Macron and Merz Hold the Keys to an EU Budget Deal, but Face Domestic Constraints

French President Emmanuel Macron and German Chancellor Friedrich Merz are poorly placed to break the deadlock over the European Union's next seven-year budget, even though the leaders of the bloc's two largest countries hold the keys to an agreement. As EU leaders prepare for a two-day summit in Brussels starting Thursday, domestic political pressure is narrowing their room for maneuver. The stakes are high: the long-term central budget is worth roughly €2 trillion, and every national leader must approve the final figures.

A months-long impasse

Capitals have been divided for months. A group led by Germany wants a smaller budget, while France and others resist cuts. Siegfried Mureșan, who co-leads the European Parliament's work on the multiannual financial framework, said delays and divisions in the Council, which represents EU governments, are worrying.

An EU diplomat, speaking anonymously, said that a joint Franco-German position could change the game, though support from Italian Prime Minister Giorgia Meloni and Polish Prime Minister Donald Tusk is also needed. An Elysée official said the two leaders might talk bilaterally during the summit, but two diplomats said no formal meeting was firmly planned.

Pressure at home

Macron leaves office next year, and an ally says that appearing too conciliatory could backfire in the presidential campaign. Far-right leader Marine Le Pen and far-left politician Jean-Luc Mélenchon both argue France gets too little in return for its EU contributions. Le Pen criticized the pace of talks, warning against locking in a deal before France's April presidential election.

Merz, after state election defeats to the far-right Alternative for Germany, is wary of concessions that could be portrayed as sending more taxpayers' money to Brussels. He has said Berlin would prefer no deal to one that raises the overall budget.

Room for a compromise

The positions may be closer than public statements suggest. France's Europe minister Benjamin Haddad said talks should focus on new revenue sources such as online gambling levies rather than massive cuts, while Paris also wants to keep national contributions stable. A German official said Berlin is open to new revenue sources but doubts they would raise enough. This week, German industry lobby BDI and other industry groups urged the government to back a more ambitious budget.

Separately, the two leaders still have not finalized a deal linking stronger "Made in Europe" rules to relaxed car emission targets.