Ukraine's €70 billion shortfall could make or break the next EU budget

The fight over the European Union's next seven-year budget has entered a critical new phase, one that could make or break the deal. ADVERTISEMENT ADVERTISEMENT In a striking coincidence, the heated negotiations have overlapped with the effort to fill Ukraine's €70 billion shortfall for 2027. Brussels had long suspected that Kyiv's accounts would show a sizable gap next year, as Russia escalates its war and devastates the levers of the domestic economy. But it was not until this month's summit that the €70 billion figure was validated. Leaders then asked the European Commission to present possible options for providing the additional financing, with joint debt immediately emerging as the most feasible path. The bloc is expected to cover two-thirds of the request, roughly €46 billion. Other allies, such as the UK, Canada, Norway and Japan, should take up the rest. The vast scale of the deficit prompted a change of agenda in next month's special summit, which was originally planned to focus exclusively on the draft budget. The meeting has been extended to two days, 26 and 27 November, to accommodate discussions on Ukraine. Fresh proposals are expected on both fronts. Technically, the two issues remain separate files. But politically, diplomats and officials say, they are becoming rapidly intertwined. "These are the most pressing issues for the remainder of the year, definitely," a diplomat said, cautioning it was still too early to talk about one big package. Two key reasons explain the entanglement. First, the two are about money. The budget battle pits the so-called “Frugals”, or “Sensible Six”, against the “Friends of Cohesion”, with the two camps clashing over which budget envelopes should be cut and by how much. The "Frugals", which happen to be the net payers, demand steep reductions across the board, while the "Friends" want to preserve bigger volumes. Second, the two face a pressing deadline set by the French election. Marine Le Pen, the candidate of the far-right National Rally, who is firmly ahead in polls, has vowed to cap her country's contribution to the budget at €5 billion a year and warned sealing a deal before the election would be a "democratic scandal". The incumbent, Emmanuel Macron, told his fellow leaders that reaching a deal between January and April would be "complicated". The same logic now applies to Ukraine. As part of her programme, Le Pen has promised to halt all French support for the war-weary country. "This funding will stop, and it is a matter of honesty to tell (Ukrainian President Volodymyr Zelenskyy) the truth," she said earlier this month. Easier or harder? The prospect of a Le Pen win in the spring weighs heavily on officials and diplomats in Brussels, who admit both open issues – the budget and Ukraine – must be resolved by the end of the year before the window of opportunity closes. The closer the election, the narrower the space for high-stakes decisions. "Our internal cohesion is fragile. If that starts to unravel, the consequences for Ukraine could be even greater than anything Trump says or does," a national official said, referring to the US president's recent shift to Russia. "We need a structural solution for financing Ukraine. We can't keep scrambling at the end of every year under pressure. Support for Kyiv needs to be properly built into the next budget. It's good that these discussions are coming together in November." However, it is not yet clear whether Ukraine would make it easier or harder to agree on the budget, which remains stuck in maximalist red lines from the opposing camps. One school of thought holds that reaching a deal may be easier because the “Frugals” includes some of Ukraine's largest bilateral donors – Denmark, Finland, the Netherlands, Sweden and Germany – who have a vested interest in locking in the fresh funding. A strong collective decision on Ukraine could make it more politically palatable for them to accept – or rather, tolerate – a bigger budget than they might have wished. "It might be helpful to get it done," another diplomat said. But an alternative view is that the “Frugals’” continued push to cut funding for agriculture and cohesion policies could make it impossible for some “Friends of Cohesion” to back a deal on Ukraine without triggering a backlash at home. The Czech Republic, Hungary and Slovakia are signalling they will exempt themselves from any joint debt to support Kyiv. Bulgaria, a vocal critic of weapons deliveries, is expected to follow suit. All of them sit in the cohesion group. Making matters more difficult, the talks will unfold against a bleak backdrop of elevated energy prices, high borrowing costs and public discontent across Europe. "It would be very dangerous, and I want to make this absolutely clear, if anyone tried to link the financing of Ukraine to the budget," Slovak Prime Minister Robert Fico said. "It would be a miracle if we reached an agreement in December."