European Council President António Costa has sought to ease tensions with German Chancellor Friedrich Merz after Berlin linked approval of the next European Union budget to a new financial commitment for Ukraine. The dispute is expected to feature at an informal European Council meeting in Dublin this week, while formal decisions on the EU budget and Ukraine financing are likely to be addressed at a special summit later this month.
The disagreement places two difficult issues at the centre of European politics: how to cover Ukraine’s projected €70 billion financial shortfall and how to secure unanimous support for the EU’s next long-term budget. Several member states have already rejected Merz’s demand that all countries participate in future Ukraine financing.
What Costa said about the EU budget and Ukraine
In a letter seen by Euronews, Costa indicated that EU leaders could hold a broad discussion on Ukraine during the informal meeting in Dublin. He also said the more detailed debate on the two linked issues would take place at a special summit in Brussels later in November, after the European Commission presents proposals for addressing Ukraine’s funding gap.
Costa’s response leaves room for Merz to raise the matter earlier than planned, but it does not amount to agreement on the German position. The European Council president is attempting to keep discussions on military and financial support for Ukraine moving while preserving the formal timetable for negotiations on the EU budget.
Why the EU budget dispute matters
The European Union has committed to covering around two-thirds of Ukraine’s estimated €70 billion shortfall, equivalent to approximately €45 billion. The financing instrument has not yet been defined. However, a fresh round of joint EU borrowing has emerged as the leading option because of the scale of the requirement.
Any proposal involving common borrowing would be politically sensitive. It could require member states to share financial responsibilities over a substantial period, while governments would need to settle the legal, budgetary and repayment arrangements before a final decision could be taken.
The next long-term EU budget is also highly contentious. It will determine spending priorities and financial contributions across the Union, and approval requires unanimity among member states. Merz’s position therefore connects Ukraine support to a separate negotiation in which every national government has a potential veto.
Key points in the dispute
- Ukraine is facing an estimated €70 billion financial gap.
- The EU has pledged to cover about €45 billion, or roughly two-thirds of that amount.
- The funding mechanism has not yet been agreed.
- Joint EU borrowing is being considered as the leading option.
- Merz has described new Ukraine aid as an essential condition for approving the next EU budget.
- Both the Ukraine financing decision and the EU budget require unanimity.
Four countries reject the ultimatum
Slovakia, the Czech Republic, Hungary and Bulgaria have pushed back against the German demand. The four countries want to avoid participation in any future loan for Ukraine, creating an immediate obstacle to a financing plan based on collective responsibility.
Slovak Prime Minister Robert Fico has described Merz’s position as “blackmail”. That criticism underlines the depth of the political divide, although the disagreement is also about financial exposure and the process by which member states would be required to participate.
The opposition means that agreement cannot be assumed at either the Dublin meeting or the later Brussels summit. Leaders will need to determine whether a common instrument can accommodate governments that do not want to join a future loan, or whether a different funding model will be required.
What happens at the Dublin meeting?
The informal European Council meeting in Dublin is expected to provide an opportunity for leaders to discuss Ukraine’s financial and security needs. Because the meeting is informal, it is not necessarily the stage at which a legally binding budget decision will be adopted.
Instead, the discussion may help identify the positions of national governments before the European Commission publishes its proposals. The special summit in Brussels later this month is expected to be the more important moment for negotiating the proposed Ukraine financing and its relationship with the next EU budget.
Further technical work will also be needed. Leaders must establish the structure of any loan or other instrument, decide how contributions would be calculated, and clarify how countries that oppose participation would be treated. The precise arrangements remain undecided.
Implications for Ireland and the wider EU
Ireland is among the EU member states that would be involved in discussions on both the Union’s budget and future support for Ukraine. The outcome could affect Ireland’s future financial commitments, although no final mechanism has been agreed and the source material does not specify the scale of any national contribution.
More broadly, the dispute tests the EU’s ability to combine support for Ukraine with agreement on its long-term finances. It also highlights the limits of unanimity when governments have different views about common borrowing, national liability and the strategic importance of continued assistance.
The debate is not yet a final EU decision. Costa has opened the door to an early political discussion, while the European Commission still needs to present its proposals and member states remain divided over whether a shared loan should be used.
What to watch next
- The discussion on Ukraine at the informal European Council meeting in Dublin.
- The European Commission’s proposals for covering Ukraine’s financial shortfall.
- Whether the four opposing countries maintain their demand to opt out of a future loan.
- The special European Council summit in Brussels later in November.
- Whether leaders can separate or successfully link Ukraine financing and the next EU budget.
The immediate takeaway from this latest EU policy dispute is that political talks are advancing, but no agreement has been reached. Costa’s response may prevent the budget negotiations from stalling immediately, yet the need for unanimity means the EU still faces a difficult path before it can approve either a new Ukraine financing instrument or its next long-term budget.