The 2027 financing problem
The EU aims to organize a new €45bn loan to cover two-thirds of Ukraine’s €70bn funding gap in 2027. This follows President Volodymyr Zelenskiy’s report to EU leaders at their October summit that the war bill for next year will reach €155bn. Kyiv faces a cash shortage because Bankova overspent on drone purchases during the first half of this year, making the previous €90bn loan approved in April insufficient. The new loan would come on top of the €45bn already due in 2027, the second tranche of the €90bn package, and the final year of the €50bn Ukraine Facility, all of which assumed the war would end in 2026. Negotiators in Brussels attempt to finalize a plan before the special European Council meeting on November 26-27 to reach an agreement by year-end. I find the reliance on collective EU borrowing a difficult path because Germany remains reluctant and Bulgaria opted out last week. Czech Prime Minister Andrej Babis stated, "Czechia will not guarantee for it," following comments from Slovak and Czech leaders who indicated they would stay outside the arrangement.
Military aid and funding details
The Council adopted eight decisions on October 26 to mobilize €4.9bn under the European Peace Facility. This amount includes €4.7bn to reimburse member states for military aid already delivered to Kyiv and €230mn for the EU Military Assistance Mission. These decisions implement part of a September 25 agreement to unlock €6.6bn after the Hungarian veto under Viktor Orban ended following the April election of Peter Magyar. Total EPF support for Ukraine now reaches €10.8bn, consisting of €9.9bn in military aid reimbursements and €950mn for training.
| Financial Component | Value |
|---|---|
| October 26 EPF decision | €4.9bn |
| Total EPF support | €10.8bn |
| Target for non-EU partners | €23.3bn |
| Potential SAFE defence projects | >€20bn |
The September 25 deal previously envisaged €4.7bn in reimbursements, €1bn for new joint procurement, and about €900mn for EUMAM, according to EU foreign policy chief Kaja Kallas. European Council President Antonio Costa expects Britain, Canada, and Norway to provide the remaining €23.3bn. The EU also presses Switzerland, Norway, Australia, and New Zealand to cover the remaining gap, though it does not count on US support. I find the division over burden-sharing concerning as countries refusing to share Ukraine’s financing burden could find less support for their demands for a larger EU budget. Germany and five other net contributors have even threatened a veto against the budget unless hundreds of billions are cut from cohesion and agricultural funding on which Central and Eastern Europe depends. A German diplomat told Politico, "How can anyone seriously believe that our taxpayers would be willing to send even one more euro in cohesion funds to those who refuse to take part in defending against the greatest threat to the security of us all?"
