EU capitals must be able to intervene to stop new legislation from Brussels if they say it’s too burdensome for governments and businesses, the leaders of Germany, Italy and Belgium wrote on Monday.

In a letter addressed to European Council President António Costa and seen by POLITICO, the three leaders said the bloc needs an “emergency brake” mechanism to help boost its flagging economic competitiveness.

German Chancellor Friedrich Merz, Italian Prime Minister Giorgia Meloni and Belgian Prime Minister Bart de Wever also called to “significantly accelerate planning and approval procedures,” suspend “certain regulatory areas for a specified period” under a new “priority rule.”

“We call for further ambitious simplification packages to decisively advance the cutting of red tape in the European Union,” they wrote, adding that the Commission must ease the burden “first and foremost” on small and medium-sized businesses.

“More broadly,” the letter reads, “our common objective should be to prevent unnecessary regulatory burdens and related costs from causing permanent losses of European industrial capacity and further weakening investment and competitiveness.”

Coming days before an EU leaders’ meeting, the call echoes demands first stated in March after a summit focused on European competitiveness, and it comes amid worsening signs for the bloc’s industrial sector.

Leaders will debate the EU’s long-term budget, energy prices, and support for Ukraine when they gather in Brussels on Thursday for a two-day European Council summit.

With the budget barely a fortnight away, Chancellor John Healey is warning of mounting economic headwinds. Can he ease the pressure on the public finances without loosening the purse strings?

Sam Coates and Anne McElvoy test the tightrope Healey is attempting to walk ahead of a major speech to the International Monetary Fund.

Elsewhere, is Donald Trump’s energy deal with Vladimir Putin putting the UK’s support for Ukraine to the test? And why has Andy Burnham chosen now to confirm Russian interference in the Brexit vote?

Plus, Sam has an exclusive on how the promise of more money for regional mayors might not be worth as much as they were hoping.

Germany has rejected Ireland’s proposal for the EU’s next seven-year budget, despite €159 billion in cuts. And it’s not alone: Governments are divided over where the cuts should fall, while the European Parliament is threatening to block the deal.

Zoya Sheftalovich and Nick Vinocur unpack the backlash and what it means for this week’s EU leaders’ summit.

Plus, Zoya interviews Migration Commissioner Magnus Brunner about Europe’s efforts to curb irregular migration and plans to tighten restrictions on Russian visitors and former soldiers.

And why the influencers expected at this week’s EU summit won’t be showing up after all.

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BRUSSELS — Europe will lose out because of €159 billion in cuts to the bloc’s next long-term budget, the European Commission has warned days before EU leaders gather in Brussels for talks on the bloc’s future spending plans.

In an unusual attack, the Commission told governments that scrapping billions from several rainy-day funds will leave Europe less equipped to deal with crises during the next seven-year budget cycle, said four EU diplomats briefed on the talks, granted anonymity to speak freely about confidential discussions.

The Commission’s top budget official, Stéphanie Riso, delivered the warning to the EU’s 27 ambassadors during a closed-door meeting on Sunday, a day after the Irish presidency of the Council of the EU, which is steering the talks, proposed cutting around 8% from the bloc’s total budget from 2028 to 2034.

The Commission is “very concerned about cuts to flexibility,” said one of the EU diplomats.

As a result of the changes, “we will have no ways left to help farmers and regions when crises hit, because of climate change or geopolitical tensions,” they added.

EU ambassadors gathered to discuss the Irish plan, which envisages cuts of €159 billion in current prices from the Commission’s nearly €2 trillion proposal. Of that amount, €38 billion was cut from foreign aid, €75 billion was axed from competitiveness, and at least €22 billion was slashed from rainy-day funds.

But even those reductions were criticized as insufficient by a German-led group of states pushing for cuts of several hundred billion. During the closed-door meeting, a rival bloc of 17 countries, known as the Friends of Cohesion, welcomed the fact that the Irish presidency had spared agriculture and regional payments from cuts.  

EU governments are racing to finalize a deal on the budget among themselves by the end of the year — before elections in France, Italy and Poland that threaten to disrupt the negotiations.

A leaders’ summit on Thursday and Friday will give early signals as to whether the end-of-year deadline is achievable — or whether leaders should start preparing contingency plans.

One EU diplomat said the pressure is now on those leaders: “What could make a difference is if Friedrich Merz and Emmanuel Macron show up, hand-in-hand, and say we live in a new world.”

Cuts to the future

The Commission warned that cuts such as those put forward by Ireland will shrink the next budget — excluding repayments to post-Covid debt — below the current one.

The cuts overwhelmingly affect EU-wide priorities such as competitiveness, defense and foreign aid while leaving traditional policies untouched such as agriculture and regional payouts, which make up almost half the budget.

The changes undermine the Commission’s proposal, which envisaged more flexibility and steered hundreds of billions of euros toward new priorities.

In a further setback for the Commission, Ireland also downsized — or even scrapped — several financial cushions to shelter EU countries from unforeseen events such as natural disasters or public health emergencies.

The EU executive argues these changes will make spending in the next budget more rigid than in the current one — and potentially warrant a midterm review of the budget further down the line.

However, Ireland’s Europe Minister Thomas Byrne disputed this claim in a press conference on Saturday, saying the budget proposal “offers increased flexibility … in response to the clear call from member states for a simplified and more flexible, modern [budget].”

Another source of tension in the next budget came from Ireland’s watering down the link between EU payouts and economic reforms.

The Commission has repeatedly defended using regular budget payments as a carrot to nudge governments to undertake reforms that will make them more competitive.

However, Ireland’s ambassador to the EU, Aingeal O’Donoghue, said during the meeting that the new text will not link EU cash disbursements and “fiscal reforms,” according to one of the diplomats.