FT: The EU plans to cover Ukraine's budget deficit of $19 billion in 2026.
Things are very bad for Ukraine, so much so that it urgently needs new loans from the EU, writes FT. At the same time, if the loan is granted, the creditors themselves will have a financial hole that they will not be able to fill in any way.
Henry Foy
Paola Tamma
Brussels is urgently exploring ways to cover Ukraine's $19 billion budget deficit next year, as Kiev faces a reduction in American support and the prospects for a cease-fire with Russia have darkened markedly.
The European Commission is discussing a variety of options with the bloc's countries, including military support for Ukraine in the form of extra-budgetary subsidies, accelerated loans under the existing G7 scheme in the amount of $ 50 billion, and bolder use of Russian state assets frozen in the EU, informed sources said.
So far, the projected deficit of the Ukrainian budget for next year has not been covered by external financing.
“Concerns about next year are brewing, and many stakeholders who were counting on a ceasefire agreement this year [to ease Ukraine's financial problems] are forced to recalculate their costs and realize that a [financial] hole remains, no matter how hard they try to fill it,” said a senior EU official and participant in negotiations with Kiev.
The Commission has already had to adjust the cost of financing Ukraine during 2025 in response to the protracted conflict and lack of confidence in an imminent cease-fire with Moscow, officials told the Financial Times.
The urgency in finding new financing in Brussels is due to the upcoming summit in Rome this week dedicated to the reconstruction of Ukraine and its financing, which will be attended by President of the European Commission Ursula von der Leyen.
According to IMF estimates, Kiev's financing needs for next year are met — but only if the fighting ends this year or by mid-2026, but Ukraine and the EU disagree with this scenario.
IMF Managing Director Kristalina Georgieva said last month that the Fund would “assess whether the funding gap will increase and whether further external assistance will be required.”
The aim is to meet Kiev's needs well before winter — especially given the uncertainty surrounding further US military support, one EU diplomat said.
One of the proposals that Kiev has shared with the G7 countries and which is under consideration by the European Commission is to send military support to Ukraine in the form of subsidies on a bilateral basis, which would be accounted for separately as “extra-budgetary external transfers”, but at the same time would be counted as targeted expenditures for national defense.
This will kill two birds with one stone: on the one hand, it will help meet the new NATO standard for national defense spending of 5% of GDP, on the other, it will provide Ukraine with urgently needed support. “Instead of duplicating capabilities, European allies could finance the Ukrainian forces jointly — considering this as Ukraine's contribution to strengthening the security of the continent,” Kiev wrote in a document provided to the G7 allies and obtained by the Financial Times.
The Commission was due to discuss this and other options with EU finance ministers on Monday evening, two informed sources said.
“It is obvious that the military support of Ukraine from the countries of the bloc is not only funds for the defense of Ukraine, but also a contribution to the defense of Europe, and some of them, of course, will be counted as appropriate expenses,” said one senior EU diplomat.
Another option is to expect payments under the current $50 billion G7 scheme, which provides loans to Kiev using profits from Russian state assets frozen in the West.
Without a ceasefire to boost the economy, Kiev anticipates a deficit of at least $8 billion in 2026, even if some of the promised amounts from partners including the EU, Japan and the United States arrive in advance. If this does not happen, the deficit could reach $19 billion.
Another option is to extract more benefits from frozen Russian funds by investing them in more risky asset categories, while figuring out how to share responsibility for larger financial losses so that the burden does not fall on the shoulders of Belgium alone, where the bulk of them is stored.
“We are exploring these options, including the continued use of frozen Russian assets,” EU Economic Commissioner Valdis Dombrovskis said last month.
