On Friday 9 September in Prague, EU finance ministers reached an agreement on the proposal for macrofinancial assistance of €5 billion in the form of a loan that will be guaranteed by all EU Member States, including Hungary.
“All Member States agreed on further support to Ukraine”, said Czech minister Zbyněk Stanjura, who hosted the meeting, saying it was “important that all Member States agree on the [public] guarantees”.
“We all stand ready to provide the necessary national guarantees in line with our shares in the EU GNI-key, subject to the completion of national procedures," say the EU Member states in their statement. The granting of national guarantees requires the approval of national parliaments.
As the EU budget is no longer able to do so, these national guarantees are essential to enable the European Commission to borrow on the markets the sums it will lend to Ukraine on a long-term basis and at a favourable rate.
This macrofinancial assistance is part of an aid package of up to €9 billion for 2022 agreed by the European Council in late June. A €1 billion loan was already disbursed in the summer (see EUROPE 13004/4).
Negotiations between the European institutions will therefore start on an additional package of up to €3 billion.
Commission Vice-President Valdis Dombrovskis noted that due to the Russian invasion, Ukraine’s GDP will fall by almost 50% this year. He recalled that the IMF estimated the financial needs for this year alone at $39 billion. Since the end of February, the EU, its Member States and financial institutions have mobilised “€9.5 billion” so far, he noted.
In Prague, the ministers also discussed the post-conflict reconstruction of Ukraine, the cost of which has been estimated by the World Bank to be $350 billion at this point.
Recalling the strategy unveiled by the Commission in May for the creation of a specific European financial instrument (see EUROPE 12955/2), Mr Dombrovskis mentioned several options on the table for mobilising the necessary funds, including the use of confiscated Russian assets.
However, the EU institution’s Vice-President warned, between the €9 billion package to be made fully operational and Ukraine’s reconstruction efforts in the future, “further short-term financing needs” would arise.
For 2023, financial assistance combining loans and grants should be put in place, according to several experts.
"We remain committed to providing timely, united and effective financial support to Ukraine, and strive for fair burden sharing, also taking into account the bilateral assistance provided by Member States so far," the EU-27 say, acknowledging "the importance of the donations" already provided by some countries, such as Germany.
See the Member States' declaration: https://aeur.eu/f/30x (Original version in French by Mathieu Bion)