The representatives of most EU member states expressed disapproval of the Commission’s proposed €66 billion budget hike during the European Council’s general affairs meeting on Monday, July 10th. Some criticized the size of the financial assistance to Ukraine, others wanted to gain access to their promised funds first, while almost everyone requested more clarifications on how the money will actually be spent.
As we wrote last month, the European Commission recently requested €65.8 billion in additional funds atop the member states usual contribution for the next 4 years to finance its increased operational costs, geopolitical ventures, and unforeseeable challenges.
Out of the total, €17 billion would go to Ukraine in direct financial assistance (along with an additional €33 billion in EU loans that is not part of the €66 billion figure), €15 billion would go to migration management and neighborhood policy, €1.9 billion to cover the growing gaps in the EU’s own operation budget, and—the biggest item—€19 billion for managing the rising debt linked to previous EU loans and spiking interests rates of expensive, long-term projects.
Understandably, most EU members don’t like to be asked for more money halfway through the current budgetary period, as the Multiannual Financial Framework (MFF) was decided years ago up until 2027. While they more or less accept the rationale that the war in Ukraine fundamentally changed the game and we need to adapt, they would also like to know what really is on the tab before picking it up.
The Commission sort of expected the countries to agree to the request during the last EU Council Summit at the end of June, but it seems like it was wishful thinking from the start. Based on Monday’s meeting, we’ll be lucky if there is a consensus by the end of the year, as any kind of agreement can only happen unanimously.
Ukraine: too much or too little?
Regarding Ukraine, the consensus in the room appeared to be that member states are generally supportive of giving money to finance the war, but almost nobody seemed entirely happy with the figure.
In general, ministers from the Eastern European countries, especially Finland and the Baltics, were of the opinion that the €17+33 billion is a good first step, but probably not enough to finance Ukraine’s needs for years.
“We have to remember that Ukraine is a country at war,” Latvian EU ambassador Lelde Līce-Līcīte said during the debate, stressing that the final agreement should contain enough flexibility to muster additional funds to Kyiv whenever needed.
On the other hand, some of the wealthiest Western European states were not so ready to commit tens of billions to Ukraine right away. “Addressing these challenges is important, but reopening the delicate compromise of the MFF is not the way forward,” argued Danmark’s representative, Per Fabricius Andersen.
“This year, we supported Ukraine without a revision. We can do so again,” Andersen added, suggesting reorganizing existing funds and encouraging private sector investments instead.
A few states also raised the issue of the democratic conditionality of the ‘Ukraine facility’—the instrument created to provide predictable financial support for Ukraine for the years 2024-2027. Hungary, for instance, asked the Commission to tie the funds to implementing the EU’s and the Venice Commission’s demands to restore the fundamental rights of national minorities, which Kyiv has been severely restricting since 2017.
Details, weapons, and walls first
France, Greece, and Portugal were generally okay with the idea of the Ukraine facility, but all demanded more details on what the conditionality will be and how the money will be spent, especially regarding all the other items on the Commission’s shopping list.
Sweden was firmly against the entire package—with the sole exception of Ukrainian funds—saying that revising the budget ceiling is out of the question, while the Netherlands—whose government collapsed just days ago—simply said it won’t have a formal opinion before the snap elections in September.
A lot of countries also criticized the proposed increase of the Commission’s operation budget, arguing that most member states are in the midst of downsizing their own public sector, so why would they fund Brussels’ instead? It is enough to think of the €30 billion budget cut Germany announced last week to understand the situation.
Several countries, such as Estonia, Bulgaria, and Croatia strongly suggested that they would be more supportive of the package if it included more investment into Europe’s defense capabilities and would also provide funds for member states’ own military modernization programs.
Poland, while being a bit more assertive, echoed the same sentiment. EU ambassador Andrzej Sadoś called the package “unbalanced” for failing to address “the needs of frontline states,” such as having to deal with refugees, upgrading their military, and building external border protection infrastructure.
Poland and Hungary: let’s take a step back
Of course, the main problem for Poland, along with Hungary, was that they are still waiting for the release of tens of billions of frozen cohesion and recovery funds withheld by the Commission years ago, with the latter financed by the same debt that Brussels now tries to catch up with. Put simply, asking for money from people you owe is not the best idea.
“How can the Commission expect Hungary to contribute to the increased costs while not having any access to the funds?” Hungarian Justice Minister Judit Varga asked during the Council debate. “We are clearly not in a position of bearing only the cost of an instrument that we can’t benefit from.”
Varga also joined the Swedish and Danish positions, pointing out that the MFF has been decided in 2020, and member states unanimously agreed that there won’t be any half-time revisions. What’s more, she said, the Commission is asking member states to foot its operational bill while expecting the same member states to face inflation and economic crises alone.
This is a problem of principle, Varga said, adding that Budapest will talk about MFF reviews after the release of frozen funds and a better explanation of how the initial budget ran dry.
Poland’s Andrzej Sadoś also brought up the issue of the frozen EU funds, implying that Warsaw will not agree to any extra contributions until the matter is solved. “I have to remind the Commission that Poland does not have access to the recovery plan,” Sadoś said plainly, “and at this stage, Poland can not support the unanimous decision necessary to complement the MFF.”
What now?
Budget Commissioner Johannes Hahn was also present at the meeting but had no meaningful replies to these concerns. Nonetheless, he reminded the member states that if they want to help Ukraine, they need to reach an agreement on the rest of the package as well, and in a relatively short time frame.
In order to be able to use the funds as intended, the EU would need a deal by December at the latest, Hahn said. In case the debate spills into next spring, he warned, we risk getting the whole thing sidelined indefinitely by the coming European elections in June 2024.
Therefore, “time is of the essence here,” Commissioner Hahn said. Nonetheless, it’s apparent that if the Commission won’t attempt to meet the member states halfway, there won’t be any deal.
