European Commission President Ursula von der Leyen warned on Wednesday that she would not back the next EU budget if a quarter of the funds are not allocated to her signature Green Deal policy as member states ramp up the fight over what they should pay and receive.
Speaking during a plenary session on Wednesday in Strasbourg, France, von der Leyen said that she will "not accept any result which does not guarantee that at least 25% of the budget is devoted to the fight against climate change".
The EU Commission wants the bloc to become the world's first carbon-neutral continent by 2050 and unveiled a raft of measures last year to achieve its goal, known as the Green Deal. These include a Just Transition Fund to help workers and businesses that will be more impacted by the bloc's transition into an environmentally friendly economy.
In her pitch to parliamentarians, von der Leyen called for compromise, arguing that "we have to find the right balance between our old policies and new priorities."
She also warned that "if the budget is not decided soon, next year we will not be able to actually finance the new priorities with the new budget as we all imagine,"
EU leaders are scheduled to meet on February 20 for an extraordinary summit to try to agree on a common position on the next multiannual financial framework (MFF) from 2021 to 2027.
But member states are divided about what the bloc's priorities should be with two distinct groups already drawing lines in the sand as the UK's exit from the EU is estimated to blow a €75 billion hole in next MFF.
Earlier this month, representatives from Bulgaria, the Czech Republic, Cyprus, Estonia, Greece, Hungary, Latvia, Lithuania, Malta, Poland, Portugal, Romania, Slovakia, Slovenia and Spain met in Portugal to hash out their own position.
Collectively, these 15 southern and eastern countries are known as the "Friends of Cohesion" after the EU's cohesion funds which are given to less-developed areas of the bloc to boost infrastructure.
Under the Commission's proposal, they are set to lose some of their funds in the 2021-2027 budget, which they decried as "unacceptable" in a joint statement released after their meeting.
They argued that "existing disparities in the level of development among regions and Member States are still substantial" and that the funding for cohesion policy should remain level with that of the 2014-2020 period.
"No Member State should suffer a sharp and disproportional decrease of its Cohesion allocation," they added.
They are, however, opposed by the so-called "Frugal Five" group made up of Austria, Denmark, Germany, the Netherlands, Sweden.
These member states want to cap the bloc's spending to 1% of its gross national income (GNI) and argue that cutting cohesion funding is necessary in order to focus on new priorities including climate change.
They also want to keep rebates, which were meant to end with Brexit.
For the period 2014-2020, Denmark, the Netherlands and Sweden were granted reductions in their annual GNI contribution ranging from €130 million less a year for Denmark to €695 million less per year for the Netherlands. Several of the countries also benefitted from reduced VAT rates.
The next EU budget is expected to reach over €1 trillion. It has to be approved by both the Council and parliament.