German Chancellor Friedrich Merz conditioned agreement on the next European Union budget on new support for Ukraine, bringing together two politically sensitive issues that have exposed deep divisions between member states.
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kyiv faces a 70 billion euro deficit in its 2027 budget caused by Russia’s relentless airstrikes. The EU has promised to cover two thirds of this deficit, or around 45 billion euros, thanks to an instrument yet to be defined.
“A collective commitment that all of us, without exception, will contribute equitably to closing this gap is an essential prerequisite for resolving this problem and for discussing any other issues, especially those with financial implications,” Merz said in a letter addressed to European Council President António Costa and seen by Euronews.
Merz argued that ongoing negotiations on the bloc’s seven-year budget should ensure “a solution supported by all member states that guarantees strong, multi-year financing prospects for Ukraine from 2028, including already accrued interest.”
The interest refers to the ongoing €90 billion support loan, supported by joint borrowing between 24 countries. Hungary, Slovakia and the Czech Republic obtained a waiver of the credit line in exchange for the necessary unanimity.
The principal will only be repaid when Russia accepts war reparations. However, interest payments will start coming due next year. Initially, Brussels estimated 3 billion euros per year, but the sharp rise in borrowing costs changed the calculation.
The 45 billion euros that the EU intends to provide to kyiv in 2027 will be added to the existing loan.
Given the size of the gap, a new round of common debt quickly appeared as the preferred option. The European Commission is expected to present possible options to countries before a special summit at the end of the month.
In his letter, Merz asks Costa to speed up the timetable for discussions by making the issue a “priority” at this week’s informal summit in Dublin. The subject was not initially included on the agenda.
The Chancellor clearly regrets that financial and military support for this war-weary country is “unevenly distributed and carried mainly by only a few member states”.
“Supporting Ukraine is a matter of our indivisible European security, as is sharing the burden of that support,” he writes.
Germany is Ukraine’s largest bilateral donor. Other key donors, such as Denmark, Finland, the Netherlands and Sweden, share Merz’s grievances and I want to merge the budget and Ukraine in one package.
It turns out that all these countries belong to the so-called “frugals” or “modernizers” who advocate widespread reductions in the draft budget. This has put them on a collision course with the “Friends of Cohesion”, who are struggling to maintain high spending levels.
The Czech Republic, Hungary and Slovakia announced that they would again exempt themselves from their common debt to support kyiv. Bulgaria, which strongly criticizes arms deliveries, is expected to follow suit. The four sit on the cohesion group.
Their refusal to participate provoked the anger of so-called “frugal” countries.
“The cohesion camp cannot have it both ways,” said one diplomat. “There is no money tree in Brussels, so we have to make political choices.”
Simon Harris, the Irish Minister of Finance, whose country holds the rotating presidency and moderates the negotiations, sided with the “frugals”.
“It is very difficult to have a serious conversation about the European budget for the next few years without Ukraine and the financing of Ukraine,” Harris said Monday morning before heading to a ministerial meeting in Brussels.
“We have to phrase this correctly. This is actually about European security.”
But not all member states share the same position.
Ignacy Niemczycki, Poland’s deputy minister for European affairs, said last week that the two issues are fundamentally separate and that linking them together could “backfire” and make a final deal “even more difficult” than it is now.
Slovak Prime Minister Robert Fico warned that such a link would be “very dangerous”.
Gn world
