Vulcan View: The latest EU developments 14 July – 18 July

Commission unveils draft 2028-2034 Multiannual Financial Framework

On Wednesday, 16 July, the European Commission announced the EU’s Multiannual Financial Framework (MFF) for 2028-2034. The MMF -the EU’s long-term budget- is planned to amount to €2 trillion, with European Commission President von der Leyen stating, “The next MFF will be the most ambitious ever proposed. It is more strategic, more flexible, more transparent, and we’re investing more transparent, and we’re investing more in our capacity to respond and more in our defence.” Key features of the budget include:

• More flexibility – for the unexpected, or shift to new priorities
• Simplification – every euro should be easy to access
• European – achieve more than national budgets alone.

The budget is composed of the following pillars:

• Pillar 1, ‘The Fund,’ will consist of €894.2 billion for areas such as CAP income support, cohesion, and fisheries.
• Pillar 2, ‘Competitiveness’, will consist of €589.6 billion for aspects such as defence and space, as well as Horizon Europe.
• Pillar 3, ‘Global Europe’, will consist of €215 billion for external action and supporting Ukraine.
• Pillar 4, ‘Administration’, will consist of €100 billion for EU staff.

The new budget will bring together EU funds implemented by Member States and Regions under one coherent strategy, with cohesion and agricultural policy at its core. This strategy will be implemented through National and Regional Partnership plans to reduce regional disparities.

A new European Competitive Fund will invest in strategic technologies to benefit the entire Single Market, as recommended in the Letta and Draghi Reports. This will focus on clean transition and decarbonisation, digital transition, health, biotech, agriculture, bioeconomy, and defence and space.

The presentation of the MFF triggered significant negative reactions from both MEPs and various Member States (e.g. Germany). This indicates that we are just beginning a lengthy and challenging negotiation process, which could result in numerous changes to the proposal.

The Multiannual Financial Framework (MFF) for 2028-2034 represents a significant shift in the European Union’s long-term financial planning, emphasising competitiveness and resilience. Although the proposal of €2 trillion is highly ambitious, initial reactions from MEPs and key Member States reveal divisions and concerns about fiscal matters. Additionally, the diminished focus on traditional sectors such as health has sparked further debate. As negotiations continue, stakeholders should anticipate potential amendments and remain actively involved to influence outcomes that align with their policy priorities.

Ireland and the next EU budget: Irish key interests for the 2028-2034 MFF

The European Union’s next long-term budget, the draft Multiannual Financial Framework (MFF) 2028-2034, was presented on Wednesday, 16 July. For Ireland, the European Commission’s draft for the 2028-2034 MFF includes two areas of critical national interest and potential contention: the future of agricultural funding and the introduction of a new EU-wide corporate tax.

Concerns over CAP reforms

One of the most notable changes in von Der Leyen’s proposal is the consolidation of the two largest budget envelopes, CAP and Cohesion Funds, into a single funding framework, the National and Regional Partnership Fund. This new fund will also provide funding for  migration and infrastructure.

Crucially, this means that CAP would no longer function as a standalone fund within the EU budget. This restructuring raises concerns that agriculture funding may no longer be ringfenced, potentially allowing resources to be diverted into other sectors. For Ireland, where €2 billion in CAP funding is distributed annually to around 120,000 farmers, the implications are profound. The proposed changes have triggered strong warnings from Irish farming organisations and political leaders. IFA President Francie Gorman has cautioned that a dramatic cut to CAP funding would “reduce food production and lead to a food price inflation.”

The Corporate Tax red flag

A second area of contention for Ireland is the proposed Corporate Resource for Europe (CORE), an EU-wide levy targeting both EU-based and foreign companies with annual turnover exceeding €100 million (up from an earlier proposal targeting those over €50 million). The levy, applied on a sliding scale, is expected to generate up to €6.8 billion annually.

Given the fiscal constraints facing the EU’s largest economies, many of which are grappling with high national deficits, there is limited appetite for increasing national contributions to the EU budget. The CORE levy is one of the several proposed new revenue streams intended to reduce the EU’s reliance on direct national contributions while enhancing its ability to invest in emerging priorities.

However, for Ireland, the proposal raises red flags. The government has already signalled its opposition, having previously rejected similar attempts to introduce corporate tax-based contributions to the EU budget. Other EU member states that similarly rely heavily on corporate tax revenues, such as Luxembourg and Sweden, are also expected to oppose the measure.

What comes next: Ireland’s leadership role

This marks the beginning of a complex, two-year negotiation process involving the European Parliament, the Council of Ministers, and the European Commission. Crucially, Ireland will assume the rotating Presidency of the EU Council in the second half of 2026, placing it in a pivotal leadership position at a critical stage of the talks. This role will require Ireland to steer negotiations, build consensus among member states, and use its diplomatic influence to shape the outcome, presenting both a significant responsibility and a strategic opportunity.

EU reacts with shock and anger to President Trump’s 30% tariff threat

The European Union is bracing for a high-stakes trade showdown after President Donald Trump’s threat to impose a 30% tariff on all EU exports by 1 August. The ultimatum shattered expectations that a political framework was within reach, leaving EU leaders scrambling. At a meeting in Brussels on 14 July, EU trade ministers debated their next move: de-escalation or retaliation.

While Member States presented a united front in backing the European Commission’s negotiators, their reactions revealed a sharp divide on strategy.

One camp, led by France, is pushing for an immediate show of force. French Commerce Minister Laurent Saint Martin insisted the EU must demonstrate its “capacity to retaliate” with “no taboos”. This hawkish stance was echoed by Austria and Sweden, who urged the bloc to be “tougher negotiators” and wield its “economic muscles”.

Conversely, a more cautious group is urging restraint. Denmark, currently holding the EU presidency, advocated for a “dual message”: keeping the door open to talks while being ready to “flash some muscles”. This approach aligns with Germany, which is anxious to secure a deal that won’t harm its economy. Others, like Ireland’s Minister of State Thomas Byrne, believe it is too early for retaliation, stating plainly, “we’re certainly not at that stage”. Similarly, Hungary warned that “precipitate retaliatory actions” would be counterproductive.

This strategic divergence captures the EU’s core challenge: how to forge a common position that is strong enough to deter President Trump, yet flexible enough to allow for a last-minute deal.

Brussels’ possible countermeasures

In Brussels, the strategy is clear: continue the dialogue with the Trump administration, but prepare a strong response if negotiations fail. Trade Commissioner Maroš Šefčovič confirmed the EU would continue to negotiate in “good faith” but is preparing “for all possible scenarios”. This preparation is taking concrete shape in a series of powerful countermeasures designed to hit the U.S. economy where it hurts.

The Commission presented to Member States on Monday, 15 July, a second list of retaliatory tariffstargeting €72 billion worth of US imports. The 200-page list includes iconic American products such as bourbon whiskey, but its true significance lies in industrial goods. Topping the list are aircraft and aircraft parts, with nearly €11 billion in tariffs aimed squarely at plane maker Boeing, followed by cars, machinery, and medical devices. This proposed package comes on top of a previously approved (but currently suspended) list targeting €21 billion in U.S. goods, which was prepared in response to earlier US steel and aluminium tariffs.

Should this not be enough, officials are exploring an even more potent third wave of retaliation. For the first time, this could move beyond goods and target America’s Achilles’ heel: its large trade surplus in services and public procurement, as Commissioner Šefčovič laid out. While member states remain cautious about such a major escalation, the Commission is looking into tools that could restrict US firms’ access to the EU’s vast public markets. One option is the Anti-Coercion Instrument (ACI), a powerful trade “bazooka” that could be used to impose wide-ranging restrictions. Nonetheless,  a less aggressive tool called the Enforcement Regulation is seen as a more likely first step. Moreover, Austria is advocating for sanctions against American digital companies.

Conclusions

The EU finds itself walking a fine line. It is talking tough and preparing a massive retaliatory package to preserve its negotiating leverage, but its primary goal remains securing a deal to avoid a mutually damaging trade war. President von der Leyen has instructed her team to “keep negotiating,” and officials believe the two weeks before the deadline are enough time to find an agreement.

The clock is now ticking towards 1 August. The immediate focus will be on last-ditch talks, with a high-level EU team travelling to Washington. At the same time, EU capitals will be studying the list of American goods subject to retaliation. The question will be whether diplomacy can prevail or if retaliation is the best way forward to protect European interests.

Compliments of Vulcan Consulting – a member of the EACCNY