German Chancellor Friedrich Merz has tied the EU’s next budget accord to new funding for Ukraine, linking two politically delicate issues that have revealed deep divisions among member states. Russia’s persistent airstrikes have left Kyiv with a €70 billion hole in its 2027 budget. The EU has pledged to make up two-thirds of the difference, or around €45 billion, via an instrument that has yet to be specified. To solve this problem and talk about anything else, especially with financial consequences, we need a collective commitment that all of us, without exception, will contribute fairly to close this gap, Merz said in a letter to European Council President António Costa.
Ongoing negotiations on the bloc’s seven-year budget should secure ‘a solution endorsed by all member states that guarantees a sound and multiannual financial perspective for Ukraine from 2028 onwards, including the interest liabilities have already accumulated
The interest is on the existing €90 billion rescue loan, supported by joint borrowing of 24 countries. Hungary, Slovakia and the Czech Republic gained an opt-out from the financing line in return for delivering the required unanimity.
The principle will not be paid until Russia decides to pay reparations for the conflict. But the interest payments will begin to decline next year. Brussels had initially expected €3 billion per year, but the sharp surge in borrowing prices has changed the equation.
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