Merz ties EU budget deal to 45 billion euros in Ukraine funding for 2027

Berlin ties the budget to Ukraine

Chancellor Friedrich Merz wrote to European Council president Antonio Costa in a letter dated 6 November, making his support for the EU's next seven-year budget for 2028 to 2034 conditional on all 27 member states committing to fund Ukraine. The letter says Ukraine is entering its fifth winter of war, with Russia escalating attacks on critical energy infrastructure. Merz argues that bilateral aid is distributed unevenly and falls mainly on a small number of member states. He wants a solution backed by all members that secures multi-year funding for Ukraine from 2028, including interest obligations that have already built up. In Brussels the move was read as an ultimatum, because it covers the 2027 budget and the years after it.

The 70 billion euro gap

Ukraine faces a financing shortfall of 70 billion euros in its 2027 budget. The EU has pledged to cover about two thirds of that gap, around 45 billion euros, through an instrument that has not yet been defined, possibly joint debt. The Commission is already examining alternatives, with the aim of reaching an agreement by the end of the year. Those 45 billion euros would be added to the existing 90 billion euro loan agreed last December. Hungary, Slovakia, Bulgaria and Czechia have said they no longer intend to take part in a new loan programme, according to reporting by Naftemporiki. Norway, Canada and the United Kingdom already contribute, with Ottawa providing 500 million US dollars.

Total 2027 financing gap70

Expected EU contribution45

Total 2027 financing gap

70 billion euro

Expected EU contribution

45 billion euro

Data from the article text

Fico and Babis push back

Slovak Prime Minister Robert Fico accused Merz of blackmail and said the bloc had to respond. He added that Slovakia holds the same veto right as the German chancellor. Czech Prime Minister Andrej Babis sided with Fico and warned that a blockage of the EU budget would also block the funds earmarked for Ukraine. Fico has repeatedly criticised the EU's Ukraine policy, opposing military aid to Kyiv and keeping friendly ties with Moscow, while most other European leaders have limited contacts with Russia since the 2022 invasion. Germany's position as the largest net contributor to the EU budget and the largest bilateral donor to Ukraine strengthens Berlin's negotiating hand, according to reporting on the letter.

Dublin and the wider agenda

On 9 November at the Eurogroup, Irish finance minister Simon Harris said the EU and Ukraine budgets are interlinked and that a serious discussion of the long-term budget is very hard without Ukraine's funding forming part of it. Ireland currently holds the rotating presidency of the Council of the EU. Harris suggested that the most likely final solution for the next EU package to Kyiv could resemble the existing 90 billion euro loan. EU leaders meet in Dublin on Thursday and Friday, 12 and 13 November, for an informal summit, and Merz wants the Ukraine question placed first on the working lunch agenda on Friday. Reporting on the summit agenda also points to a year-end deadline set by Costa, with a key meeting in Brussels shortly before Christmas. Leaders must also choose a successor to Christine Lagarde at the European Central Bank, after she stepped down early so she could comment freely on the French presidential election, where Marine Le Pen is seeking victory.