The EU is trying to organise a new Ukraine loan of roughly €45bn to cover about two-thirds of Ukraine’s €70bn funding gap next year, as the EU’s Council approves another €4.9bn in military assistance under a separate programme previously blocked by Hungary.

Kyiv is short of cash as the previous €90bn loan approved in April is not enough after Bankova, Ukraine’s presidential administration, heavily over spent on drone purchases in the first half of this year, according to Ukrainian President Volodymyr Zelenskiy.

He has been asking for at least an addition €70bn to cover planned expenditures through to the end of next year. The original €90bn loan was never intended to cover more than two thirds of Ukraine’s costs until the end of 2027, but Ukraine’s non-EU G7 partners have yet to commit to covering the missing sum. Now all those asks have gone up again leaving Bankova in an increasingly precarious situation.

Meeting in Brussels, MEPs are trying to thrash out a new plan to finance the scheme before a special European Council meeting on November 26-27, sources told Ukrinform. Leaders aim to agree the package by year-end, backed by guarantees from the current EU budget, five EU diplomats and officials told Politico the same day.

Using Russia’s frozen central bank assets is now unlikely, as Belgium continues to stonewall the idea, and the lack of agreement among other member states on sharing the financial and legal risks.

That leaves the only option of collective EU borrowing for the third time ever at the European level, something many states like Germany are very reluctant to do. Previously, the EU issued collective debt for a post-coronavirus stimulus package and the €90bn loan in April was also cover by EU bonds.

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 this funding was built on the assumption that the war would end in 2026. President Volodymyr Zelenskiy told EU leaders at their October summit that next year’s war bill would be €155bn, suggesting that he will be back in Brussels next year asking for additional funding on top of the current proposals. Both Ukraine and Russia continue to scale up their war spending, as detailed in a recent IntelliNews feature on war and money.

€4.9bn short-term European Peace Facility military funding

Separately, the Council adopted eight decisions on October 26 mobilising €4.9bn under the European Peace Facility (EPF), comprising €4.7bn to reimburse member states for military aid already delivered to Kyiv and €230mn for the EU Military Assistance Mission in support of Ukraine (EUMAM).

The decisions bring total EPF support for Ukraine to €10.8bn, including €9.9bn in military aid reimbursements and €950mn for training, the Council said.

They implement part of a September 25 agreement to unlock €6.6bn following a long-running Hungarian veto under Viktor Orban, who was ousted from office earlier this year. The agreement came after Peter Magyar’s government replaced Orban’s following his election defeat in April.

That deal envisaged €4.7bn in reimbursements, €1bn for new joint procurement and about €900mn for EUMAM, including reinforcement in 2027, EU foreign policy chief Kaja Kallas said at the time. The October decisions therefore cover only part of the agreed package.

The EPF is an off-budget military assistance fund, and reimbursements are paid to member states rather than directly to Ukraine’s government. Some countries intend to use the money to finance further military support for Kyiv, Kallas has said.

Brussels also expects unspent loans from the SAFE  (Security Action for Europe) defence instrument, part of the ReArm Europe programme, to support joint defence projects with Ukraine worth potentially more than €20bn.

But the proposed new loan faces divisions over burden-sharing. Czech and Slovak leaders indicated at this month’s summit that they would again stay outside the borrowing arrangement, while Hungary is also likely to opt out, two diplomats told Politico. Czech Prime Minister Andrej Babis said afterwards that “Czechia will not guarantee for it”. Bulgaria has also opted out last week.

Those divisions are spilling into negotiations over the EU’s 2028-2034 budget. Germany and five other net contributors have threatened a veto unless hundreds of billions are cut, mostly from cohesion and agricultural funding on which Central and Eastern Europe depends.

Kyiv’s strongest supporters warn that countries refusing to share Ukraine’s financing burden could find less support for their demands for a larger EU budget.

“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?” a German diplomat told Politico.

Another EU diplomat warned against funding Ukraine while cutting programmes for Europeans. “It would be better to fund both,” the diplomat said.

The EU is pressing other G7 countries, Switzerland, Norway, Australia, New Zealand and international lenders to cover the remaining gap, but does not count on US support. European Council President Antonio Costa has said Britain, Canada and Norway are expected to provide the remaining €23.3bn, as Europe struggles to offset the loss of US military funding.