EU’s €86bn budget battle casts shadow over Ukraine funding

Disputes among member states over top-up could threaten flow of war support to Kyiv.

EU funding to shore up Ukraine is being held up by fractious disagreements among member states, with worries about strained national budgets and rising costs in Brussels threatening the flow of financial support to Kyiv. Brussels’ requests for a total of €86bn in additional funding, aimed at easing strains on the EU budget while locking in four years of support to Ukraine, have divided member states and led to calls for reductions and a longer approval timetable, according to people involved in talks. The debate is a key test of western resolve over Ukraine, as war sceptics in Europe and the US begin to point to the limited gains made by Kyiv’s summer counteroffensive against Russia. The latest round of US funding for Ukraine may also face a tricky path through Capitol Hill amid rising concerns about the war and broader disputes over government spending. Brussels proposed the latest package of financing for Ukraine to stretch over four years, in part to insulate Kyiv from political volatility. EU ministers will restart consultations today after their summer break, with support for Ukraine top of the agenda at meetings of defence and foreign ministers. So far, funding negotiations have been complicated by the European Commission bundling together financial support for Ukraine with top-up requirements for the EU budget, including provisions to cover debt interest costs and a salary increase for EU officials. Many member states have said that while the extra financial support for Ukraine is reasonable, the other elements of the package are the result of an internal EU budget management issue that does not merit additional funds.

Countries such as Germany and the Netherlands have led the resistance, arguing that national budgetary belt-tightening owing to rising interest rates and wage demands should also be reflected in Brussels. “The timing is not opportune,” said one senior EU diplomat. “Governments are having to make difficult decisions themselves and now Brussels asks them to contribute more.” “Frankly, ‘Brussels needs our money to increase Commission salaries in line with inflation’ is not a great domestic political platform for a national leader to take,” they added. The dispute sets the stage for what is expected to be one of the most fraught EU negotiations of the remainder of this year. In June, the commission laid out a €66bn top-up for the 2021-27 budget, which was funded by member states. Brussels has separately proposed €20bn for weapons supplies to Ukraine. The €66bn includes almost €19bn to cover unexpectedly high interest costs on joint EU borrowing, about €2bn for administration cost increases including salary increases for officials, €15bn for expenses related to rising migration and funding for external countries, and €10bn for initiatives including a new innovation fund. This top-up to the multiannual financial framework (MFF) also includes €17bn in grants for Kyiv and is supplemented by a package of €33bn in loans. Together this €50bn package over four years aims to give the country longer-term budget stability, an approach Brussels has encouraged other donors to adopt.

The EU’s larger countries are currently discussing aspects of the MFF top-up with the aim of reaching a consensus position, two officials said, noting that it was likely the debate could drag on towards the end of the year. “December will be when these issues all come together and we need an answer,” said a senior EU official involved in the Ukraine funding negotiations. At the same time, the EU’s 27 member states are being asked to together contribute another €20bn for a Brussels-administered weapons fund designed to guarantee military support to Ukraine for the next four years. That funding pot, envisaged as part of the EU’s contribution to so-called long-term “security commitments” to Ukraine designed to protect it against Russian aggression, will be further discussed by defence and foreign ministers from across the bloc this week. Multiple member state officials say that the fund — part of the EU’s European Peace Facility that has been funding weapons shipments to Ukraine since last February — will ultimately be given backing thanks to widespread willingness to help Kyiv. But they warned it needed to be factored into the overall financial demands from Brussels and assessed alongside the MFF top-up. “We all want to help Ukraine, there’s no reluctance to do what is being asked, or even to do more if necessary,” said one senior EU diplomat from a country that had raised concerns over the amounts being requested. “But the money is all coming from the same pots. Something has to give.”