The ambassadors of the Member States to the European Union (Coreper) have reached a partial political agreement, by qualified majority, on the draft Regulation establishing the ‘Ukraine Facility’, the instrument designed to implement the macrofinancial assistance that the EU will provide to Ukraine in exchange for reforms and investments and close monitoring of the financing granted.
“The EU is committed to providing unfaltering support to Ukraine as long as needed. (...) The support would help Ukraine take forward the reforms and modernisation efforts needed for it to advance on its path towards future EU membership”, said Belgian Minister of Finance Vincent van Peteghem in a press release.
The partial agreement enables the Belgian Presidency of the Council of the EU to initiate negotiations with the European Parliament on the ‘Ukraine Facility’. But it does not address the question of funding, which the European Commission had suggested should be set at €50 billion over the period 2024-2027 in its initial proposal last June (see EUROPE 13205/9). This package was approved by twenty-six Member States and rejected by Hungary at the European Summit in December 2023, as part of the negotiations on the revision of the Multiannual Financial Framework (MFF) 2021-2027 (see EUROPE 13322/3).
Despite the continuing uncertainty over the level and duration of funding, the Member States are continuing to work on the basis of macrofinancial assistance of €50 billion between now and 2027, even though the figures given in the partial agreement are indicative. This aid would be provided in the form of subsidies to the tune of €17 billion (maximum €5 billion per year), and €33 billion in loans granted on very advantageous terms (35-year maturity and moratorium on repayments until 2034).
Under the EU Council’s partial agreement, the Member States are making significant changes to the breakdown of the envelope: - 32% of the resources would be allocated to the Ukrainian action plan for reform and investment (compared with 78% under the initial proposal); - 42% for the investment framework, for which the EU will provide a budget guarantee of €7.9 billion (compared with 16% under the initial proposal); - 24% for the costs associated with the gradual alignment with the Community acquis (compared with 5% under the initial proposal).
The Ukrainian authorities will have to present an action plan detailing the investments and reforms they intend to implement with the EU aid, in particular to modernise and/or rebuild the infrastructure destroyed by the military aggression in Ukraine and to bring it closer to EU standards.
In its assessment of the plan, the European Commission will have to indicate whether Ukraine is meeting the objectives set, particularly in terms of macroeconomic stability and respect for the Rule of law. It will have to put in place a framework for cooperation with the Ukrainian authorities to monitor and control the use of funds in order to prevent fraud and conflicts of interest. It will in fine be up to the EU Council to give the go-ahead for the action plan.
Finally, while the Commission recommended transparency for beneficiaries receiving more than €500,000 in aid, Member States would lower this threshold to €100,000 of aid received cumulatively.
It should be noted that the EU Council is giving the EIB a role in mobilising the public guarantee based on the EU budget, by entrusting it with the management of 25% of the amount of this guarantee between now and July 2026 for operations involving sovereign countries and public entities participating in the investment framework.
See the partial political agreement of the Council of the EU: https://aeur.eu/f/abq
Parliament supports the EU macrofinancial assistance of €50 billion over 4 years, including €33 billion in preferential loans (see EUROPE 13273/20). It is introducing additional transparency measures on the use of funds and would like to be placed on an equal footing with the EU Council in the transmission of information by the Commission. According to Parliament, Ukraine’s action plan should be drawn up in consultation with the Verkhovna Rada and ratified by means of a delegated act from the Commission, which would give it a right of scrutiny.
MFF. On Wednesday, according to our information, Hungary maintained a “transactional” stance on the revision of the MFF, with the aim of negotiating changes to the terms and conditions of future aid to Ukraine and obtaining concessions in exchange for its agreement. In particular, it would like EU aid to be annual, close to €15 billion a year, so that any future decision to extend assistance is taken unanimously by the Member States.
And Budapest would not want to have to contribute to interest payments on loans taken out under the Next Generation EU recovery plan while payments to the Hungarian recovery plan remain blocked, due to the lack of sufficient reforms to respect the Rule of law in Hungary and the independence of the judiciary. (Original version in French by Mathieu Bion)