On one thing EU leaders are agreed – that the EU, as a concrete expression of its solidarity, must help Ukraine bridge the huge budget funding gap it faces next year. The problem is how?
The commission has proposed to do so by using €140 billion of Russian frozen assets held in the EU as collateral for interest-free loans to Kyiv, a suggestion decried by Russia as illegal confiscation. The EU has frozen some €210 billion Russian state assets of which around €185 billion are held at Euroclear, the Brussels-based central securities depository.
The Belgian government continues to wield its veto against the proposal and – together with Euroclear – insists the measure will undermine market confidence in the security of European deposit institutions and push up the cost of borrowing. Belgium fears it will be vulnerable to Russian legal and other retaliation, and insists that the rest of the union must provide it with guarantees that they will share in any fallout.
The Commission has structured what are now referred to as “reparation loans” so that, it argues, they do not constitute confiscation but borrowings against assets that will be repaid by Russia as part of reparations agreed in a peace deal, albeit that this is a somewhat dubious prospect.
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Alternative approaches, European Commission President Ursula von der Leyen has suggested, include Member States themselves providing bilateral grants to Ukraine, or the union borrowing collectively for a new Ukraine debt fund . Both are non-runners, as she knows, for states already struggling with debt, the majority of which are suspicious of even the idea of extending the union’s post-Covid collective debt-raising exercise.
It is hoped a deal on the loan can be agreed at the Brussels summit on December 18th. Member states in the interim must work to provide Belgium with the reassurances it needs, and to reshape the peace pact now proposed by Trump to strengthen Russian reparation obligations, along with other changes needed to underpin Ukraine and EU security.
