On Wednesday 9 November, the Executive Vice-President of the European Commission, Valdis Dombrovkis, and the Commissioner for the Budget, Johannes Hahn, presented the EU’s support package for Ukraine of up to €18 billion for 2023, equal to €1.5 billion per month.
The aim is to help the country continue to pay salaries, keep essential public services running, ensure macroeconomic stability and restore destroyed critical infrastructure.
According to the International Monetary Fund, Ukraine needs between €3 and 4 billion per month in 2023 to maintain its public services.
The €18 billion of assistance, which the Commission describes as “stable, regular and predictable”, will take the form of highly concessional loans, to be disbursed in regular instalments from 2023 onwards through a Macro-Financial Assistance + (MFA+) instrument. According to Mr Hahn, disbursements could be made on a quarterly basis.
The funds will be repayable over a maximum period of 35 years, starting in 2033. To ensure the financing of the loans, the Commission proposes to borrow on capital markets using the diversified funding strategy. It also proposes to use the headway of the EU budget for the period 2021-2027 in a targeted way for Ukraine, limited in time, to guarantee this borrowing. “There will be no need for new and more complex guarantees from Member State”, said Commissioner Hahn.
The EU proposes to cover Ukraine’s interest rate costs through additional targeted payments by Member States into the EU budget until the end of this Multiannual Financial Framework in 2027. These contributions should be renewed after 2027, unless interest rate payments are covered by other means in future long-term EU budgets, the Commission says. Interest would start to be paid from 2024.
According to Mr Hahn, “a very conservative estimate for the costs of the borrowing (3.5% on the interest for 15 year maturity bonds) is €630 million for the whole year”. The contribution of each Member State would be based on the share of gross national income. The Commissioner said this would be “about €18 million for Austria”, which is his country of origin, and “€6 million for Hungary”, a country reluctant about a European guarantee (see EUROPE 13058/15).
EU Member States and third countries will also be able to add additional funds to the instrument, to be used as grants, if they so wish. The funds will then be channelled through the EU budget, allowing Ukraine to receive aid in a coordinated manner.
European support will need to be accompanied by reforms on the part of Ukraine, particularly in terms of the rule of law, good governance and measures to combat fraud and corruption in the country. The Executive Vice-President clarified that while support is subject to conditionality, Ukraine is a country at war, and conditionality will be “realistic and achievable, given the circumstances”.
In order to implement this support in practice, the European Commission is proposing a new instrument - MFA+ (https://aeur.eu/f/3zj ) -, the amendment of the Financial Regulation laying down general rules on EU expenditure (https://aeur.eu/f/3zk ) and a technical amendment to the Regulation on the Multiannual Financial Framework 2021-2027 in order to guarantee borrowing for Ukraine by using the budgetary ‘headroom’ (https://aeur.eu/f/3zl ).
Mr Dombrovskis hoped the EU Council would agree on 6 December and the Parliament by the end of the year so that the first payment could be made in January 2023. “Aid must be decided quickly, Ukraine’s financial needs are urgent”, he said. According to Mr Hahn, there is broad support in the Council and the European Parliament for this aid, and he believes that the remaining reluctance can be overcome. He expressed confidence that a solution could be found by the end of the year.
In a debate in the European Parliament the same day, the President of the European Council, Charles Michel, said that Member States would analyse this proposal “very seriously so that a signal of stability can be given to the Ukrainians”. On behalf of the EPP and S&D, Siegfried Mureșan (Romanian) and Iratxe García Pérez (Spanish) called on the European Parliament to stand united in helping Ukraine. (Original version in French by Camille-Cerise Gessant)