BRUSSELS — Ukraine’s war chest stands to get a vital cash injection after EU
envoys agreed on a €90 billion loan to finance Kyiv’s defense against Russia,
the Cypriot Council presidency said on Wednesday.
“The new financing will help ensure the country’s fierce resilience in the face
of Russian aggression,” Cypriot Finance Minister Makis Keravnos said in a
statement.
Without the loan Ukraine had risked running out of cash by April, which would
have been catastrophic for its war effort and could have crippled its
negotiating efforts during ongoing American-backed peace talks with Russia.
EU lawmakers still have some hurdles to clear, such as agreeing on the
conditions Ukraine must satisfy to get a payout, before Brussels can raise money
on the global debt market to finance the loan — which is backed by the EU’s
seven-year budget.
A big point of dispute among EU countries was how Ukraine will be able to spend
the money, and who will benefit. One-third of the money will go for normal
budgetary needs and the rest for defense.
France led efforts to get Ukraine to spend as much of that as possible with EU
defense companies, mindful that the bloc’s taxpayers are footing the €3 billion
annual bill to cover interest payments on the loan.
However, Germany, the Netherlands and the Scandinavian nations pushed to give
Ukraine as much flexibility as possible.
The draft deal, seen by POLITICO, will allow Ukraine to buy key weapons from
third countries — including the U.S. and the U.K. — either when no equivalent
product is available in the EU or when there is an urgent need, while also
strengthening the oversight of EU states over such derogations.
The list of weapons Kyiv will be able to buy outside the bloc includes air and
missile defense systems, fighter aircraft ammunition and deep-strike
capabilities.
If the U.K. or other third countries like South Korea, which have signed
security deals with the EU and have helped Ukraine, want to take part in
procurement deals beyond that, they will have to contribute financially to help
cover interest payments on the loan.
The European Parliament must now examine the changes the Council has made to the
legal text. | Philipp von Ditfurth/picture alliance via Getty Images
The text also mentions that the contribution of non-EU countries — to be agreed
in upcoming negotiations with the European Commission — should be proportional
to how much their defense firms could gain from taking part in the scheme.
Canada, which already has a deal to take part in the EU’s separate €150 billion
SAFE loans-for-weapons scheme, will not have to pay extra to take part in the
Ukraine program, but would have detail the products that could be procured by
Kyiv.
NEXT STEPS
Now that ambassadors have reached a deal, the European Parliament must examine
the changes the Council has made to the legal text before approving the measure.
If all goes well, Kyiv will get €45 billion from the EU this year in tranches.
The remaining cash will arrive in 2027.
Ukraine will only repay the money if Moscow ends its full-scale invasion and
pays war reparations. If Russia refuses, the EU will consider raiding the
Kremlin’s frozen assets lying in financial institutions across the bloc.
While the loan will keep Ukrainian forces in the fight, the amount won’t cover
Kyiv’s total financing needs — even with another round of loans, worth $8
billion, expected from the International Monetary Fund.
By the IMF’s own estimates, Kyiv will need at least €135 billion to sustain its
military and budgetary needs this year and next.
Meanwhile, U.S. and EU officials are working on a plan to rebuild Ukraine that
aims to attract $800 billion in public and private funds over 10 years. For that
to happen, the eastern front must first fall silent — a remote likelihood at
this point.
Veronika Melkozerova contributed reporting from Kyiv.
Tag - European Monetary Union
FRANKFURT — No one saw this coming.
Eurozone finance ministers on Monday picked Croatia’s central bank governor,
Boris Vujčić, as the European Central Bank’s next vice president — defying all
expectations and the European Parliament’s calls for someone else.
Ministers chose Vujčić over his Finnish counterpart Olli Rehn, the favorite to
win, in the third and final round of voting after seeing off other heavyweight
contenders in Portugal’s Mário Centeno and Latvia’s Mārtiņš Kazāks — the
Parliament’s preferred picks for the job. Estonia’s Madis Müller and
Lithuania’s Rimantas Šadžius lost out in the first round.
At a time when the U.S. administration is putting extreme pressure on the
Federal Reserve to lower interest rates, the choice of Vujčić — a technocrat
with no obvious partisan backing — is a strong signal of the EU’s desire to keep
the ECB independent of direct political influence.
Barring any last-minute surprises, EU leaders will formally present Vujčić to
succeed incumbent Vice President Luis de Guindos when the Spaniard ends his
eight-year term on May 31.
“Crazy,” was all one diplomat could muster after the vote. Others were more
understanding. “He is the most senior central banker of them all,” a second said
on the condition of anonymity.
Vujčić needed 16 votes from ministers who represent 65 percent of the eurozone’s
population, meaning he had the support of the euroclub’s largest members to
clinch victory.
Germany, France and Spain will all have been thinking strategically ahead of
Monday’s vote, which kicks off a game of musical chairs for a place at the ECB’s
coveted six-person Executive Board over the next two years. The vice presidency
is the first of four board vacancies, including the presidency, that will come
up in that time. All are important positions for the eurozone’s biggest economic
powerhouses.
By tapping Vujčić for the no. 2 job, capitals have kept the playing field wide
open — especially when it comes to finding a successor for ECB President
Christine Lagarde once her term ends on Oct. 31, 2027.
Vujčić now faces an awkward hearing in Parliament, whose non-binding preference
for the post was completely ignored by finance ministers. The 61-year-old will
need to bring Parliament onside to avoid MEPs voting against his victory in a
symbolic, but politically embarrassing, ballot — a similar fate to when
Luxembourg’s governor, Yves Mersch, joined the ECB’s highest echelon in 2012.
DARK HORSE
Vujčić has vast experience as a central banker, having led the Croatian National
Bank since 2012, and is highly regarded among fellow rate-setters. But his
appointment will still come as a massive surprise to ECB watchers who have long
bet on Rehn. Rehn’s dual experience in Brussels politics and monetary policy had
widely been seen as giving him an edge over his five rivals.
Croatia’s chances were seen as slim from the outset, as it only joined the
eurozone in 2023, placing it toward the back of the queue for a seat at the
Executive Board. None of the three Baltic states, which adopted the euro roughly
a decade earlier than Croatia, have yet had a representative serve on the Board.
While generally considered a moderate hawk, Vujčić defies the usual
northern-hawk-versus-southern-dove classification that has historically
dominated debates when politicians haggle over coveted positions at the ECB.
His appointment is thus unlikely to change the probability of either a northern
heavyweight such as Germany or the Netherlands, or a southern contender such as
Spain, securing the presidency.
Current front-runners for the top job include former Dutch central bank chief
Klaas Knot and Bank for International Settlements head Pablo Hernández de Cos.
But in European politics, two years is an eternity. Lagarde herself only emerged
as a serious candidate late in the process to name a successor for Mario Draghi,
showing how fast the ECB’s leadership race can turn.
BRUSSELS — The European Commission on Wednesday unveiled a €90 billion loan to
Ukraine aimed at saving it from financial collapse as it continues to battle
Russia while aid from the U.S. dries up.
About one-third of the cash will be used for normal budget expenditures and the
rest will go to defense — although countries still need to formally agree to
what extent Ukraine can use the money to buy weapons from outside the EU. A
Commission proposal gives EU defense firms preferential treatment but allows
Ukraine to buy foreign weapons if they aren’t immediately available in Europe.
While the loan is interest-free for Ukraine, it is forecast to cost EU
taxpayers between €3 billion and €4 billion a year in borrowing costs from 2028.
The EU had to resort to the loan after an earlier effort to use sanctioned
Russian frozen assets ran into opposition from Belgium.
The race is now on for EU lawmakers to agree on a final legal text that’ll pave
the way for disbursements in April, when Ukraine’s war chest runs out. Meetings
between EU treasury and defense officials are already planned for Friday. The
European Parliament could fast-track the loan as early as next week.
The financing package is also crucial for unlocking additional loans to Ukraine
from the International Monetary Fund. The Washington-based Fund wants to ensure
Kyiv’s finances aren’t overstretched, as the war enters its fifth year next
month.
The €90 billion will be paid out over the next two years, as Moscow shows no
sign of slowing down its offensive on Ukraine despite U.S.-led efforts to agree
on a ceasefire.
“Russia shows no sign of abating, no sign of remorse, no sign of seeking peace,”
Commission President Ursula von der Leyen told reporters after presenting the
proposal. “We all want peace for Ukraine, and for that, Ukraine must be in a
position of strength.”
When EU leaders agreed on the loan, Ukrainian President Volodymyr Zelenskyy
called the deal an “unprecedented decision, and it will also have an impact on
the peace negotiations.”
Adding to the pressure on the EU, the U.S. under President Donald Trump has
halted new military and financial aid to Ukraine, leaving it up to Europe to
ensure Kyiv can continue fighting.
Once the legal text is agreed, the EU will raise joint debt to finance
the initiative, although the governments in the Czech Republic, Hungary and
Slovakia said they will not participate in the funding drive.
The conditions on military spending are splitting EU countries. Paris
is demanding strict rules to prevent money from flowing to U.S. weapons
manufacturers, while Germany and other Northern European countries want to give
Ukraine greater flexibility on how to spend the cash, pointing out that some key
systems needed by Ukraine aren’t manufactured in Europe.
MEETING HALFWAY
The Commission has put forward a compromise proposal — seen by POLITICO. It
gives preferential treatment to defense companies based in the EU, Ukraine and
neighboring countries, including Norway, Iceland and Liechtenstein, but doesn’t
rule out purchases from abroad.
To keep the Northern European capitals happy, the Commission’s proposal allows
Ukraine to buy specialized weapons produced outside the EU if they are vital for
Kyiv’s defense against Russian forces. These include the U.S. Patriot long-range
missile and air defense systems.
The rules could be bent further in cases “where there is an urgent need for a
given defense product” that can’t be delivered quickly from within Europe.
Weapons aren’t considered European if more than 35 percent of their parts come
from outside the continent, according to the draft. That’s in line with previous
EU defense-financing initiatives, such as the €150 billion SAFE
loans-for-weapons program.
Two other legal texts are included in the legislative package. One proposes
using the upper borrowing limit in the current budget to guarantee the loan. The
other is designed to tweak the Ukraine Facility, a 2023 initiative that governs
the bloc’s long-term financial support to Kyiv. The Commission will also create
a new money pot to cover the borrowing costs before the new EU budget enters
into force in 2028.
RUSSIAN COLLATERAL
Ukraine only has to repay the €90 billion loan if it receives post-war
reparations from Russia — an unlikely scenario. If this doesn’t happen, the EU
has left the door open to tapping frozen Russian state assets across the bloc to
pay itself back.
Belgium’s steadfast opposition to leveraging the frozen assets, most of which
are based in the Brussels-based financial depository Euroclear, promises to make
that negotiation difficult. However, the Commission can indefinitely roll over
its debt by issuing eurobonds until it finds the necessary means to pay off the
loan. The goal is to ensure Ukraine isn’t left holding the bill.
“The Union reserves its right to use the cash balances from immobilized Russian
assets held in the EU to repay the Ukraine Support Loan,” Economy Commissioner
Valdis Dombrovskis said alongside von der Leyen. “Supporting Ukraine is a litmus
test for Europe. The outcome of Russia’s brutal war of aggression against
Ukraine will determine Europe’s future.”
Jacopo Barigazzi contributed to this report from Brussels.
Croatia, Estonia, Finland, Latvia, Lithuania and Portugal will face off for the
European Central Bank’s No. 2 job, according to a statement from the Council of
the EU.
The crowded race for the vice presidency kickstarts a wider battle for a seat on
the ECB’s coveted six-person executive board, the eurozone’s most powerful forum
for economic and monetary policy.
Four of the seats, including the presidency itself, will become vacant over the
next two years. Competition will be fierce, as the eurozone’s largest economies
will seek to maintain their influence on the board, leaving smaller countries
with fewer seats to fight over.
Eurozone finance ministers are set to pick the winner behind closed doors in a
secret ballot when they meet in Brussels for this month’s Eurogroup meeting on
Jan. 19. The winner will need at least 16 votes from the 21 ministers,
representing around 65 percent of the eurozone’s population.
Eurozone leaders formally propose the candidate to succeed the outgoing vice
president, Luis de Guindos, whose eight-year term ends on May 31. The European
Parliament and the ECB are entitled to an opinion about the final pick.
Northern European applicants make up the bulk of the contenders, with Finland’s
central banker, Olli Rehn, facing competition from Baltic neighbors. These
include his central banking peers, Estonia’s Madis Müller and Latvia’s Mārtiņš
Kazāks. Lithuania’s former finance minister, Rimantas Šadžius, completes the
Baltic round-up. The other two applicants come from Southern Europe: Portugal’s
ex-Eurogroup president, Mário Centeno, and the Croatian central bank governor,
Boris Vujčić.
The candidates are tentatively scheduled to face questions from MEPs behind
closed doors before finance ministers meet on Jan. 19.
Less than 24 hours before EU leaders descend on Brussels for vital talks on
financing Ukraine’s war effort, Belgium believes negotiations are going in
reverse.
“We are going backward,” Belgium’s EU ambassador, Peter Moors, told his peers on
Wednesday during closed-door talks, according to two diplomats present at the
meeting.
The European Commission and EU officials are in a race against time to appease
Belgian concerns over a €210 billion financing package for Ukraine that
leverages frozen Russian state assets across the bloc. Belgium’s support is
crucial, as the lion’s share of frozen assets lies in the Brussels-based
financial depository Euroclear.
Bart De Wever, the country’s prime minister, refuses to get on board until the
other EU governments provide substantial financial and legal safeguards that
protect Euroclear and his government from Russian retaliation — at home and
abroad.
One of the most sensitive issues for Belgium is placing a lid on the financial
guarantees that currently stand at €210 billion. Belgium believes that the
guarantees provided by other EU countries should have no limits in order to
protect them under any scenario.
Talks looked to be going in the right direction. The Belgians backed a
Commission pitch for EU capitals to cough up as much as possible in financial
guarantees against the Ukrainian package — only for Belgium’s ambassador to drop
a bombshell at the end of the meeting.
“I just don’t know anymore,” one diplomat said, on condition of anonymity in
order to speak freely.
A spokesperson for the Belgian permanent representation declined to comment.
Another key demand from Belgium is that all EU countries end their bilateral
investment treaties with Russia to ensure Belgium isn’t left alone to deal with
retaliation from Moscow. But to Belgium’s annoyance, several countries are
reluctant to do so over fears of retribution from the Kremlin.
Moors said during the meeting that any decision on the use of the assets will
have to be taken by De Wever, according to an EU diplomat.
Belgium is pushing the Commission to explore alternative options to finance
Ukraine, such as issuing joint debt — a position that’s gained traction with
Bulgaria, Italy, and Malta.
European Commission President Ursula von der Leyen cautiously opened the door to
joint debt during a speech at the European Parliament in Strasbourg on Wednesday
morning.
“I proposed two different options for this upcoming European Council, one based
on assets and one based on EU borrowing. And we will have to decide which way we
want to take,” she said.
But joint debt requires unanimous support, unlikely given Hungarian Prime
Minister Viktor Orbán’s threats to veto further EU aid to Kyiv.
Moors proposed a possible workaround on Tuesday by suggesting triggering an
emergency clause — known as Article 122 — that would nullify the veto threat.
The Commission and Council’s lawyers rebuffed the Belgian pitch at the same
meeting, saying it was not legally viable.
The idea was first proposed by the president of the European Central Bank,
Christine Lagarde, during a dinner of finance ministers last week, but has been
challenged by Northern European countries.
De Wever is expected to suggest this option during the meeting of EU leaders on
Thursday.
ATHENS — The country that almost got kicked out of the eurozone is now running
the powerful EU body that rescued it from bankruptcy.
Greece’s finance minister, Kyriakos Pierrakakis, on Thursday beat Belgian Deputy
Prime Minister Vincent Van Peteghem in a two-horse race for the Eurogroup
presidency. Although an informal forum for eurozone finance ministers, the post
has proved pivotal in overcoming crises — notably the sovereign debt crisis,
which resulted in three bailouts of the Greek government.
That was 10 years ago, when Pierrakakis’ predecessor described the Eurogroup as
a place fit only for psychopaths. Today, Athens presents itself as a poster
child of fiscal prudence after dramatically reducing its debt pile to around 147
percent of its economic output — albeit still the highest tally in the eurozone.
“My generation was shaped by an existential crisis that revealed the power of
resilience, the cost of complacency, the necessity of reform, and the strategic
importance of European solidarity,” Pierrakakis wrote in his motivational letter
for the job. “Our story is not only national; it is deeply European.”
Few diplomats initially expected the 42-year-old computer scientist and
political economist to win the race to lead the Eurogroup after incumbent
Paschal Donohoe’s shock resignation last month. Belgium’s Van Peteghem could
boast more experience and held a great deal of respect within the eurozone,
setting him up as the early favorite to win.
But Belgium’s continued reluctance to back the European Commission’s bid to use
the cash value of frozen Russian assets to finance a €165 billion reparations
loan to Ukraine ultimately contributed to Van Peteghem’s defeat.
NOT TYPICAL
Pierrakakis isn’t a typical member of the center-right ruling New Democracy
party, which belongs to the European People’s Party. His political background is
a socialist one, having served as an advisor to the centre-left PASOK party from
2009, when Greece plunged into financial crisis. He was even one of the Greek
technocrats negotiating with the country’s creditors.
The Harvard and MIT graduate joined New Democracy to support Prime Minister
Kyriakos Mitsotakis’ bid for the party leadership in 2015, because he felt that
they shared a political vision.
Pierrakakis got his big political break when New Democracy won the national
election in 2019, after four years of serving as a director of the research and
policy institute diaNEOsis. He was named minister of digital governance,
overseeing Greece’s efforts to modernize the country’s creaking bureaucracy,
adopting digital solutions for everything from Cabinet meetings to medical
prescriptions.
Those efforts made him one of the most popular ministers in the Greek cabinet
— so much so that Pierrakakis is often touted as Mitsotakis’ likely successor
for the party leadership in the Greek press.
Few diplomats initially expected the 42-year-old computer scientist and
political economist to win the race to lead the Eurogroup after incumbent
Paschal Donohoe’s shock resignation last month. | Nicolas Economou/Getty Images
After the re-election of New Democracy in 2023, Pierrakakis took over the
Education Ministry, where he backed controversial legislation that paved the way
for the establishment of private universities in Greece.
A Cabinet reshuffle in March placed him within the finance ministry, where he
has sped up plans to pay down Greece’s debt to creditors and pledged to bring
the country’s debt below 120 percent of GDP before 2030.
BRUSSELS — Belgium is demanding that the EU provide an extra cash buffer to
ensure against Kremlin threats over a €210 billion loan to Ukraine using Russian
assets, according to documents obtained by POLITICO.
The cash buffer is part of a series of changes that the Belgian government wants
to make to the European Commission’s proposal, which would be financed by
leveraging €185 billion of frozen Russian state assets held by the
Brussels-based financial depository Euroclear. The remaining €25 billion would
come from other frozen Russian assets, lying in private bank accounts across the
bloc — predominantly in France.
Belgium’s fresh demand is designed to give Euroclear more financial firepower to
withstand Russian retaliation.
This cash buffer would come on top of financial guarantees that EU countries
would provide against the €210 billion loan to protect Belgium from paying back
the full amount if the Kremlin claws back the money.
In its list of amendments to the Commission, Belgium even suggested increasing
the guarantees to cover potential legal disputes and settlements — an idea that
is opposed by many governments.
Belgium’s demands come as EU leaders prepare to descend on Brussels on Dec. 18
to try and secure Ukraine’s ability to finance its defences against Russia. As
things stand, Kyiv’s war chest will run bare in April. Failure to use the
Russian assets to finance the loan would force EU capitals to reach into their
own pockets to keep Ukraine afloat. But frugal countries are politically opposed
to shifting the burden to EU taxpayers.
Belgium is the main holdout over financing Ukraine using the Russian assets,
amid fears that it will be on the hook to repay the full amount if Moscow
manages to claw its money back.
The bulk of this revenue is currently being funneled to Ukraine to pay down a
€45 billion loan from G7 countries, with Euroclear retaining a 10 percent buffer
to cover legal risks. | Artur Widak/Getty Images
In its list of suggested changes, Belgium asked the EU to set aside an
unspecified amount of money to protect Euroclear from the risk of Russian
retaliation. It said that the safety net will account for “increased costs which
Euroclear might suffer (e.g. legal costs to defend against retaliation)” and
compensate for lost revenue.
According to the document, the extra cash buffer should be financed by the
windfall profits that Euroclear collects in interest from a deposit account at
the European Central Bank, where the Kremlin-sanctioned money is currently
sitting. The proceeds amounted to €4 billion last year.
The bulk of this revenue is currently being funneled to Ukraine to pay down a
€45 billion loan from G7 countries, with Euroclear retaining a 10 percent buffer
to cover legal risks. In order to better protect Euroclear, Belgium wants to
raise this threshold over the coming years.
BRUSSELS — France and Italy can breathe a sigh of relief after the EU’s
statistics office signaled that the financial guarantees needed to back a €210
billion financing package to Ukraine won’t increase their heavy debt burdens.
Eurostat on Tuesday evening sent a letter, obtained by POLITICO, informing the
bloc’s treasuries that the financial guarantees underpinning the loan, backed by
frozen Russian state assets on Belgian soil, would be considered “contingent
liabilities.” In other words, the guarantees would only impact countries’ debt
piles if triggered.
Paris and Rome wanted Eurostat to clarify how the guarantees would be treated
under EU rules for public spending, as both countries carry a debt burden above
100 percent of their respective economic output.
Eurostat’s letter is expected to allay fears that signing up to the loan would
undermine investor confidence in highly indebted countries and potentially raise
their borrowing costs. That’s key for the Italians and French, as EU leaders
prepare to discuss the initiative at a summit next week. Failure to secure a
deal could leave Ukraine without enough funds to keep Russian forces at bay next
year.
The Commission has suggested all EU countries share the risk by providing
financial guarantees against the loan in case the Kremlin manages to claw back
its sanctioned cash, which is held in the Brussels-based financial depository
Euroclear.
“None of the conditions” that would lead to EU liability being transferred to
member states “would be met,” Eurostat wrote in a letter, adding that the
chances of EU countries ever paying those guarantees are weak. The Commission
instead will be held liable for those guarantees, the agency added.
Germany is set to bear the brunt of the loan, guaranteeing some €52 billion
under the Commission’s draft rules. This figure will likely rise as Hungary has
already refused to take part in the funding drive for Ukraine. The letter is
unlikely to change Belgium’s stance, as it wants much higher guarantees and
greater legal safeguards against Russian retaliation at home and abroad.
The biggest risk facing the Commission’s proposal is the prospect of the assets
being unfrozen if pro-Russia countries refuse to keep existing sanctions in
place.
Under current rules, the EU must unanimously reauthorize the sanctions every six
months. That means Kremlin-friendly countries, such as Hungary and Slovakia, can
force the EU to release the sanctioned money with a simple no vote.
To make this scenario more unlikely, the Commission suggested a controversial
legal fix that will be discussed today by EU ambassadors. Eurostat described the
possibility of EU countries paying out for the loan as “a complex event with no
obvious probability assessment at the time of inception.”
EU countries will need to individually commit billions of euros to guarantee as
much as €210 billion in urgently needed loans to Ukraine, with Germany set to
backstop up to €52 billion, according to documents obtained by POLITICO.
The European Commission presented the eye-watering totals to diplomats last week
after unveiling a €165 billion reparations loan to Ukraine using the cash value
of frozen Russian assets.
The backstops, which would be divided up proportionally among countries across
the bloc, are needed to secure a go-ahead on the loan from Prime Minister Bart
De Wever. The Belgian leader has opposed the use of sovereign Russian assets
over concerns that his country alone may eventually be required to pay the money
back to Moscow. Some €185 billion in frozen Russian assets are under the
stewardship of the Brussels-based financial depository, Euroclear, while another
€25 billion is scattered across the bloc in private bank accounts.
The per-country totals may go up, however, if Kremlin-friendly countries such as
Hungary refuse to join the initiative — though non-EU countries may help, if
they choose, by covering some of the overall guarantee. Norway had been mooted
as a possible candidate until its finance minister, Jens Stoltenberg, distanced
Oslo from the idea.
Ukraine faces a budget shortfall of €71.7 billion next year and will have to
start cutting public spending from April unless fresh money arrives. Hungary on
Friday vetoed issuing new EU debt to plug Kyiv’s budget gap, putting the onus on
leaders to convince De Wever to support using Russian assets when EU leaders
meet on Dec. 18, rather than dipping into their own national coffers.
German Chancellor Friedrich Merz was in Brussels on Friday evening to reassure
De Wever that Germany would provide 25 percent of the backstop, the largest
share of any country.
“We had a very constructive exchange on this issue,” Merz said after dining with
the Belgian leader. “Belgium’s particular concern about the question of how to
make use of frozen Russian assets is undeniable and must be addressed in any
conceivable solution in such a way that all European states bear the same risk.”
CHECKS AND BALANCES
The proposed reparations loan earmarks €115 billion to finance Ukraine’s defense
industry over five years, while €50 billion would cover Kyiv’s budgetary needs.
The remaining €45 billion from the overall package would repay a G7 loan to
Ukraine, issued last year.
The funds would be disbursed in six payments over the year, according to the
Commission’s slideshows.
Certain checks and balances would be in place to prevent crooks from pocketing
the money. In terms of defense spending, for example, this would include
ensuring that the contracts and the spending plans are acceptable to the
Commission.
The Commission would also detail Ukraine’s financing needs and outline where the
government receives military and financial aid, allowing EU capitals to track
the money streaming to Kyiv.
BRUSSELS — Hungary formally ruled out issuing eurobonds to support Ukraine on
Friday, a move that robs the EU of a potential Plan B should it fail to find a
way to use frozen Russian state assets to finance a €165 billion loan to Kyiv.
The European Commission wants the 27 EU member countries to agree at a summit
later this month to support Kyiv’s faltering economy with a loan based on
immobilized Russian central bank reserves. Belgium is pushing back hard as it
holds the lion’s share of that frozen cash and fears it would be on the hook if
the Kremlin sues.
Eurobonds would have provided an alternative funding stream to Ukraine, but
Budapest rejected the idea of issuing joint debt backed by the EU’s seven-year
budget, two diplomats at a meeting of ambassadors told POLITICO.
Hungary’s rejection came hours before a dinner between German Chancellor
Friedrich Merz and Belgian Prime Minister Bart De Wever in Brussels to discuss
the loan.
Merz said he was planning to use the event to bring De Wever on board.
“I take the concerns and objections of the Belgian prime minister very
seriously,” Merz told reporters on Thursday night. “I don’t want to persuade
him, I want to convince him that the path we are proposing here is the right
one.”
Germany is offering a backstop on 25 percent of the funds to convince Belgium to
send the frozen billions to Ukraine, but De Wever wants a broader guarantee from
the whole EU that Belgium will be insured for the full amount, or more.
The Commission proposed eurobonds on Wednesday as one of two options, along with
the Russian asset-backed loan, to ensure that Ukraine’s war chest doesn’t run
bare as soon as next April.
Raising debt through the EU budget to prop up Ukraine requires a unanimous vote,
however. Hungary’s rejection now raises the stakes for what are expected to be
intense negotiations on the loan before EU leaders gather in Brussels on Dec.
18.
Officials did not expect an immediate breakthrough given De Wever’s strong
opposition.
The Commission has repeatedly downplayed the financial and legal risks
associated with the reparation loan and insists its proposal addresses most of
Belgium’s concerns.
The proposed reparations loan earmarks €115 billion to finance Ukraine’s defense
industry over five years, while €50 billion would go to cover Kyiv’s budgetary
needs.
James Angelos contributed reporting from Berlin.