Hi, this is Andrea Dudik in Prague. Welcome to our weekly newsletter on what’s shaping economics and investments from the Baltic Sea to the Balkans. You can subscribe here.

War Chest

Ukraine relies on the financial support of allies to sustain its fight against Russian invaders and after three and a half years of war, concerns are mounting about how to cover its rising military needs. Now the International Monetary Fund appears to have found some more troubling news.

The country’s third-largest creditor believes that Ukraine’s funding needs over the next two years may be as much as $20 billion higher than what Kyiv currently estimates. The discrepancy emerged during meetings with IMF staff in recent days to discuss external financing for 2026 and 2027, according to my colleague Volodymyr Verbianyi. 

Officials in Ukraine and at the IMF declined to comment as discussions continue. For now, the country is sticking with its initial projection that it needs to secure as much as another $37.5 billion over the two-year period. But if the IMF estimates are correct, then the figure could be more like $50-60 billion.  

It sets the scene for tricky negotiations on the next aid package, though this week also saw a timely reminder of Ukraine’s importance on Europe’s front line against Vladimir Putin’s forces. Poland said it shot down Russian drones that crossed into its territory. The government in Warsaw called the incursion an “act of aggression” and swiftly asked its NATO allies to convene.

Polish stocks declined along with the zloty right after incident. Some investors, though, reckon that there’s unlikely to be an escalation in tension that would wipe out big gains for the market this year.

A house destroyed by debris from a Russian drone shot down in the village of Wyryki-Wola, eastern Poland, on Sept. 10. Photographer: Wojtek Radwanski/AFP/Getty Images

The question now is whether the 19 drones sharpen the minds of officials as they look at Ukraine’s financial situation. The aid contribution from the US has dwindled since Donald Trump was elected president, turning the European Union into the largest donor. In a speech this week, European Commission President Ursula von der Leyen stood firm: “Make no mistake, this is a fight for our future.”

Around the Region

Czech Republic: Buyout firm GTCR agreed to buy generic drugmaker Zentiva in a deal that people familiar with the transaction said could be valued at about $4.8 billion.

Poland: The central bank may be finished with interest-rate cuts this year as lingering wage growth and loose fiscal policy pose inflationary risks, a monetary policymaker told Bloomberg. Meanwhile, the country’s bickering leaders were served warning — stop the fighting or the economy will suffer the consequences. 

Hungary: Contemporary Amperex Technology Co. Ltd. is tweaking its €7.3 billion ($8.5 billion) factory near Debrecen to produce several types of batteries as the Chinese manufacturer reacts to fluctuating demand from Europe’s automakers. Meanwhile, the EU’s top court annulled a decision to approve Hungarian state aid for two new nuclear reactors being built by Russia in the town of Paks.

Slovakia: The government announced a €2.7 billion package of spending cuts and tax increases for 2026 to avert further rating downgrades.

Poland: Households should be allowed to contest mortgages tied to the interbank rate, an adviser to the EU’s top court said in a legal opinion. The decision raises the prospect of a new wave of lawsuits for banks.

(Bloomberg’s Vienna office will host the CEOs of Erste Group Bank and Raiffeisen Bank International for a discussion about the region’s economies, politics and more at 4:15 p.m. CET on Sept. 15th. Click here for a live stream on Bloomberg.com. Terminal clients can access the event via LIVE .)

Chart of the Week

Romanian government bonds extended their decline after inflation accelerated to the fastest pace in two years as the government takes measures to fix its finances. The yield on 10-year sovereign notes hit the highest level since the mid-May selloff around the country’s presidential election. The government raised a consumer tax last month to help narrow the EU’s widest budget deficit. 

By the Numbers

• Hungary clinched a 10-year gas supply agreement with Shell, marking one of its first steps to diversify away from Russian flows as a European Union deadline to phase out those imports nears.
• Shares in 4iG Nyrt. extended a surge after the Hungarian company, which Prime Minister Viktor Orban is transforming into a conglomerate, announced a partnership with a Czech defense group. The stock is up about 50% in three months.
• Serbia left borrowing costs unchanged for a 12th straight month as policymakers zeroed in on inflation risks over slower economic growth. The Ukrainian central bank, meanwhile, left the key rate at 15.5%.

Things to Watch

• Wizz Air plans to end operations in Vienna as the Hungarian discount carrier, facing persistent cost pressure, scales back its growth ambitions.
• Kosovo’s top court suspended all steps toward forming a new government until the end of September, extending the political deadlock.
• The Czech central bank needs to keep monetary policy restrictive for a longer period of time to address persistent inflation risks in the economy, according to Deputy Governor Eva Zamrazilova. 

Final Thought

Montenegro has become a popular tourist destination, its economy doubled over the past decade and it’s lobbying to join the EU and the eurozone. This summer, though, has seen the escalation of a fight over something fundamental to those goals: the central bank’s independence. Governor Irena Radovic, who has clamped down on money laundering, has seen her authority undermined after parliament refused to approve her picks for internal positions. The president told her to fight back, but Prime Minister Milojko Spajic declined to say when lawmakers might approve Radovic’s nominees. He told Bloomberg, though, that the central bank’s independence was sacrosanct to him.

Montenegro wants to join the EU and the eurozone by 2028. Photographer: wellsie82/Getty Images

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