On Wednesday 7 September, the European Commission put forward a new €5 billion macrofinancial assistance package for Ukraine, which will require public guarantees from the Member States for 70% of the loan.
The assistance, which will bring the EU’s macrofinancial assistance to €7.2 billion since the start of the Russian invasion of Ukraine at the end of February, will help Kyiv meet its financial needs, which amount to around €5 billion a month.
As the EU budget is no longer able to do this on its own, the Commission is proposing to mobilise public guarantees from the Member States to provide guarantees along the lines of what was done to set up the SURE initiative providing loans to national short-time working schemes of up to €100 billion.
These state guarantees, which require the approval of national parliaments, would be distributed according to each Member State’s contribution to the EU budget. They would be called upon in the event of a default by Kyiv on the macrofinancial assistance of €1 billion already paid out this summer (see EUROPE 13004/4) and the €5 billion proposed this Wednesday.
Given that the EU budget will protect 9% of this €6 billion package, the public guarantees will have to cover the remaining 61% to reach the required 70% threshold of €3.66 billion. A €540 million contribution to the EU budget would also be requested from the Member States in case of a Ukrainian default.
During prior discussions in the EU Council on this macrofinancial assistance, Hungary expressed its “reservations” about approving such a scheme, an EU source acknowledged on Tuesday. The issue was on the agenda of the Hungarian government meeting on Wednesday. According to this source, even if Hungary only contributes 1% of the EU budget, “moving forward with the EU27 Member States would demonstrate the unity of the Member States” in supporting Ukraine.
The Czech Presidency of the EU Council hopes that they will overcome this hurdle by Friday 9 September, so that EU Finance Ministers can send a positive political signal at their informal meeting in Prague (see other news).
If the macrofinancial assistance of €5 billion is approved, the question of additional assistance of up to €3 billion will then arise, in line with the June European Council agreement of a package of up to €9 billion for 2022. For the remaining €3 billion, a combination of loans and grants should be possible, as requested by Germany, which announced €1 billion in bilateral grant aid in the spring as part of its G7 Presidency (see EUROPE 12957/2).
“There is a debate on how bilateral aid will be accounted for”, the source confirmed, recalling that government guarantees are treated as public debt, while subsidies feed directly into national deficits. They noted that if the war lasts a long time, Ukraine’s financial needs will be even higher in 2023 than the €9 billion package envisaged in the scenario of a war ending in 2022.
“Ukraine must win this war (...). The EU will continue to do its part to make sure this happens – solidarity will prevail, and peace will come”, said the President of the European Commission, Ursula von der Leyen, in a press release.
Read the Commission’s proposal: https://aeur.eu/f/2z7 (Original version in French by Mathieu Bion)