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If I were in this position, I'd refuse to give any money to the uncle, but my cousins would have the most awesome birthday presents and lots of fun trips with me to help them deal with having a deadbeat dad.
Also, while it's clear you're not in the US, so your laws may differ, there are trust funds you can set up for the kids that the uncle can't touch - and if they're young, it could be a lot of money for them when it matures at a minimal cost to you. Grandparents who want to support their grandchildren often do this when the parents can't be trusted with money due to addiction or criminal behavior. Another option to support the kids would be to take out a life insurance policy on the uncle in the kids name - there are a couple of variations that allow the kids to borrow against the value of the policy before he dies once they come of age.