Czechia, Hungary and Slovakia will not join the bloc’s other 24 countries in sharing the debt burden, but agreed not to obstruct Ukraine’s financing needs. As part of the carve-out deal, the Commission will propose a so-called enhanced cooperation early next week, giving the 24 countries a legal platform to raise joint debt.
Many of the hallmarks of the €210 billion financing package for Ukraine will be transferred to the new plan for common debt. These include payout structures in tranches, anti-corruption safeguards, and an outline for how much money should be spent on Kyiv’s military and the country’s budgetary needs.
European governments resorted to joint debt after failing to agree on a controversial plan to leverage frozen Russian assets across the bloc.
The new plan would provide Ukraine with €45 billion next year, handing Kyiv a crucial lifeline as it enters its fifth year of fighting. The remaining funds would be disbursed in 2027.
Cost of borrowing
The new plan won’t come cheap. The EU is expected to pay €3 billion annually in interest from 2028 through its seven-year budget, which is largely financed by EU governments, senior Commission officials told reporters on Friday. Interest payments would begin in 2027, but would cost only €1 billion that year.
Ukraine will only have to repay the loan once Russia ends the war and pays war reparations. That seems unlikely, which means the EU could continuously roll over the debt or use frozen Russian assets to repay it.
That would require another political agreement among EU leaders, as Belgium is strongly opposed to using the frozen assets, most of which are held in the Brussels-based financial depository Euroclear.
It was Belgium’s resistance that ultimately forced leaders to pursue common debt. Belgian Prime Minister Bart De Wever wanted unlimited financial guarantees against the Russian asset-backed loan, a demand too great for his peers.