EU’s Ukraine loan may have been Plan B, but don’t underestimate its significance to the bloc | Ukraine
The EU’s failure to agree a “compensation loan” to Ukraine backed by frozen Russian assets was a political blow to the bloc’s big beasts, but the last-gasp alternative it has devised will do the job and marks a potentially significant first.
After a 16-hour marathon, EU leaders agreed early on Friday to fund a much-needed €90bn (£79bn) loan to Ukraine, which is at risk of running out of money by next April. However, the solution they found was not the solution most people wanted.
More than two months ago, the European Commission publicly announced a plan to provide a loan to Kiev in exchange for some of the €210 billion of Russian central bank assets frozen in Europe, most of which are held at the Euroclear clearing house in Belgium.
The idea was that the EU would borrow money from Euroclear to lend to Ukraine. Russia will remain the legal owner of the assets, and Kiev will repay the loan using Russia’s reparations after the war, which will then repay EU Euroclear.
It looked orderly, was legally watertight, EU lawyers argued, and was attractive for two main reasons: it did not involve new joint borrowing, and it provided a certain moral satisfaction in seeing Russian money helping Ukraine fight Russian aggression.
But there was an obstacle. Belgian Prime Minister Bart De Wever argued that Moscow, which sees the plan as theft, will retaliate and that courts in Russia-friendly jurisdictions such as China may order the seizure of Belgium’s assets.
De Wever held out for weeks, resisting especially heavy pressure from commission chief Ursula von der Leyen and her compatriot, the German chancellor Friedrich Merz, who saw the “compensation loan” as a Plan A without a Plan B.
The alternative – joint borrowing – may have appealed to some southern EU countries, but it was fiercely opposed by Berlin and its frugal northern European allies, who were averse to taking on more debt for other already overburdened member states.
By the start of Thursday’s EU summit, leaders and diplomats were convinced that De Wever, whose popularity at home had grown, would give in. Instead, he demanded unlimited cash support from every EU member in case of any Russian claims.
This was too much. And so Plan B, supported primarily by Italy’s Giorgia Meloni and increasingly by French President Emmanuel Macron, using unallocated funds from the EU budget as collateral for a mass loan to Ukraine, won the day.
Objections that the Eurobond alternative required unanimity were overcome in a historic and potentially far-reaching move by securing the support of Eurosceptic Hungary, Slovakia and the Czech Republic in exchange for exemptions.
The result was, above all, extremely important for Ukraine, and Ukraine will receive the money it desperately needs sooner than in Plan A. Although the German chancellor expressed satisfaction with the agreement, it was a political loss for von der Leyen and Merz.
This was a victory for an elated De Wever, who said “rationality has prevailed” and “the voice of small and medium-sized member states matters”, and good news for Eurosceptic prime ministers Viktor Orbán, Andrej Babiš and Robert Fico.
They can go home and boast to their populist base that taxpayers in Hungary, the Czech Republic and Slovakia respectively will not be asked to do anything for Ukraine’s defense.
Friday’s agreement has again exposed the deep divisions that often cripple the EU’s decision-making and underlined how far it still has to go to create a fully united Europe capable of acting effectively and decisively in a hostile world.
But the bloc managed to reach an agreement on an existentially important goal. Analysts even suggest that he may have found a new path forward. This was “a big deal for the EU”. said Guntram WolffFrom the Bruegel economic think tank.
“If you want to carry out EU foreign policy, you need EU resources and debt. The European Council has provided this,” he said, adding that the summit also marked, significantly, the first time a non-unanimous decision had been reached on new EU debt.
Alberto Alemanno, professor of EU law, accepted the deal It was “unprecedented”. He said allowing willing states to proceed had not previously been tried for “EU budget-backed borrowing with selective participation in collective responsibility”.
“Debt without unanimity… Is this the long-term direction of common European resources?” asked Jeremy Cliffe of the European Council on Foreign Relations. If so, Thursday’s summit could be a turning point.
