European Union leaders have agreed to borrow 90 billion euros ($105 billion) to help fund Ukraine’s defense against Russia over the next two years. This decision marks a shift from an earlier plan to finance Ukraine using frozen Russian assets.
The EU will provide interest-free loans for 2026-2027, supported by EU borrowing in capital markets and backed by the EU budget’s excess capacity. This amount is expected to cover about two-thirds of Ukraine’s needs during this period. Initially, Britain was to contribute to filling the funding gap with its frozen Russian assets.
Despite initial resistance to the EU borrowing plan, particularly from Hungary, a compromise was reached. Hungary, Slovakia, and the Czech Republic allowed the scheme to proceed after being reassured it would not financially impact them.
The proposal to use frozen Russian assets faced challenges, especially from Belgium, which holds a significant portion of these assets. Other countries like Italy, Malta, and Bulgaria also expressed concerns. The plan would have involved investing the frozen funds in zero-interest bonds, helping meet Ukraine’s needs without outright confiscation, which is against international law. However, the need for Belgium to have guarantees against potential risks stalled this approach.
As for repayment, EU leaders stated that the Russian assets will remain frozen until Russia pays reparations to Ukraine. If this occurs, Ukraine could use those funds to repay the loan, though this scenario seems unlikely. Borrowing 90 billion euros is considered manageable to support Ukraine and maintain investor interest, with expectations of sufficient appetite for this new loan.
With information from Reuters