Ukraine needs another €70 billion, but where will the EU find the money?

The European Union is scrambling to find an additional €70 billion for Ukraine next year, after Russia's escalating assault on the country and its economy rendered the bloc's existing financial support plans insufficient.

At the end of a two-day summit last week, EU leaders heard directly from Zelenskyy about the scale of the shortfall.

"The war will cost €155 billion next year. And we need at least €70 billion more from you: for defence, for weapons, and for our resilience. This is a realistic amount. And I ask you to find this support. It will help us hold Russia back," he said.

According to Zelenskyy, the extra injection of cash will help Ukraine ramp up domestic production of its cutting-edge drones to stop Russia's advances on the battlefield, disrupt its supply chains and undercut its war apparatus.

"We really need at least €70 billion additionally for next year," he added.

The appeal struck a chord. EU leaders tasked the European Commission with exploring ways to plug the gap, which is considerably larger than Brussels had anticipated.

Faced with a swelling bill, Brussels has been quick to stress that the €70 billion will be a "joint effort" with other allies, such as the UK, Norway, Canada and Japan.

"We always said that we cannot walk this alone. We cannot do this all alone. Therefore, our partners in general must step up," a Commission spokesperson said.

"They have to come forward with pledges, and they have to deliver on those commitments. This is very important."

It is not yet clear how much of the €70 billion the EU will provide, given that the previous split of two-thirds vs one-third has not worked out as planned. Nor is it clear how quickly Kyiv will need the money. What is clear is that the options for raising such a vast sum at short notice are severely limited.

Adding to the pressure, the high-stakes negotiations will unfold in parallel with the bitter fight over the next long-term budget and the lead-up to the French presidential election, where frontrunner Marine Le Pen has vowed to end all aid to Ukraine.

Tapping the markets

Raising fresh joint EU debt on the financial markets, as Brussels is already doing for the €90 billion loan, currently appears the most likely option, according to diplomats and officials. The Commission could increase the existing credit facility, effectively extending the current financing arrangement.

The financial landscape, however, has sharply deteriorated since December, when leaders signed off on the loan. Borrowing costs have soared worldwide in response to surging oil prices, rising public debt and strong demand for AI spending.

European countries have been hit particularly hard, especially those already heavily indebted. Belgium is now borrowing at rates comparable to Greece, while France is paying more than Italy.

This makes the prospect of fresh debt politically sensitive, even difficult, as it would add to the mounting pile of interest payments.

Hungary, Slovakia and the Czech Republic are already exempted from the €90 billion loan. At last week's summit, Slovak Prime Minister Robert Fico said he and his Hungarian counterpart, Péter Magyar, had agreed to maintain the policy.

"If they (other countries) want to provide a loan to Ukraine, they can do so, but at least two countries are indicating at this point that we will not participate in this financial mechanism," Fico said. "We show solidarity in other ways."

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