Budget Commissioner Günther Oettinger will present his proposal for the Multiannual Financial Framework on May 2, 2018 | John Thys/AFP via Getty Images EU budget hawks under attack With the UK out and Germany and France feeling generous, pressure is growing on other countries to dig deeper.

The EU's tightfisted paymasters are on the ropes.

Brussels' big battle over money begins in earnest next week when Commissioner Günther Oettinger unveils his proposal for the EU's next long-term budget. EU officials are bracing for a long struggle that will split the bloc in all sorts of ways — payers vs. recipients, east vs. west, north vs. south.

But wealthy net-payer countries who oppose any increase in budget contributions — Austria, Denmark, the Netherlands and Sweden — are already on the defensive, their ranks thinned and their muscle sharply diminished.

Britain, their ally and traditional leader, no longer has skin in the game. Even worse, Brexit has blown a giant hole in the budget that will require higher contributions across the board just to avoid steep spending cuts. France and Germany, which toed the U.K.'s red line last time, have proclaimed a willingness to open their wallets wider.

"My goal for the multiannual budget is this: no increase in contributions, but better results within a smaller budget" — Dutch Prime Minister Mark Rutte

In the last big budget brawl, the global financial crisis bolstered the U.K.'s case for keeping spending down when national governments were implementing austerity policies at home.

"Where is that alliance now?" a senior EU official asked. "The U.K. is gone. Germany ... they are prepared to pay more. France, clearly on the same line."

"I think it is clear to everybody," the official added, "that everybody will have to pay more."

The backdrop to the debate this time around is markedly different. From Portugal to Poland, EU economies are humming, with several countries running budgetary surpluses. EU leaders, after their first discussion about the new long-term budget at a summit in February, publicly declared support for spending more on major priorities, including on migration, security and defense, and education.

The EU's current seven-year budget, known as the Multiannual Financial Framework (MFF), amounts to around €1 trillion — that's 1 percent of the bloc's gross national income (GNI). Oettinger is pushing to raise that to what he calls "1.1x" — something above 1.1 percent.

He has gained early traction in his push for the budget to be seen as a way to answer the threat of populism, and to show the EU capably addressing citizens' concerns.

"We must not deny any ambition of existing policies, but we must add the new ambitions we carry," French President Emmanuel Macron declared in a speech to the European Parliament last week. "France is ready to increase its contribution."

But even if all member countries ultimately agree to put more into the EU's coffers — and some are already putting up serious resistance — the key questions will be: How much more? How should the cash be spent this time around? And what financial or political conditions will be attached?

Ferocious debate

Between now and final approval of the budget lie many months — perhaps two years — of ferocious debate and negotiation over the seven-year financial blueprint, which will run from 2021 to 2027.

This will entail not just the usual tug-of-war over winners and losers, but also feuding over how to carry out complex policy changes, including how to curb and revamp agricultural subsidies, where to target unavoidable cuts in regional development funds, and how to send a warning to countries that defy EU rules and standards under the catchphrase of "conditionality" — attaching legal strings to payouts. (Yes, Poland and Hungary, this means you.)

The main catch in securing an overall deal: While the Commission makes the initial proposal, and Parliament must vote its approval, the final package is only adopted by the unanimous agreement of the leaders on the European Council. One senior EU official described the negotiations to get a deal as "the most disgusting."

There are potentially endless points of contention, evidenced by the leaders' discussion in February, where they could not even reach quick consensus on whether they should aim to complete the MFF for a vote by the current Parliament — a hugely ambitious timetable supported by the Commission — or wait until after the 2019 European election, to avoid taking hard decisions before facing the voters.

In that discussion, Portuguese Prime Minister António Costa spoke out strongly in favor of moving as quickly as possible — a predictable position given his country is a net recipient of EU funds. Any delay in the adoption of the budget means a delay in Lisbon's ability to spend what it is allocated.

German Chancellor Angela Merkel, speaking for a group of about nine countries, responded with a willingness to try to speed the process, but only if there was quick, unanimous support from all the leaders around the table. There was not. Dutch Prime Minister Mark Rutte pushed back, saying "quality is more important than speed" and urging that leaders wait to see the Commission's draft proposal before making a final decision.

Rutte has also emerged as the leader of the faction demanding a smaller budget.

"My goal for the multiannual budget is this: no increase in contributions, but better results within a smaller budget," he declared in a speech in Berlin last month.

But while he may lose that argument, he may well be right about the time needed to pass the budget. The current MFF took more than two years to complete from draft to approval by Parliament, and back then there was no Brexit distracting the EU's major players.

Despite the disagreement over timing, officials said the initial discussion among leaders was positive, and reflected the deep sense of unity that Brexit has created among EU27 leaders and has only seemed to grow stronger.

Still, fierce disputes are inevitable. One big fight will be over a proposed budget line for a eurozone emergency fund. Macron, for instance, supports the idea. Rutte and Merkel are skeptical.

Contentious conditions

Another major discussion will be over attaching more conditions to budget payouts. The Commission and multiple countries want to figure out a way to add new "political" conditions as a way to send a message to Poland, which has battled with Brussels over the rule of law, or Hungary, which has rebelled over migration policy.

Few officials see any chance of adopting "punitive" provisions, which pose legal and technical challenges and won’t win unanimous support. But the budget could still make a political point by, for example, allocating money for the integration of refugees and migrants. Countries more welcoming to immigrants would qualify for more funds.

Officials must also agree on a new Own Resource Decision, governing how the EU generates its own revenue, and figure out how to eliminate a complex rebate system in place since 1985.

Oettinger has already signalled the broad outlines of his May 2 draft, and a so-called communication from the Commission ahead of the February leaders' meeting offered more clues.

He has said that roughly half of the Brexit budget gap, projected at €12 billion-13 billion a year, should come from higher contributions by EU countries and half should come from cuts. And he has proposed that spending for new priorities — projected at some €100 billion — should be covered with 80 percent from "fresh money" and 20 percent from restructuring, i.e. cuts.

Fabian Zuleeg, an expert on the EU budget who is chief executive and chief economist at the European Policy Centre, a think tank in Brussels, said Oettinger is much more likely to win consensus on the overall size of the budget than on proposals for new revenue streams.

Currently, the lion's share of EU budget revenue comes from national contributions. Much of the rest comes from a portion of customs duties and value-added tax collected by EU countries and transferred to Brussels. Various proposals have been floated to give the bloc more direct income — such as using carbon emission fees or a proposed new digital tax. But some governments have signaled opposition to these ideas and similar resistance is expected to any efforts to carry out major budget reforms.

Already a proposal to combine a dozen existing budget instruments for specific types of foreign aid into a single "external aid" instrument has generated pushback from some advocacy groups. And Central and Eastern European countries are chafing at rumors of a new formula for disbursing regional funds. "There is a very strong status quo bias," Zuleeg said. "It is much easier to move a little bit from the positions which are already there than to reform fundamentally."

Ultimately, all 27 leaders need to be able to sell the package back home. "In the end, everybody will have to be a winner," the senior EU official said. "Nobody goes out of that European Council a loser."

This article is part of POLITICO’s new coverage of the EU budget, tracking the development of the seven-year Multiannual Financial Framework, and the first EU budget that will face a low or no contribution from the United Kingdom. This coverage includes the Budget Briefing newsletter every Monday afternoon. Email pro@politico.eu to request a complimentary trial.