The European Union proposes to cover two-thirds of Ukraine's financial needs of 90 billion euros over the next two years – two options are proposed for this – either through EU borrowing or a "reparations loan" using frozen Russian assets, European Commission President Ursula von der Leyen announced on Wednesday during a briefing on solutions to support Ukraine's financial needs in 2026-2027, UNN reports.
We must increase the cost of the war for Putin's aggression. And today's proposal gives us the means to do so. So, what is this proposal? Today we propose to cover two-thirds of Ukraine's financial needs over the next two years. So, that's 90 billion euros. The rest will be covered by international partners. And today we are offering member states two solutions for agreement.
According to her, "the IMF estimates that Ukraine will need 135 billion euros over the next two years. That is 2026 and 2027."
Meanwhile, Ukraine's Finance Minister Serhiy Marchenko announced today a deficit of $45 billion (38.6 billion euros) for next year during the adoption of the 2026 Budget in the Verkhovna Rada. "We need to generate an additional more than $45 billion from international partners for next year," he said. Roksolana Pidlasa, head of the budget committee of the Verkhovna Rada, clarified that it is about "the entire deficit we have, amounting to $45.5 billion (39 billion euros - ed.)."
Two options
According to von der Leyen, the "first solution proposed by the European Commission is EU borrowing." "This is essentially raising capital on capital markets and using the EU budget as a guarantee for that. And transferring that capital as a loan to Ukraine," she explained. "This decision must be taken unanimously."
"And the second solution that we are proposing today in the legal text is the so-called reparations loan. Here we would use the cash balances from immobilized Russian assets in the European Union," von der Leyen said.
According to her, "we propose to cover all financial institutions that have accumulated such cash balances. And these institutions will have to transfer the cash to a reparations loan instrument. In other words, we take the cash balances," she noted.
"We provide them to Ukraine as a loan. And Ukraine must repay this loan if and when Russia pays reparations," she noted. "This decision can be taken by a qualified majority."
Directions for using funds
"Then the question arises of how we will use this money. First, we will use this money for budgetary support for Ukraine. And here we will build on the success of existing instruments. You know both of them. That is, on the one hand, either macro-financial assistance or the Ukraine Facility," said von der Leyen.
"And the second area where we will use this money is military support. Here, the main goal is to further strengthen Ukraine's defense-industrial potential and integrate these capabilities into our defense-industrial base. And here we would use the so-called cascading principle. In other words, the funds will be used primarily for production and procurement in Ukraine, the European Union, and then in the so-called EEA countries. But if we have urgent needs that cannot be met by Ukraine or the European Union, then we allow these urgent needs to be purchased from outside with this money," the President of the European Commission said.
EU protection and safeguards
Valdis Dombrovskis, European Commissioner for Economy, in turn, emphasized that "everything we propose today is legally sound, fully compliant with EU law and international law."
This respects the principle of sovereign immunity, and the reparations loan does not harm the claims of the Russian central bank
He also spoke about the "protective and precautionary measures contained in the proposals."
"Having listened carefully to all Member States, we propose to create a robust system based on existing safeguards that we have built over recent years. In a spirit of solidarity, we call on Member States to provide guarantees to support the loan. This guarantee will ensure full protection of EU borrowing and ensure a fair sharing of the burden among Member States," the European Commissioner noted.
"Under the next MFF (EU multiannual budget - ed.), these guarantees will be assumed by the EU budget reserve. And if there is unanimity on amending the current MFF regulation, which we propose, this protection can already be ensured within this MFF reserve. In short, these safeguards will cover the unlikely event that the Union has to repay its loans without reparations and at the same time cover any losses of a Member State if it is forced to pay a claim from Russia," Dombrovskis said.
"Although the risk of this is very low," he emphasized. "Firstly, these are not actions of individual Member States, but actions of the Union, which are fully compliant with EU law and international law. Secondly, existing safeguards ensure that claims against Belgium or any other Member State cannot be enforced in the EU due to the so-called no-claim clause."
"Thirdly, to address the risk of enforcement of indivisible assets of Member States in third countries, we are introducing a provision that allows for the recovery of damages. The proposals also provide for mechanisms to deter any entity that facilitates the enforcement of claims on behalf of Russia, or entities sponsored by Russia, both within and outside the Union," he said.
"Guarantees will be based on all these safeguards only where appropriate, that the actions of the Union entail the responsibility of the Union, and not the responsibility of any individual Member State," the European Commissioner noted.
About Russian assets
"We also propose today provisions for the further immobilization of Russian assets in the EU," Dombrovskis said.
"The proposal for a new regulation provides a legal basis for measures that correspond to this economic and security situation, including a ban on the transfer of immobilized assets of the Russian central bank back to Russia. (...) This regulation will operate in parallel with the sanctions regime," the European Commissioner said.
About the loan amount
As for the volume of funding, the EU has about 210 billion euros of immobilized assets. Thus, this is the maximum amount of the loan we can offer. The President has already explained how these funds will be distributed
According to him, "they will not be paid out in a lump sum, but will be created to respond to Ukraine's changing needs. This will be spelled out in its financing strategy, which will be submitted annually." "We will also keep 45 billion euros of these amounts in reserve to repay existing loans, ensuring that ERA loans do not increase Ukraine's debt burden," Dombrovskis said.
"And last but not least, the proposals are underpinned by Ukraine's fulfillment of key preconditions for receiving support. This includes respect for democratic mechanisms, human rights, and the rule of law, including the fight against corruption," he noted.
Legal proposals
As reported by the European Commission, the proposed package of legal proposals consists of:
- a proposed Regulation establishing a reparations loan;
- a proposal to prohibit any transfer of immobilized assets of the Russian central bank back to Russia;
- two proposals establishing important safeguards for the reparations loan, aimed at protecting EU Member States and financial institutions from possible retaliatory measures. Two joint proposals for amendments to Council Regulation (EU) 833/2014 will be published after the Council takes a position on them, in accordance with current procedures. They will be supplemented by a parallel proposal for a Council Decision from Kaja Kallas, High Representative of the EU for Foreign Affairs and Security Policy and Vice-President of the European Commission;
- a proposed amendment to the current MFF (multiannual EU budget) to allow the use of the EU budget to support the loan to Ukraine, which could serve both proposed solutions.