EU's main political group on collision course with Germany over budget increase demands

By Jan Strupczewski

BRUSSELS (Reuters) -The European Union's next long-term budget must be bigger than the current one, the main political group in the European Parliament said, putting itself on a collision course with the biggest contributor Germany, which does not want any increase.

The centre-right European People's Party, with 188 deputies in the 720-seat parliament, is the EU's biggest political grouping and its support will be crucial for a deal on the EU's 2028-2034 budget, which pays for joint EU policies.

For decades, the budget, called the Multiannual Financial Framework, has been around 1% of EU gross national income, now about 1.2 trillion euros ($1.38 trillion) over seven years.

"New priorities require new own resources to cover both debt repayments and the Union's increasing spending needs. We cannot do more with less," said Siegfried Muresan, who is the vice-chairman of the party and a negotiator for the next EU budget.

The EU budget pays to equalise standards of living across the 27-nation bloc, support farmers, research and development, innovation, border management and climate action.

But governments also want it to also help with security and defence and to strengthen Europe's industrial base to compete more effectively with China and the United States in leadership in clean and digital technologies.

"The EU budget has a key role in making Europe safer. We need a more ambitious allocation for security and defence. Therefore, a moderate, limited increase of the budget is unavoidable," Muresan said.

Germany, the budget's biggest net contributor, does not want to pay more into the common European pot. "There is no basis for increasing the ... (EU budget) volume relative to Gross National Income," a German document spelling out Berlin's position showed.

OWN RESOURCES

Apart from national contributions, which make up the bulk of EU budget revenues, it also gets money from "own resources" - revenues from a share of the Value Added Tax collected by governments, from tariffs and national contributions based on the amount of non-recycled plastic packaging waste generated by a member state.

There is discussion on expanding such dedicated sources of revenue to boost EU income, especially as a way to repay the hundreds of billions of euros the EU jointly borrowed to restart its economy after the COVID pandemic. Germany has left the door open to increasing EU budget revenues in this way.

"The Federal Government will ... constructively examine the Commission's proposals in this regard, so that ... repayments will not have to be made at the expense of the regular EU budget," the German government paper said.

The European People's Party also pushed back at ideas that the next EU budget should link disbursements to an EU country reaching reform milestones and targets, as is the case in the EU post-COVID Recovery Fund.

"Local and regional authorities and other beneficiaries cannot be penalised or held accountable for reforms that are not implemented at the national level," the Party said in a statement.

The Party also said it did not want further centralisation of spending plans at government level. "Regional and local authorities know better the needs and specificities on the ground."

($1 = 0.8714 euros)

(Reporting by Jan Strupczewski. Editing by Jane Merriman)