EU member states scramble to finalise budget top-up talks, secure Ukraine package

On the eve of a decisive EU summit, member states are in eleventh-hour negotiations to secure a deal to increase the EU’s budget this week but disagree on where to make the cuts to fund it.

Member states are asking to reduce their additional national contributions to the minimum and for redeployments and use of unallocated funds instead but disagree on where to cut, with the question being now asked directly to leaders.

The outcome of an agreement on the package remains unclear at the time of writing, including on a deal for Ukraine’s €50 billion lifeline.

“We are heading into a difficult European Council (…). All delegations have different requests on migration and defence,” one EU senior official said.

Despite different positions across the bloc, “the push to have a solution [this week] will be quite high, I think leaders will be tempted to close this before the end of the year,” they added.

The European Commission in June tabled a €98.8 billion package, including €66 billion in fresh money, to increase the initial seven-year budget, which it says was exhausted by crises, such as support to Ukraine and the COVID pandemic.

The EU budget package also includes a €50 billion aid to Ukraine to help keep the war-torn country’s economy afloat.

In the October EU summit, several leaders – including Belgium, Germany, and Denmark – spoke out against the Commission’s proposal, asking to re-purpose funds and unused money as they struggle to address the cost-of-living crisis. Hungary’s Prime Minister Viktor Orbán also criticised the fund for Ukraine. 

But the series of ‘Negotiating Box’ proposals, drafted by the Spanish EU presidency and European Council President’s cabinet, have so far failed to convince the member states.

How to save €50 billion for Ukraine

As a priority, EU ambassadors have sought a deal to secure a €50 billion Ukraine Facility.

After months of resistance, Budapest could green light on a Ukraine ‘package deal’ if Brussels unblocks all funds frozen by the bloc over concerns about the rule of law, Orbán’s political director Balazs Orbán told Bloomberg on Tuesday (12 December), a day before the Commission’s is expected to unlock €10 billion in EU funding.

The comments come as EU diplomats believed that Orbán is exploiting his veto power to blackmail Brussels into resuming Hungary’s suspended EU funds payments and split the budget package in two.

“We are open to discuss dedicated budget or fund for Ukraine”, but “if we intend money for Ukraine, it should not be part of the EU budget, but handled outside,” Zoltan Kovacs, Secretary of State for International Communication, told reporters last week.

“We have to secure Ukraine”, one EU diplomat said, worried the whole package would fall through.

“Even at 26, with some sort of closer cooperation, without Hungary”, they said, outside the framework of the EU budget, “with bilateral commitments, for example”.

Budget Commissioner Johannes Hahn told reporters, including Euractiv, that if Orban hampered the agreement on Ukraine’s package, a Plan B could be considered.

He, however, insisted that “some member states also said that [agreeing on] Ukraine only is not acceptable”.  A second EU diplomat told Euractiv that most member states are against splitting the package in half.

“We will continue fighting for a full revision of the [budget],” the EU senior official said.

In the meantime, the current scheme contains ideas to lower the amount of fresh money given for the €50 billion fund, according to documents seen by Euractiv.

An earlier proposal planned to re-purpose the member states’ money to pay Ukraine’s interest costs, agreed last year, for the €50 billion fund. This would have effectively lowered the overall amount of the fund. It was deleted, showing member states’ discontent.

However, elements of re-purposing of EU funds to Ukraine’s facility remain in the proposal of around €2 billion, which different member states criticised, two EU diplomats said.

Name of the game: re-deployments

The idea to re-purpose EU funds to new priorities was put forward by different non-papers from Austria, Denmark, Sweden and Finland, seen by Euractiv and taken forward by the framework proposals throughout the autumn. According to the Copenhagen, €18.2 billion is still available in the budget.

The latest internal proposal by Michel’s cabinet on Tuesday (12 December), seen by Euractiv, tables a €64,6 billion top-up, including 33 loans for Ukraine.

With €9,1 billion found in the existing budget that would be re-purposed for the new priorities, fresh money would only account for €22.5 billion.

The text came after another plan to cut much more into the top-up, including aid for handling migration flux and relationships with other countries of transit and departures, which irked several countries.

Despite France’s push for the €10 billion STEP fund (Strategic Technologies for Europe Platform) to boost competitiveness, it is cut to €1,5 billion for the European Defence Fund and could otherwise be funded by existing programmes.

Other countries suffering from natural disasters want to amp up the EU-funded civil protection to fight against forest fires and send aid to the flooded.

[Edited by Jonathan Packroff/Alice Taylor]

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