Brussels – One of the thorniest issues surrounding the EU’s support for Ukraine and the prospect of Kyiv joining the Union remains the financial one. Not only do the potential implications for the EU budget raise concerns, but the current difficulties in securing a common approach to financing Ukraine in 2027 are also prompting questions about whether it might be better to consider a differentiated financing architecture tailored to Kyiv’s needs and challenges.
“This kind of solution could also help to sweeten the deal or make it easier for some countries to agree to Ukraine becoming a new member,” explains Philipp Lausberg, Senior Policy Analyst at the European Policy Centre (EPC), in an interview with The New Union Post, discussing his recently published policy brief on how to make Kyiv’s EU accession work for both sides. “If you can address these two larger issues” – the Common Agricultural Policy (CAP) and cohesion policy – “it may be easier.”
Ongoing disagreements
The current confrontation between German Chancellor Friedrich Merz and Slovak Prime Minister Robert Fico – with the former linking negotiations on the 2028–2034 Multiannual Financial Framework (MFF) to all member states getting on board with providing €70 billion in financing for Ukraine in 2027, and the latter accusing him of holding the EU budget hostage – risks becoming a preview of the political obstacles that could make Kyiv’s accession negotiations even more difficult, as “disagreement is not going to go away,” Lausberg warns.
On the one hand, Czechia, Hungary and Slovakia did not support the first loans, and it seems that all three will also stay out of the next one, along with Bulgaria. “Yet these countries are not the main ones you need for a loan,” the EPC’s Senior Policy Analyst stresses, recalling that, while they will not share the costs if Kyiv is unable to repay the loan, the fact that these relatively small economies are not participating “will not stop another loan.”
On the other hand, “this is more about the distribution of burdens and the leverage Merz uses to get his own point on the MFF across,” which is cutting it down by several billions – something Czechia, Hungary, Slovakia, Bulgaria and several other member states oppose. Lausberg believes that this is “more of a tactical manoeuvre” aimed at putting pressure on the ‘Friends of Cohesion’ in the MFF negotiations. “It is less about whether Ukraine will be financed or not,” he continues, while acknowledging that “it is going to be harder” to raise the requested funds for Kyiv this time.
It is fairly easy to anticipate that “there is going to be some opposition” to Ukraine’s future EU accession. However, “I think that a proposal like the one I made could smooth this a bit,” Lausberg states, introducing his main arguments on the CAP and cohesion policy.
With no EU agricultural subsidies and Ukraine choosing not to comply with all the standards – which would make it “more competitive” in emerging markets, but at the same time it “cannot easily export into Europe” – the issue of protecting EU farmers would be “almost resolved”. Moreover, if an ad hoc reconstruction instrument were preferred over the conventional allocation of cohesion funds, “it can become more a matter of a coalition of the willing, with or without the countries that do not want to contribute.” Those who participate could reap significant returns if Ukraine grows “fairly well after the war,” provided that strong security guarantees are in place.
How to better integrate Ukraine
The integration model proposed by the EPC’s Senior Policy Analyst is “explicitly based on the idea that both sides should benefit from this as much as possible,” addressing concerns that a differentiated model for Kyiv’s accession could create a perception in Ukraine of second-class EU membership.
On the Common Agricultural Policy, “Ukraine will not really benefit that much from getting full access,” Lausberg notes, arguing that place-based subsidies “do not really make European agriculture competitive.” On the contrary, Kyiv is “extremely competitive” on the world market, thanks to its large agricultural businesses, particularly when it comes to the adoption of new technologies. Excluding Ukraine from place-based subsidies could be partially offset by “enhanced investment and capacity-building support.”
As for cohesion policy, “it makes much more sense to set up a proper reconstruction instrument that corresponds to Ukraine’s actual needs, rather than trying to put in cohesion funding” designed for long-term convergence and regional development in peacetime. Lausberg argues that, instead, a “dedicated and sizable” instrument established by a coalition of willing EU and non-EU countries could also serve as “an investment vehicle that can benefit everyone.”
While Ukraine could benefit “much better” from this change in approach to EU funding, Lausberg stresses the need to integrate the country “as soon as possible into everything that has to do with competitiveness and security,” particularly in the fields of defence industry, digital technology, energy and infrastructure – “where they can add value to Europe and Europe can add value to them.”
At the same time, a differentiated financing architecture for Kyiv could trigger an internal debate within the Union about the need to move beyond “a model of funding that we should get away from anyway.” In other words, this “should not only be a case where you do something different because it is Ukraine, but also an opportunity to change the EU budget itself.” Lausberg’s broader argument is for “more strategic investments” in the MFF, meaning “focusing on investment in European added value while using fewer grants and more financial instruments that can crowd in additional private financing.”
In this respect, the Commission’s proposal for the 2028–2034 MFF had “much more investment-oriented financing” and was based on the idea of ensuring that money is spent on European added value, “which is the whole point of the EU budget.” However, the ongoing negotiations show that the shares allocated to cohesion policy and the CAP are increasing again, because “this is where most countries do not want to see any cuts,” alongside resistance to greater European-level steering.
As for integrating Ukraine, the proposed €100 billion ad hoc Reserve “is a good first step, but the solution to Ukraine’s problem is not the EU budget,” the EPC’s Senior Policy Analyst warns. He describes the MFF as “a shrinking pot of money” – smaller than the previous one in real terms and marked by distributive conflicts among member states – that “is not going to make a big difference” for a country like Ukraine. “We need to use the EU budget in a way that allows it to multiply its effect,” for example through targeted investments that can respond to Kyiv’s changing needs.
Reconstruction is also something that “needs to be done outside the EU budget, because it is quite specialised.” It is also important to ensure that Europeans benefit from the process, as “just spending free money on Ukraine is not going to go down well.” On the contrary, Lausberg concludes, an instrument that invests on behalf of EU countries, generates returns and takes stakes in raw materials, industry, agriculture and anything that needs to be rebuilt “is much easier to sell to Europeans as well.”
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