Germany wants to cap next EU budget at 1% of GDP - sources

Germany, the European Union's largest economy, wants to limit the bloc's next budget for 2021-27 at 1% of the bloc's economic output, sources told Reuters, below the 1.11% proposed by the executive European Commission. EU states are gearing up for a battle over the budget, which is due to be agreed next year, and national ministers meet in Brussels on Monday to discuss the issue.

Diplomatic sources said Germany - the biggest net contributor to the bloc's joint coffers - would present the proposal to fellow ministers on Monday. The ministers will also discuss making funding from the bloc conditional on upholding the bloc's values, including the rule of law, a plan that could set up a confrontation between the liberal West and the ex-communist Poland and Hungary in the bloc's east.

Warsaw and Budapest - leading beneficiaries of EU development programs - have been accused of undermining democracy by their wealthier peers, who have grown increasingly reluctant to chip in for them. The bloc's current Finnish presidency hopes the national EU leaders will be able to agree on a rough outline of the budget at a summit in October.

But others say it may take longer, not least because of question marks over Brexit and to what extent other countries will have to raise their contributions to make up for the loss of UK funding.