EU Leaders Approve €90 Billion Loan for Ukraine

In a significant move, European Union leaders have agreed to provide Ukraine with a substantial interest-free loan to support its military and economic needs over the next two years. This decision comes after discussions about utilizing frozen Russian assets did not reach a consensus.

Loan Approval and Financial Details

Antonio Costa, the EU Council president, announced on social media that the leaders have reached a deal to extend approximately €90 billion (about $106 billion) in support for the years 2026-2027. “We committed, we delivered,” Costa stated, emphasizing unity in this decision.

With the EU’s public finances already under strain from high debt levels, the European Commission suggested using frozen assets from the Russian central bank to secure this large loan for Ukraine. Joint borrowing against the EU budget was also considered as an alternative.

Reactions from EU Leaders

Belgian Prime Minister Bart De Wever noted that the decision to secure the loan through borrowing, rather than using frozen assets, helped avoid “chaos and division.” He praised the EU’s ability to remain united during late-night discussions.

German Chancellor Friedrich Merz added that Ukraine would only need to repay the loan if Russia compensates for the war damages. He reserved the right for the EU to apply frozen Russian assets for repayment in case Russia defaults on reparations. Despite advocating for the use of frozen assets, Merz asserted that the decision sends a strong message to Russian President Vladimir Putin.

Ukraine’s Needs and President Zelenskyy’s Position

Ukraine is estimated to require an additional €135 billion (around $159 billion) to sustain its economy over the coming two years. President Volodymyr Zelenskyy expressed at the summit that utilizing Russian assets was not only a viable option but also a moral and legal obligation. “Russian assets must be used to defend against Russian aggression and rebuild what was destroyed by Russian attacks,” he stated.

Loan Execution and Political Dynamics

A draft text presented at the summit revealed that the funding would be generated through borrowing on capital markets, secured against the EU budget. Notably, the agreement will not impose financial obligations on Hungary, Slovakia, or the Czech Republic, who opposed contributing to Ukraine’s financing.

Although Moscow-friendly Hungary previously asserted its opposition to the deal, the leaders agreed to continue discussions involving EU governments and the European Parliament to establish a loan based on the immobilized Russian central bank assets.

Understanding the Broader Context

Poland’s Prime Minister Donald Tusk framed the funding decision as a crucial choice: “money today or blood tomorrow,” reflecting the urgency of the matter. One EU diplomat remarked that securing two years of funding for Ukraine is a positive outcome, despite the complex discussions regarding the frozen assets.

After hours of deliberation, it became evident that the intricacies of leveraging frozen Russian assets were politically and technically challenging. One diplomat noted a sentiment of shifting focus from merely saving Ukraine to also preserving the dignity of those advocating for utilizing frozen funds.

The main complication revolved around Belgium, where a significant portion of the €210 billion in Russian assets is held, as they sought adequate guarantees against financial risks linked to potential Russian retaliation.

Following this development, Russia’s central bank announced intentions to seek damages from European banks for the blocking and usage of its assets, further complicating the landscape.

Conclusion

The EU’s decision to grant a €90 billion loan to Ukraine marks a pivotal development in addressing the ongoing conflict and economic distress faced by the country. This move reflects the EU’s commitment to supporting Ukraine amidst challenging geopolitical dynamics.

• EU leaders have approved a €90 billion interest-free loan to Ukraine.
• The decision followed unsuccessful discussions on using frozen Russian assets for the loan.
• Ukraine needs an estimated €135 billion to stabilize its economy in the upcoming years.
• There is ongoing dialogue about the use of frozen Russian assets in future funding considerations.