Macron and Merz hold keys to an EU budget deal - but may be too weak to use them

Key Points:

• EU leaders, particularly Emmanuel Macron of France and Friedrich Merz of Germany, face significant political pressure and are struggling to break the deadlock over the EU’s next seven-year budget, worth approximately €2 trillion.
• Macron, who is leaving office next year, is reluctant to make major concessions due to fears of political backlash from presidential candidates, while Merz faces domestic pressure after election defeats and prefers no deal to an increased budget.
• Despite public differences, France and Germany’s positions may not be as far apart as they seem, with both sides expected to eventually reach a compromise, though this is complicated by differing views on budget cuts and new revenue sources.
• France advocates raising funds through new EU "own resources" like online gambling levies rather than deep cuts, whereas Germany is more skeptical about the potential revenue from such measures but is open to discussion.
• German industry groups have urged the government to support a more ambitious EU budget, increasing pressure on Merz to soften his stance on budget cuts ahead of the summit.