Mujtaba Rahman is the head of Eurasia Group’s Europe practice. He tweets at @Mij_Europe.
Donald Trump’s return to the White House is now the main issue occupying senior minds across Europe’s capitals — and rightfully so.
Trump 2.0 creates risks for the EU across a range of issues, including security, trade, and the bloc’s stance on China. But the immediate concern is what happens with Ukraine, particularly given Trump’s stated aim of ending the conflict in “24 hours.”
In this regard, the bloc has already agreed on one early priority: It must do everything possible to convince Trump that Ukraine should enter any negotiations from a position of strength, and that a bad deal for Ukraine would make him look weak on the international stage — much like Afghanistan did for President Joe Biden, or Syria did for former President Barack Obama.
While this line of argument is being pushed by NATO Secretary-General Mark Rutte and several EU leaders, presenting Trump with this angle alone is unlikely to sway him. Therefore, the bloc has also begun discussing an “offer” it hopes might make Trump more sympathetic.
But if the EU wants to seriously influence Ukraine’s negotiations it has to be willing to pay for it.
The bloc’s biggest concern is that negotiations over Ukraine’s future might turn into a “mini Munich.” That they would not only involve immediate territorial losses for Ukraine but also risk further Russian advances in the country’s east, a big wave of Ukrainian refugees to the EU and a mindset of appeasement that would exclude Kyiv’s NATO membership and possibly jeopardize its push to join the EU too.
Such a turn would be a major strategic setback for the EU and greatly test its cohesion. It’s also much more likely to happen if Ukraine start talks from a position of weakness — which is why putting a lot more money on the table is important.
Officials believe the recently brokered €50 billion G7 loan will last Ukraine until the end of 2025. So, the purpose of any fresh money would be to signal support for Ukraine in 2026 and possibly 2027.
In the EU’s eyes, such an offer could also give Trump the “win” he needs — U.S. pressure forcing the bloc to shoulder more of the financial burden for Ukraine, as well as for its own security and defense.
Yet, stumping up more cash is no easy task.
France’s government recently fell as it tried to pass a budget for 2025. Germany’s upcoming February elections and subsequent coalition negotiations will complicate Berlin’s ability to sign off on decisions of major fiscal consequence. Moreover, seven member countries are in an excessive deficit procedure; there is only around €5 billion left for defense in the existing EU budget; and since the next EU budget will only run from 2028 onward, it cannot help address what can be done now.
However, the bloc is exploring a range of different options to organize more money for Ukraine.
One idea is to simply lend Kyiv money at concessional interest rates and longer repayment periods against the so-called headroom in the EU budget. Another is to augment the EU’s ability to borrow against this headroom, with member countries providing a fiscal guarantee. Such a template would be modeled on the EU’s €100 billion SURE facility, which was established to support furlough schemes during Covid-19.
Other possibilities include the European Stability Mechanism (ESM), which retains a lending capacity of €422 billion. But a previous attempt to make the ESM useful to member countries during the pandemic failed, as no member drew down any of the cheap cash that was on offer.
Repurposing unused NextGenerationEU funds is another option, since only 41 percent of the €650 billion post-Covid Recovery and Resilience Facility has been used so far. But while the target is €300 billion by the end of the year, the facility is due to expire by the end of 2026 and is unlikely to be extended.
The main issue, however, is that all these options are technically and politically complicated, as they require the involvement of the EU’s 27 national parliaments — at least to some degree.
Furthermore, as ever larger sums of money for Ukraine will invariably involve more weapons purchases from the U.S., it will inevitably face opposition in some EU capitals, even if they recognize the need for more pragmatism in the short and medium term.
An emerging compromise on the European Defense Industry Program, which would enable a greater percentage of euros to be used for non-EU military procurement, demonstrates this growing pragmatism. And some policy-makers in Brussels want to go even further, citing former U.S. Secretary of State Mike Pompeo’s “lend-lease” plan as a possible model to follow. Such a scheme would allow Ukraine to use billions of euros to borrow U.S. military equipment without any restrictions.
Further still, some member countries want to create one overall package combining billions for Ukraine with the EU’s own security and defense and trade concessions — such as buying more U.S. LNG and agricultural products, as well as more alignment with the U.S.’s tougher stance on China.
Such a package is a useful idea. Not only would it send a stronger signal to both Trump and Russian President Vladimir Putin, it could also help maintain intra-EU cohesion, marrying the concerns of member countries more worried about trade with those more anxious about security. The logic is simple: Spending even more on EU security and defense would result in even greater fiscal transfers to the U.S., thus securing even more concessions when it comes to tariffs.
Overall, the EU’s institutions and member countries are clearly alive to the challenge a second Trump administration presents. More money for Ukraine now seems inevitable, and it will undoubtedly make the front end of the bloc’s broader approach. As one senior EU official said: “The choice is the following: Trump’s plan or Putin’s plan — unless we have the guts to propose an alternative that we need to be willing to pay for.”
And the EU’s moment of truth is fast approaching.
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