EU plans mix of grants and loans to aid Ukraine – POLITICO

A new draft proposal by the European Commission would provide €8 billion in financial aid to Ukraine through a mix of grants and loans, two EU officials told POLITICO Friday.

The EU would disburse up to €5 billion as long-term loans leveraged on the back of guarantees provided by EU countries, according to their contribution to the bloc’s budget. Interest payments would be subsidized by the EU’s budget. The remaining amount, around €3 billion, would be provided as grants, the officials said.

The new draft proposal comes after Germany refused to provide guarantees to back up to €9 billion in loans for Ukraine. Berlin argued that grants are better suited to help Kyiv — which is already heavily in debt — and pointed to its own bilateral grant of €1 billion.

That position caused Italy and France, which also provided bilateral aid, to raise issues as well, forcing the Commission back to the drawing board.

While there’s no timeline yet, the Commission is aiming to obtain approval by the European Parliament and EU countries in September so that disbursement can start in October, one official said.

The issue of aid has become fraught, with Ukraine President Volodymyr Zelenskyy blasting the EU for the delay in his most recent overnight address.

Back in May, EU leaders pledged to provide “up to €9 billion” in macro financial assistance to Kyiv. But so far, the Commission has only been able to disburse €1 billion in loans backed by the EU’s budget.

The challenge is acute, because Kyiv has been running a budget deficit of around $5 billion per month since Russia’s invasion. It has called on international donors for help so it can cover basic costs like pensions and public sector wages — or risk financial collapse.

“Every day and in various ways, I remind some leaders of the European Union that Ukrainian pensioners, our displaced persons, our teachers and other people who depend on budget payments cannot be held hostage to their indecision or bureaucracy,” Zelenskyy said.

“Such an artificial delay of macro-financial assistance to our state is either a crime or a mistake, and it is difficult to say which is worse in such conditions of a full-scale war,” Zelenskyy said, referring to the remaining €8 billion.

The challenges for the Commission is how to fund the guarantee of 70 percent that it needs to raise funds on the markets, as its own budget is depleted. Earlier Friday, a Commission spokesperson said it is trying to find “sufficient guarantees outside the EU budget.”

“We are looking at various options, one of which is working with guarantees from member states,” the spokesperson said, while declining to comment on the timing of the Commission’s formal proposal.

In his address, Zelenskyy held back from taking a direct swipe at Berlin but urged his viewers: “Let’s believe that this is still a mistake and that it will be corrected.”

The German finance ministry didn’t reply to a request for comment.

This story has been updated.

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