Merz ties Ukraine aid to EU budget, drawing blackmail charge

By Daniel Okafor

The EU has agreed to lend Ukraine €90 billion, but Friedrich Merz has signalled he will block its 2028-34 budget without a deal committing every member state to Ukraine financing.

Slovakia’s Russia-friendly prime minister, Robert Fico, rejected that condition in Bratislava. “What the chancellor is doing is typical blackmail, and I will not give in to it,” Fico told reporters.

He spoke alongside Czech Prime Minister Andrej Babiš, whose populist government also rejects a future Ukraine loan. “I do not know why he is saying it,” Babiš said, referring to Merz’s position.

The Guardian reported that the resistance comes from central European governments that are net beneficiaries of EU funds but do not want to finance Ukraine’s war effort.

What is Merz demanding?

Merz asked European Council leaders to discuss Ukraine’s financing needs at a Dublin summit on Friday. In a letter seen by The Guardian, he told European Council President António Costa, who will chair the meeting, that bilateral aid remains uneven.

“We must continue to support Ukraine in its fight to defend itself. This is in our shared vital interest,” Merz wrote. “And yet, bilateral assistance to Ukraine is distributed unevenly and carried mostly by only a few member states.”

Merz wrote that “a collective commitment … without exception” was an “essential pre-requisite” for resolving Ukraine’s funding shortfall and “discussing any further matters, particularly those with financial implications.”

He also said every member state must contribute to a “sound” financial perspective for Ukraine from 2028 within the next seven-year budget, known as the multiannual financial framework. A German government official said: “Financial support for Ukraine of all EU member states is essential in order to successfully complete the MFF.”

How large is Ukraine’s funding gap?

The EU agreed last year to lend Ukraine €90 billion, intended to cover two-thirds of Ukraine’s military and civilian costs for 2026 and 2027. The Guardian reported that Russia’s relentless bombardment has since raised those costs, prompting President Volodymyr Zelenskyy to request €70 billion to fill the shortfall.

The EU endorsed Zelenskyy’s figures and pledged to find €45 billion. Ukraine’s other allies, including the UK and Canada, are expected to provide the remainder.

Merz last year led an effort to use €210 billion of Russia’s sovereign wealth frozen in the EU. A Belgium-led opposition scuppered that plan, even though Belgium hosts most of the frozen assets in Brussels. The €90 billion loan served as the fallback.

Who may stay out?

Hungary, Slovakia and Czechia opted out of the €90 billion loan and have indicated they will remain outside the next round. Bulgaria joined them after the election of Moscow-friendly Prime Minister Rumen Radev last April.

The Guardian said the standoff reflects growing exasperation among northern EU members, the largest backers of Ukraine, over smaller contributions from central and southern European governments.

Germany, the EU’s largest net contributor, wants steep cuts to the proposed budget. It also opposes generous EU funding for member states that refuse to contribute to Ukraine’s financial needs. The Ukraine dispute has entered the negotiations over the EU’s 2028-34 budget.

Can the budget deal survive?

Berlin wants Ukraine funding decisions to move from unanimity to a qualified-majority vote, which would prevent one government from blocking EU decisions. The German position links the voting change to the broader multiannual financial framework talks.

European Council President António Costa, a former Portuguese prime minister, has responsibility for finding a budget agreement. He wants a deal by the end of the year, before elections in France, Poland and Italy in 2027 complicate negotiations.

A Costa spokesperson confirmed receipt of Merz’s letter without commenting on its details. “President Costa will make time for interventions on Ukraine at the informal European Council in Dublin this week,” the spokesperson said. Ukraine finance will also feature at a special EU budget summit on November 26-27.

The November 26-27 meeting will test whether EU leaders can produce an all-state Ukraine commitment before Costa’s year-end deadline, with qualified-majority voting the proposed mechanism for limiting holdout power.