German Chancellor Friedrich Merz has signalled he will block the EU’s seven-year budget unless there is a deal on financial aid for Ukraine, triggering accusations of "typical blackmail" from some other European leaders. The German chancellor’s intervention has angered leaders in central Europe who are net beneficiaries of EU funds but do not want to take part in an upcoming funding round to support Ukraine’s war effort. Slovakia’s Russia-friendly prime minister, Robert Fico, told reporters in Bratislava that he would not give in to what he called "classic blackmail." He was speaking alongside his Czech counterpart, Andrej Babis, whose populist government also rejects taking part in a future loan for Ukraine. Babis said he did not know why Merz was saying it, referring to the German leader’s position.
The financing dispute
Merz wants EU leaders to discuss Ukraine’s financing needs at a summit in Dublin on Friday. In a letter to European Council president Antonio Costa, Merz wrote that bilateral assistance to Ukraine is distributed unevenly and carried mostly by only a few member states. The EU last year agreed to lend Ukraine €90bn, which was intended to cover two-thirds of its military and civilian costs for 2026 and 2027. Since then, Russia’s relentless bombardment has heaped more costs on Kyiv, prompting President Volodymyr Zelenskyy to call for €70bn to fill a budget shortfall. The EU has endorsed Zelenskyy’s figures and pledged to find €45bn, with Ukraine’s other allies, such as the UK and Canada, expected to provide the rest.
Merz argued that he does not want to repeat last year’s approach, when a different €90 billion loan for Ukraine was agreed only with financial guarantees and liabilities from most EU countries, while three nations secured an opt-out. Hungary, Slovakia and Czechia, which opted out of that loan, have indicated they will stay out of the next round. Those three member states have now been joined by Bulgaria, following the election of Moscow-friendly prime minister Rumen Radev last April. A German government official stated that financial support for Ukraine of all EU member states is essential in order to successfully complete the multiannual financial framework. Berlin is also seeking to switch the decision-making process on funding Ukraine to a qualified-majority vote, rather than unanimity, in order to prevent one government from blocking EU decisions.
Budget negotiations and opposition
The issue of Ukraine’s financing is now ricocheting into tortuous negotiations on the EU budget for 2028-34. Germany, the largest net contributor, wants steep cuts in the proposed budget, while opposing generous EU funding for member states that refuse to chip in to Ukraine’s financial needs. In his letter, Merz writes that a collective commitment without exception is an essential pre-requisite for resolving Ukraine’s funding shortfall and discussing any further matters, particularly those with financial implications. He also states that all member states need to contribute to a sound financial perspective for Ukraine from 2028 in the context of the EU’s next seven-year budget.
However, that view is not shared by Hungarian Prime Minister Peter Magyar, who came to Berlin with four ministers and a state secretary to discuss deeper cooperation. Magyar underlined the general rapprochement between Germany and Hungary after years of icy relations under Budapest’s previous leader Viktor Orban. He noted diplomatically that he does not necessarily consider it the right approach for the European budget, which is actually intended for seven years and for Europe, to be linked to other matters. The task of finding an agreement on the budget falls to Costa, a former Portuguese prime minister. He wants a deal by the end of the year, before elections in France, Poland and Italy in 2027 that are likely to complicate the task. A spokesperson for Costa confirmed receipt of the letter without commenting on details.
