Merz Ties the EU's Next Seven-Year Budget to Ukraine, and Picks a Fight With Half the Council

Friedrich Merz has written to European Council President António Costa asking him to put Ukraine's financing gap at the top of the agenda for the informal leaders' meeting in Dublin on 13 November, and to treat it as a precondition for any discussion of the EU's next seven-year budget.

The letter, seen by Euronews and the Kyiv Independent, sets out a number that has been circulating in Brussels for weeks but has not previously been attached to a formal demand: Ukraine faces a shortfall of about €70 billion in its 2027 budget, of which roughly €45 billion is expected to fall to the European Union. That is on top of the existing €90 billion support loan, and it has no agreed instrument behind it yet.

What the letter actually asks

The central sentence is about method rather than money. A collective commitment, Merz writes, that "all of us, without exception, will contribute fairly to closing this gap is an essential prerequisite for resolving this issue and for discussing any further matters, particularly those with financial implications".

On the budget itself, he is careful. He does not threaten a veto. He asks that the negotiations on the 2028-2034 framework guarantee "a solution supported by all member states that ensures a sound and multiannual financing perspective for Ukraine from 2028 onwards, including the interest liabilities that have already accrued".

That last clause is the technical heart of the problem. The existing €90 billion loan was raised through common borrowing by 24 member states; Hungary, Slovakia and the Czech Republic secured an opt-out in exchange for the unanimity needed to issue it. The principal is not due until Russia pays reparations, but interest starts falling due next year. Brussels originally put the cost at about €3 billion a year. Borrowing costs have since risen, and the estimate no longer holds.

Why the timing matters

The calendar leaves almost no room. Leaders meet informally in Dublin on 13 November, a meeting originally dedicated to artificial intelligence. Giorgia Meloni had already succeeded in adding a debate on Europe's role in the Ukraine peace talks. Merz now wants a third item. Then comes the formal summit in Brussels on 26 and 27 November, which was prepared around the multiannual budget. The Commission is due to present member states with options for the 2027 gap before a special summit at the end of the month.

Three meetings in three weeks, each with a different set of participants and a different mandate, on a file that requires unanimity somewhere along the line. That is the opposite of how the EU normally handles a negotiation it wants to win.

The coalition behind the demand

Merz is not alone. Denmark, Finland, the Netherlands and Sweden share his complaint that bilateral support for Ukraine is "distributed unevenly and carried mostly by only a few member states", and they too want the budget and Ukraine merged into a single package.

What makes this more than a donor grievance is that all four of those countries also belong to the group pressing for across-the-board cuts to the draft budget. The demand for fair burden-sharing and the demand for a smaller budget are being made by the same governments, in the same weeks, to the same institutions. That puts them directly against the Friends of Cohesion, who are fighting to protect the spending envelopes that the frugals want to trim.

The counter-argument from the cohesion camp is that the two files are separate and should stay separate. Ignacy Niemczycki, Poland's deputy minister for European affairs, warned last week that binding them together could "backfire" and make a final deal harder. Robert Fico went further, calling the link "very dangerous".

One EU diplomat put the frugal position more bluntly: "The cohesion camp cannot have their cake and eat it. There is no money tree in Brussels, so we need to make political choices."

The opt-out problem

There is a concrete precedent that makes the Merz demand harder to satisfy than it sounds. When the €90 billion loan was agreed, three governments stayed outside it, and they got that in writing. The Czech Republic, Hungary and Slovakia are signalling they will exempt themselves again from any new joint debt for Kyiv. Bulgaria, which has been a vocal critic of weapons deliveries and sits in the cohesion group, is expected to follow.

If four member states refuse to participate, the "all of us, without exception" commitment Merz is asking for cannot be delivered in the form he has described. It could be delivered in a different form: contributions counted through bilateral aid, or through a mechanism that lets opt-outs pay into a different pot. But that is precisely the accounting argument the frugals say they are trying to end.

Ireland, which holds the rotating presidency and moderates the budget talks, has sided with them. "It's very hard to have a serious conversation about the European budget for the next several years without Ukraine and the financing of Ukraine," finance minister Simon Harris said on Monday. "We do need to frame this correctly. This is actually European security."

What to watch in Dublin

Whether Costa adds the item, which he can do without anyone's permission. Whether the four likely opt-outs repeat their position in the room rather than in briefing notes. And whether the Commission arrives with a proposal for the 2027 gap before the 26 November summit, or after it.

Merz has said supporting Ukraine is "a matter of our indivisible European security". The question Dublin will answer is whether indivisible security comes with indivisible financing, or whether the Union is about to build a second mechanism that some members pay into and others watch.