The highest leadership of the European Commission and the Belgian government will meet on Friday to try to overcome the political deadlock related to the use of frozen Russian state assets to finance a 140 billion euro "reparations loan" to Ukraine, Politico reports, citing two high-ranking EU officials, writes UNN.
Details
Belgium is in no hurry to approve the plan proposed by the European Commission as a way to use sanctioned Russian funds to support Ukraine without their final seizure, while these funds are stored in the Brussels financial company Euroclear.
Belgian Prime Minister Bart De Wever fears that his government will have to pay billions to Moscow if the Kremlin's army of lawyers sues over the initiative. At a meeting of EU leaders in October, De Wever demanded stronger guarantees from EU leaders to protect his country from the financial and legal risks that could arise from the initiative.
Friday's crucial meeting follows the failure of deputy finance ministers from the bloc's countries to make progress in negotiations on the "reparations loan" on Tuesday. The European Commission warned that time is running out.
"The longer we drag it out, the more difficult it will be. This could call into question possible interim solutions," Valdis Dombrovskis, European Commissioner for Economy, told reporters in the Bulgarian capital Sofia on Tuesday.
Ukraine will face a budget deficit next year if the money does not arrive by spring, the publication writes. The European Commission warns the EU government that without an agreement on the use of Russian assets, they will have to support Kyiv with their own funds, which is unattractive to many after the pandemic crashed national budgets.
"How will we get 140 billion euros from European budgets this time of year?" asked the deputy finance minister, who expressed dissatisfaction with Belgium's actions. "There's no way."
The European Commission will present Belgium with a memorandum on alternative options for financing Ukraine, which include EU borrowing. There is hope that De Wever, who is also facing financial difficulties, will soften when he sees the lack of other viable options, the publication writes.
Belgium's demands
For his part, De Wever outlined what is needed for Belgium to support the plan.
First, Belgium wants to eliminate the threat of a veto by Hungary or another country on sanctions.
Every six months, the EU must unanimously extend its sanctions against Russia, which means that any Kremlin-friendly country, such as Hungary or Slovakia, could unfreeze Russian assets and force Euroclear to transfer all sanctioned funds back to the Kremlin, the publication explains.
The European Commission is working to annul the veto to provide Belgium with the long-term certainty it needs on this issue, the publication writes.
Secondly, Belgium wants other EU countries to share the risk.
The European Commission has repeatedly stated that Ukraine should only start repaying the 140 billion euro loan after Russia ends the war and pays reparations. However, the Belgians want EU countries to provide financial guarantees for the loan if Russia ends the war and demands its assets back, or if Kremlin lawyers convince a court of the need to return the funds to Moscow.
Even if all EU countries provide national guarantees, Belgium wants to be sure that any payments will be made immediately. The European Commission has suggested that it could provide a loan to any country that has difficulty providing funds at any given time. But such an approach would increase the country's debt, which is unpopular for countries like France and Italy, the publication points out.
And finally, Belgium is urging the European Commission to consider using the current seven-year EU budget as a guarantee for the loan, rather than relying on national governments.
Theoretically, the European Commission, as noted, could use part of the cash buffer, called a reserve, embedded in the EU budget for this purpose. This idea makes sense after the submission of a new budget in 2028. However, it is not yet clear whether the reserve will be sufficient for the current level.