Trump’s Plan for Europe to Foot Ukraine Bill Ups Budget Pressure

Donald Trump’s plan to allow the European Union pay for arms supplied to Ukraine is piling pressure on EU officials negotiating how to finance the bloc’s defense-spending ambitions. 

The deliberations are feeding into the hard-fought talks to draw up the 27-member EU’s €1.2 trillion budget, as member states begin a two-year process for carving out a consensus. While many European capitals want to embrace standard funding for farmers and regions — amounting to two-thirds of the budget — others are keen to divert financing to new and more urgent issues, such as defense. 

“So many priorities, so little money,” Czech Foreign Minister Jan Lipavsky told reporters Tuesday, saying defense spending would have to compete with existing demands such as agriculture. Talks will be “very difficult,” he said. 

The EU’s complex budget process takes place against a shifting geopolitical landscape, with the US under Trump tilting away from European security and the region’s commitment to back Ukraine’s effort to defend itself against Russia’s assault. The US president this week pledged a “top-of-the-line” weapons package, but said Europe’s NATO allies will have to foot the bill. 

The European Commission, the EU’s executive arm, will present a draft of its seven-year budget for the period starting in 2028 Wednesday, with security and competitiveness topping the agenda. Some countries are reinforcing a push to deploy joint borrowing to add to the bloc’s leverage, which could benefit Kyiv.

The myriad moving parts of the process are complicated by the EU’s need to accelerate rearmament after years of underinvestment. Russia’s war, now in its fourth year, and wobbling US support have laid bare the continent’s need to bolster its military capability. 

Trump’s proposal to provide weapons financed by European coffers met with a lukewarm response on Tuesday. The EU’s top foreign-policy official, Kaja Kallas, warned that if the bloc pays for US arms, it would amount to European support.

“We’re doing as much as we can to help Ukraine,” Kallas said. “The call is that everybody would do the same. If you promised to give the weapons but say someone else is going to pay for it, it’s not really given by you, is it?”

Whatever defense spending is earmarked by the EU is separate — and much less — than what member states are investing individually. Defense Commissioner Andrius Kubilius estimated that EU financing would be on the order of 40 times less than national defense spending over the next budget period. 

The bloc’s treaties don’t allow EU funding to be used for weapons purchases from the US for Ukraine, Kubilius told Bloomberg News. But capitals can be prompted to use a bloc-wide €150 billion loan fund for joint procurement, potentially freeing up national funds for off-the-shelf purchases from the US. 

The considerations are all the more difficult as many EU governments struggle to rein in an ever-mounting debt pile. At an EU summit last month, German Chancellor Friedrich Merz warned that the pileup in credit among states and companies fueled the risk of a new financial crisis. 

Others, including Spanish Prime Minister Pedro Sanchez, have asked how a new NATO commitment to ramp up defense spending to 5% of economic output could be delivered given the constraints on public finances, Bloomberg reported.

Member states including France, Spain and Greece have promoted joint borrowing as an avenue to leverage more financing. Spain floated offering non-refundable grants to members on the region’s eastern flank. Italy is among governments insisting that relying on national debt isn’t sustainable, given the fragile state of finances in some capitals. 

Some nations long opposed to big European budgets are now more open to innovative solutions, including Denmark. But in closed-door discussions in recent days, Germany and the Netherlands have maintained their rejection of issuing common debt for defense spending, people familiar with the matter said. 

Lipavsky on Tuesday said he opposed joint debt, remarking that he wanted to see pandemic-related debt — for which the bloc did open its purse strings with joint bonds — repaid first. 

The EU set up the €150 billion loan instrument, financed by common debt, to provide cheap credit to member states that could participate in joint procurement with some countries including Ukraine. European Commission President Ursula von der Leyen told members to use this credit to invest directly in Ukraine, since 40% of industrial capacity is unused. 

“Our member states can take their SAFE loans and procure directly from Ukraine’s defense industry. For our member states it’s high quality, fast, and cheap,” she said this month. “For Ukraine, it’s both — crucial revenues, but also the opportunity to strengthen its defense industrial base.”

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