European governments from Germany to Finland and Lithuania are clashing over their 2027 budgets, with disputes over spending cuts, pension reductions and windfall taxes.
The Economist reports that Europe accounts for half the world's social spending, but its fractured politics make cuts difficult . In Germany, Chancellor Friedrich Merz's centre-right Union (CDU/CSU) coalition with the SPD (Social Democratic Party) is struggling to agree on tax plans for the 2027 budget . The Union rejects a proposed plastic tax and wants deeper income tax cuts, while Finance Minister Lars Klingbeil says a promised electricity tax reduction is not feasible without financing proposals . The Union would likely accept a tax on sugary drinks and has largely agreed on alcohol tax, but rejects the plastic tax outright . The SPD wants to favor families and cut housing benefits less . A decisive budget committee session is scheduled for Thursday .
The German government also faces criticism over its own spending. The Taxpayers' Association said on Wednesday that 16 federal ministries have spent almost €6 million on furniture, decoration and art since May 2025 . The Foreign Office spent €840,062 and the Defense Ministry €813,000, while the government preaches austerity to citizens . A surge in electric vehicle demand has also blown past subsidy forecasts, with a scheme expected to last until 2029 now likely to run out of cash by the end of 2027 .
In Finland, the governing National Coalition Party has proposed €2 billion in savings from pensions for the next term . Prime Minister Petteri Orpo has assured that pensions will not be cut . Pia Kauma, a National Coalition MP, warned on Wednesday that cutting the pension index would be a "big mistake" and a permanent reduction in pensioners' incomes . Pension expenses exceed €40 billion annually, with €37 billion paid through the earnings-related pension system rather than tax revenue . The Finns Party has proposed freezing the index only for pensions above €2,000 per month .
In Lithuania, lawmakers are debating a windfall tax on companies earning above-normal profits . Virginijus Sinkevičius has proposed using part of the revenue to lower fuel excise taxes, though the amount remains unclear because profit data and tariffs are lacking . Poland applies a 60 percent rate, but in Lithuania Orlen Lietuva could pay the tax only in Poland . The country's 2027 budget is approaching its final stages, with officials still arguing over what to add and what to remove .
