EU budget battle erupts as four countries defy Germany's Merz over Ukraine aid

Hind Al Soulia - Riyadh - BRATISLAVA — Slovakia's Russia-friendly prime minister Robert Fico accused the German chancellor of "blackmail" as four EU countries resisted his demand to link approval of the bloc's next long-term budget to fresh financial support for Ukraine.

Friedrich Merz has signaled he will block the EU’s seven-year budget unless there is a deal on financial aid for Ukraine, setting the stage for stormy talks later this month.

The German chancellor’s intervention has angered leaders in central Europe who are net beneficiaries of EU funds but do not want to take part in an upcoming funding round to support Ukraine’s war effort.

The leaders of the Czech Republic, Hungary and Bulgaria have also pushed back against Merz's ultimatum.

Fico denounced the German move as a "textbook case of blackmail" and threatened to wield his veto.

"We have an equal say in this matter," Fico said on Tuesday as he welcomed his Czech counterpart, Andrej Babiš, in Bratislava.

"Just as Mr Merz talks about using his veto, I can say exactly the same. We have the same veto power as the German federal chancellor."

Babiš quipped that Merz "probably doesn't realise" that the proposed EU budget already earmarks €100 billion for Ukraine. However, those funds will not become available until 2028, while Kyiv faces a €70 billion shortfall next year.

"Today will not be business as usual – not by a long shot. Today, we must respond to blackmail," Fico said, expressing his displeasure.

"What the federal chancellor is doing is a textbook case of blackmail, and I reject it. We are a sovereign country. We are the Slovak Republic. We have our own views."

Merz upped the ante in a letter to European Council President António Costa, declaring that fresh aid for Ukraine was an "essential prerequisite" for approving the next EU budget. The move effectively links two highly contentious issues, both of which require unanimity.

Brussels has promised to cover two-thirds of Ukraine's €70 billion gap, roughly €45 billion, through a yet-to-be-defined instrument. Given the massive scale of the needs, a new round of joint debt has quickly emerged as the frontrunner option.

The new funding would come on top of an existing €90 billion support loan, from which Slovakia, the Czech Republic and Hungary secured exemptions.

"Supporting Ukraine is a matter of our indivisible European security, and so must be the burden sharing for that support," Merz wrote.

Merz received Hungarian Prime Minister Péter Magyar in Berlin on Tuesday, just a day after the letter became public.

At the end of the bilateral meeting, Magyar made clear he opposed linking the EU budget with Ukraine aid, arguing the two issues are intrinsically distinct.

"It is possible, obviously, that it has to do a lot with politics. I do not consider this to be blackmail. So I do not use any such words, because everything is connected to everything in today's world," he said, referring to Fico's earlier comments.

"But I think that this does not necessarily have a good message."

Magyar said Hungary could not commit to fresh debt at the European level because it is already struggling to rein in its soaring public deficit.

"In this regard, this is obviously unacceptable for us for domestic political reasons, but we will negotiate in Berlin, Dublin and Brussels," he said.

"We will find a solution for the EU budget. I am sure of it."

Speaking in Varna, Bulgarian Prime Minister Rumen Radev also pointed to high deficit levels as a reason to exempt his country from future credit lines to Ukraine. Radev said his country will continue support through other means, such as energy flows.

"Bulgaria is in no way blocking the decisions at the Council level that are taken in unity for everyone to support (Ukraine) as they can," Radev said.

Slovakia, the Czech Republic, Hungary and Bulgaria all belong to the "Friends of Cohesion", a group of 17 countries that wants to protect cohesion and agricultural funds in the next long-term EU budget. This has put them on a collision course with the "frugals", who demand across-the-board reductions.

The "frugals" include some of the largest donors to Ukraine, such as Germany, and resent how Slovakia, the Czech Republic, Hungary and Bulgaria are trying to opt out of supporting Ukraine while, at the same time, demanding cohesion funds.

Speaking alongside Magyar in Berlin, Merz insisted that support for Ukraine must be shared more fairly.

"It's not a good option to continue down this path. Ukraine policy should be fully included in the European Union budget," he said.

"At least four countries think differently, but it is definitely important to talk about this."