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.
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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.
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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.