Earlier on Wednesday, the commission unveiled the draft proposal after intense negotiations that stretched late into Tuesday night and resumed on Wednesday morning.

The figure of €1.98 trillion represents a substantial jump from the €1.2 trillion — equivalent to 1% of EU’s output — that was allocated during the last budgetary cycle, between 2021 and 2027. 

Included in the draft plan is a €590 billion competitiveness, prosperity and security fund, of which €451 billion is earmarked for helping European companies keep pace with their international rivals.

In order to direct resources to those areas, funding for agriculture — traditionally one of the bloc’s biggest expenses — will be slashed. Farmers will get at least €300 billion in direct payments, European Commission President Ursula von der Leyen told reporters in Brussels. That compares with €387 billion in the current agriculture budget, although the mix of targets for the funding will change somewhat. 

The commission also proposed €100 billion in funding for Ukraine for the seven-year period covered by the budget. Bloomberg previously reported that the commission was weighing the move. Von der Leyen said the money would support Ukraine’s recovery and resilience, as well as the country’s path to EU membership.

Wednesday’s proposal kicks off a laborious process which will see the European Parliament and the European Council, representing member states, weigh in on the process. EU leaders need to give their unanimous backing. The budget must be agreed by the end of 2027. 

Debates about the EU’s budget have long been contentious, as the EU grapples with competing demands from agriculture to regional funding for poorer member states. 

This year’s proposal, which will govern the bloc’s spending priorities between 2028 and 2034, is even more sensitive given the EU’s aim to bolster its defense capabilities and improve its competitiveness as it faces economic threats from the US and increasing competition from China. A report by former European Central Bank President Mario Draghi last year warned that the EU is facing a €800 billion a year investment gap.

The current long-term budget supports around 50 EU funds from research to energy projects. It is financed primarily by contributions from member states, with richer economies being net contributors to the common pot. 

European Parliament President Roberta Metsola said the parliament — which must approve the proposal — would ensure that every cent of the budget will count. “Fiscal discipline is not a choice, it is our responsibility,” she said.