Merz Tells EU: Fund Ukraine or Forget the Budget Deal

Merz put it in writing. In a letter to European Council President António Costa seen by Euronews, the chancellor called a fair collective commitment to closing Ukraine's funding gap an essential prerequisite for settling the bloc's next seven-year budget — and for discussing anything else with financial implications. He wants Costa to push the matter up the agenda at this week's informal summit in Dublin, where it was not originally scheduled.

The gap is €70 billion in Ukraine's 2027 budget, opened up by Russia's ongoing airstrikes. The EU has promised to cover two-thirds of it, roughly €45 billion, through an instrument nobody has defined yet — and that sits on top of an existing €90 billion support loan backed by joint borrowing from 24 countries. Hungary, Slovakia and the Czech Republic secured an opt-out from that credit line in return for their unanimity, and the principal stays unpaid until Russia agrees to war reparations. Interest, though, starts coming due next year: Brussels first pencilled in €3 billion annually, but rising borrowing costs have changed the maths.

With numbers that size, a new round of joint debt has become the leading option. The European Commission will hand countries possible routes before a special summit at the end of the month. Merz also used the letter to complain that financial and military backing is distributed unevenly and carried by only a few states, writing that supporting Ukraine is a matter of indivisible European security and burden-sharing must follow. Germany is the largest bilateral donor; Denmark, Finland, the Netherlands and Sweden share his frustration and want budget and Ukraine fused into one package.

Those same countries are the so-called frugals, or modernisers, pushing across-the-board cuts to the draft budget — putting them on a collision course with the Friends of Cohesion, who want spending kept high. Czechia, Hungary and Slovakia are indicating they will exempt themselves from joint debt again, with Bulgaria, a vocal critic of weapons deliveries, expected to join them. All four sit in the cohesion camp, and that has rankled. One diplomat put it bluntly: the cohesion camp cannot have its cake and eat it, adding there is no money tree in Brussels so political choices are needed.

Ireland's finance minister Simon Harris, whose country holds the rotating presidency and moderates the talks, backed the frugals. Speaking on Monday before a ministerial meeting in Brussels, he said it is very hard to have a serious conversation about the European budget for the next several years without Ukraine and its financing, framing the whole thing as European security. Not everyone agrees. Poland's deputy minister for European affairs, Ignacy Niemczycki, argued last week the two issues are fundamentally distinct and that binding them could backfire and make a deal even harder, while Slovak Prime Minister Robert Fico called the link very dangerous.