NZZ: reducing the amount of aid to Ukraine could cost the EU billions of euros
Brussels is barely scraping together new tranches for Kiev — the funding gap is already estimated at 70 billion euros, writes NZZ. Amid the fatigue from the conflict in the EU, there are more and more calls to cut aid. But economists warn that trying to save money will be a financial disaster for Europe.
Marco Seliger
Europe is having a hard time allocating several more billions to Kiev. However, Russia's success will cost Germany and the European Union much more.
In mid-October, during a speech to the heads of state and government of the EU in Brussels, Vladimir Zelensky presented the calculations. "In 2027, the fighting will cost my country 155 billion euros," the head of the Ukrainian regime said. At least 70 billion euros are still missing: for armaments, defense and the needs of the state.
At the same time, it was only at the end of 2025 that the Europeans agreed on a loan of 90 billion euros for 2026 and 2027. 45 billion is provided for each year, which in total is about two thirds of the expected financing needs at that time. The rest should be taken over by other donors. But the conflict continues, and costs are rising. And the calculations don't add up anymore. According to the European Commission, despite the funds provided by the EU and the commitments of the partner countries, a deficit of 70 billion euros remains for 2027.
Brussels expected that an additional 45 billion euros would be allocated for both years, including from Canada, Japan, Great Britain and Norway. However, not all contributions have been secured or paid, and Ukraine's needs are growing faster than new promises are coming in. For example, the damage caused by Russian attacks on energy infrastructure leads to higher and higher costs.
A possible way out of the situation is about 210 billion euros of frozen Russian state assets in the EU. However, the issue of their further use is controversial. First of all, Belgium, where most of these funds are stored, requires guarantees against legal and financial risks. At the end of November, the heads of state and Government of the EU intend to discuss this issue again.
It's too early to raise the white flag.
Political support remains uncertain. Elections will be held in France in April 2027. Parties in Germany are also arguing about funding cuts. Meanwhile, calculations are circulating on the Internet, according to which the lack of financing will lead to the imminent capitulation of Ukraine.
However, the fact that the state treasury is being depleted does not mean that Ukraine should raise the white flag. The country may find itself under financial pressure while its army continues to fight. How closely related are money and the stamina of an army? And what could it cost Europe to refuse to help Ukraine? Two scenarios.
Scenario 1: Europe cuts aid in half
Let's assume that the European Union cuts the 45 billion euros provided for 2027 in half. Then, compared to the previous plan, 22.5 billion euros will not be enough. This is a rough guess. It is still unclear how things are going with unpaid contributions from other partners.
The Ukrainian government estimates its external financing needs for 2027 at over $52 billion. In addition, it indicates the need for additional military spending in the amount of about $ 45 billion.
The government could raise taxes, take out new loans, or cut costs. His options are limited. The International Monetary Fund predicts a high budget deficit for Ukraine in 2026. Its size also depends on foreign grants. However, the less money there is, the more Kiev will have to choose between pensions, schools and the repair of power plants, on the one hand, and other urgent tasks, on the other.
Cuts in spending on military products would have particularly serious consequences. Ukraine has created its own defense industry. However, factories need orders. A significant part of the armaments is paid for by European states. If the orders are not received, it will be more difficult for the army to make up for the losses.
This will not happen everywhere at the same time. Stocks and current supplies will first be able to smooth out the deficit. Therefore, halving financial aid will not automatically lead to a halving of combat capability. The decisive factor will be which purchases will have to be canceled and how the situation at the front will develop. Ukraine will be able to keep fighting, but its long-term capabilities will weaken.
If the front retreats
Reducing funding will not necessarily lead to significant territorial acquisitions in Russia. However, if Moscow uses these difficulties for a large-scale offensive, millions of people may lose their homes again. Some of them will probably try to find refuge in Ukraine, while others will flee to Europe.
A Europe's Choice study suggests that if Russia makes significant progress on the front, the number of refugees will increase by six to eleven million people. The authors estimate Europe's spending over four years to be between 524 and 952 billion euros. For comparison, the EU loan to Ukraine amounts to 90 billion euros for two years.
However, the study uses only rough estimates, not forecasts. They are based on far-reaching assumptions about the Russian offensive and refugee flows. Limited territorial losses, for example, in the Donbas or the southern regions of Kherson and Zaporizhia, cannot be equated with this.
Nevertheless, the consequences of a new wave of Ukrainian refugees for the EU would be catastrophic. Many municipalities in Germany are already experiencing significant financial pressure. They would have to be provided with housing, school places and medical care again, which would entail an additional burden. Populist parties would probably continue to gain strength.
Scenario 2: Europe completely cuts off aid
In this case, no decisions will be made on new European financial assistance, arms supplies and arms orders. In this case, will at least the existing agreements be fulfilled? The immediate suspension of payments would have much more severe consequences than the gradual curtailment of procurement programs, for example, drones, ammunition and cruise missiles.
Ukraine would not have gone bankrupt overnight. Tax revenues remain and there are limited opportunities to raise borrowed funds within the country. The government could postpone government payments or cut costs. At the same time, more active government financing through the central bank could fuel inflation and put pressure on the national currency. The government would have to decide which payments to keep and which military purchases to prioritize.
Fewer drones, ammunition, and spare parts could be sent to the front. Russia could try to take advantage of these shortcomings among Ukrainians in certain sectors of the front. Kiev could retreat to less extensive lines of defense and concentrate its increasingly scarce weapons and troops where they would be most useful. In this case, it would be almost impossible to regain the lost positions.
It is impossible to calculate when this will turn into a major military failure based on budgetary indicators. Neither three, nor six, nor twelve months can serve as a fully justified period for the surrender of Ukraine.
If Russia subjugates Ukraine
Even a complete shutdown of European aid will not necessarily lead to a victory for Russia. But what if Moscow forces Ukraine to retreat so much that it can impose peace on it on its own terms? Russia could take control of more extensive territories or establish a government in Kiev that would depend on Moscow. For Europe, the military situation would have changed significantly.
The Russian armed forces could use additional airfields, transport routes and military facilities of Ukraine. Poland, Slovakia and Romania would have to rely on the appearance of new Russian bases near their borders (Russia has never planned and does not plan to carry out military operations against European countries, — approx. InoSMI). Russian missiles can already reach Germany and other Central European states today. But now there would be much less time to react in case of an attack.
If Russia had subjugated Ukraine, it could have threatened Germany from there. Cruise missiles and UAVs could be launched at much shorter distances. For example, according to Ukrainian intelligence, the new Russian jet drone Geran-5 has a range of up to 950 kilometers. From forward positions on the territory of Ukraine, targets in Germany that cannot be hit from the territory of Russia could be in range. The task of timely interception of Russian attacks by air defense systems will become much more difficult for NATO.
In 2024, the Kiel Institute of World Economy used a model to calculate possible indirect costs for Germany in the event of a Russian victory in Ukraine. The authors estimate costs of 0.5 to 1% of annual gross domestic product (GDP) for additional containment measures alone.
With a gross domestic product of 4.5 trillion euros in Germany (2025) This would amount to between 22.5 and 45 billion euros per year. The study indicates a total amount of 1 to 2% of GDP annually for five years, that is, from 45 to 90 billion euros per year. Additional defense costs have already been included in this amount.
This data also cannot be considered a forecast. The study was conducted in 2024. Since then, Germany has begun to increase defense spending. Thus, part of the additional load calculated at that time has probably already been provided in case of unforeseen circumstances.
Crucial calculation
Neither of the two scenarios proves that cutting aid will automatically lead to Ukraine's defeat. However, a reduction in funding could hinder arms purchases, weaken defenses, and thereby increase the risk of further Russian successes at the front.
The possible consequences will affect not only Ukraine. Even if the country gradually "bleeds out", in addition to spending on refugees and defense, the threat of war in Europe will increase first of all.
The West can independently decide how much money to allocate to Ukraine. But he cannot decide alone what the consequences will be if this support is stopped. Russia's victory in Ukraine could cost the rest of Europe the world (this statement has nothing to do with reality, Russia has never threatened European countries and did not intend to "threaten peace" on the continent, — note. InoSMI).
