The Nordic and Baltic countries alongside Poland announced on Wednesday that they would increase their support for Ukraine in the coming months. This support will include strengthening the country’s defense industry and investing in the provision of additional ammunition.

“We are committed to strengthening our defenses, including deterrence and resilience against both conventional and hybrid attacks, and to expanding sanctions against Russia and those who enable Russian aggression,” the leaders of Denmark, Estonia, Finland, Latvia, Norway, Poland, and Sweden said in a statement.

Meeting at the Swedish government retreat in Harpsund, southwest of Stockholm, the leaders discussed transatlantic relations, regional security cooperation, and a common policy on the war in Ukraine.

Baltic, Scandinavian, and Polish aid: Second largest to Kyiv

The election of Donald Trump to a second term as president has raised questions about the U.S. commitment to supporting Ukraine in its war against Russia and Washington’s role in NATO.

The Scandinavian and Baltic countries, many of which border Russia, are among Ukraine’s biggest supporters. According to the Kiel Institute’s Ukraine Support Tracker, aid from Scandinavia, the Baltics, and Poland has totaled approximately 24 billion euros, making them the second-largest contributors in absolute terms, after the United States.

Swedish Prime Minister Ulf Kristersson stated: “Europe must take more responsibility for its own security. This is only possible if we strengthen our cooperation and continue to support Ukraine in the long term as it fights for its security and ours.”

Criticism of China grows in the Baltics

Nordic and Baltic leaders, who view China’s growing support for Russia as damaging to Beijing’s relations with Europe, have also called for an urgent toughening of the EU’s response to hybrid warfare, including sabotage of critical infrastructure.

The prime ministers of Finland and Sweden told the Financial Times (FT) that it was too early to draw conclusions about who was responsible for damaging the Finland-Germany and Sweden-Lithuania data cables and the motivation behind it. A joint Finnish-Swedish investigation into the matter is currently underway.

However, Finland’s Prime Minister Petteri Orpo expressed concern: “We have seen that China is increasingly supporting Russia. I am worried. I hope they have heard Europe’s message. It would not be good for relations between Europe and China if they increased their support for Russia in its fight against Ukraine,” he warned.

Chinese-flagged ship at the center of tensions

Estonian Prime Minister Kristen Michal also spoke at the Nordic-Baltic summit, saying: “This has happened twice before. Is it really bad seamanship? We need an impartial inquiry. But such incidents and Russia’s support in Ukraine affect China’s ability to do business with Europe and limit its diplomatic options.”

All eyes are now on the Chinese bulk carrier Yi Peng 3, whose anchor was allegedly damaged in recent television footage taken just outside Danish territorial waters.

The ship is being closely monitored by the Swedish, Danish, and German navies. Maritime information shows that the Yi Peng 3 is passing close to the Finland-Germany and Sweden-Lithuania data cables, which were cut earlier this month.

Swedish Prime Minister Ulf Kristersson has called on China to order the Yi Peng 3 to enter Swedish waters to assist with the investigation.

France has withdrawn its opposition to non-EU companies accessing EU-funded financial incentives for Europe’s defense industry. This decision aligns with Brussels’ ambition to foster a stronger domestic arms industry that is less dependent on the United States.

French diplomats in Brussels have signaled support for a proposal permitting up to 35% of EU budget-funded incentives to be allocated to defense products from outside the 27-member bloc. This shift in stance was revealed by five individuals familiar with the technical discussions, as reported by the Financial Times (FT) last week.

For nearly a year, Paris resisted the involvement of defense firms from countries such as the United States, Britain, Israel, and Turkey in the EU’s proposed European Defence Investment Plan (EDIP). French officials argued that supporting only European defense firms was critical to the bloc’s pursuit of “strategic autonomy”.

Trump’s arrival prompts a policy shift

This position evolved earlier this month; two officials noted. They explained that it would be challenging for the EU to lobby President-elect Donald Trump to maintain U.S. military support for Europe while simultaneously barring American companies from participating in efforts to bolster the European defense industry.

“Since [the U.S. election], everybody is thinking a little bit smarter,” said one official.

Countries with close ties to the U.K. defense sector, such as Sweden, had opposed France’s earlier stance, citing concerns that it might exclude firms with British shareholders or those reliant on U.K.-sourced components.

The 65/35 proposal and negotiations ahead

The 65/35 proposal, drafted by Hungary (the current holder of the EU presidency) with contributions from France, Germany, Italy, and Spain, has emerged as a potential compromise. Negotiations on the plan will continue in the coming weeks, with possible revisions before its presentation to the European Parliament in early 2025.

The proposal includes a clause barring participation by countries deemed contrary to the bloc’s security interests or the principle of “good relations”. One official described the plan as a “good basis” for a compromise.

Boosting Europe’s defense industry

The European Defence Investment Plan (EDIP), first proposed in February last year, requires approval from all EU capitals and the European Parliament. Its primary goal is to fund joint production and procurement of European-made weapons, addressing critical gaps in the continent’s underfunded arms industry.

Key objectives include increasing the availability and supply of essential defense products, and tackling bottlenecks in critical supply chains, including those tied to Ukrainian manufacturers.

Although only €1.5 billion has been allocated to the initiative under the current EU budget (running until 2027), many member states are advocating for substantial increases in funding.

The EDIP is expected to establish a long-term framework for future EU defense initiatives. This effort reflects the EU’s broader push toward defense self-sufficiency, a trend likely to accelerate under Trump’s presidency. Even before the election, Brussels had been encouraging coordinated defense procurement to enhance interoperability, reduce costs, and respond to rising national defense budgets across member states.

The Christian Democratic Union (CDU) and the Christian Social Union (CSU), leading in opinion polls ahead of Germany’s upcoming elections on 23 February, have proposed significant changes to social benefits. This includes plans to reduce welfare aid for Ukrainian refugees and address Germany’s 5.5 million long-term unemployed by implementing stricter employment measures.

One controversial proposal involves limiting unemployment benefits for Ukrainian refugees. The CDU/CSU is questioning whether Ukrainians should continue receiving the standard unemployment benefit (‘Bürgergeld’), which is higher than the refugee-specific benefits.

Under an EU Council Directive on temporary protection for displaced persons, Ukrainian refugees arriving in Germany after the outbreak of the war were granted temporary residence status and entitled to full social benefits. This includes up to 563 euros per month in unemployment benefits, coverage for rent and heating costs, and additional allowances for children, depending on their age. Currently, Germany is hosting 1.2 million Ukrainian refugees, including 530,000 work-eligible individuals and approximately 360,000 children.

Stephan Stracke, the CDU/CSU’s social policy spokesman, emphasized that while Germany must provide protection to those fleeing “war and violence”, this does not equate to granting them benefits equal to those of German citizens. Stracke proposed that newly arrived Ukrainian refugees should instead receive standard asylum seeker benefits, which amount to 460 euros per month.

This policy shift aligns with broader plans by the CDU to overhaul the welfare system, including introducing tougher sanctions for individuals who refuse to work and increasing mandatory engagements with authorities.

Germany faces challenges in integrating Ukrainian refugees into its labor market, especially when compared to other European countries. A study by the Institute for Employment Research (IAB) revealed that as of March 2023, only 27% of Ukrainians in Germany had secured employment. In contrast, 57% of Ukrainian refugees in Lithuania and 53% in Denmark have found jobs.

Stracke argued that the generous benefits offered in Germany might deter some refugees from seeking employment. He added, “Other European countries are doing much better. That’s why Germany needs to emphasize the principle of ‘support and demand’, encouraging more refugees to enter the workforce.”

The CDU’s stance on refugee welfare reflects a longstanding conservative policy approach. In 2022, CDU leader Friedrich Merz, who is widely expected to lead Germany’s next government, sparked debate by referring to “social tourism” among Ukrainian refugees. He claimed that some refugees were traveling between Germany and Ukraine to access benefits.

The right-wing Alternative for Germany (AfD) has similarly argued that high welfare payouts contribute to the growing number of refugees reliant on state aid.