On Wednesday 14 January, the European Commission will unveil a package of three legislative texts aimed at setting up a €90 billion ‘support loan’ to Ukraine for 2026 and 2027, backed by the EU budget, in line with decisions taken by the European Council at the end of December (see EUROPE 13676/1).
This package includes: a proposal to introduce a ‘support loan’; a proposal setting out the conditions attached to this loan in terms of investment, reforms and respect for democratic standards (Rule of law, fight against corruption) by the candidate country, which will modify the ‘Ukraine Facility’, another EU macro-financial aid package worth €50 billion over the period 2024-2027; a proposal amending the Multiannual Financial Framework (MFF) to authorise the Commission to raise funds for Ukraine using margins in the EU budget.
The two proposals will be adopted as part of enhanced cooperation between twenty-four Member States, Hungary, Slovakia and the Czech Republic having refused to take part in the initiative. Modifying the MFF will require unanimity among EU countries, the three dissenting countries having agreed not to oppose it.
What is the return on investment for the EU? One of the issues at stake in the EU Council discussions will be the level of purchasing by Ukraine of European-produced weapons, as was the case during negotiations on the ‘SAFE’ and ‘EDIP’ instruments for strengthening the European defence industry. In its conclusions, the European Council stressed the importance of the future loan “strengthening the European and Ukrainian defence industries“. This is an important issue for countries like France.
In a document sent to the Commission, which Agence Europe has seen, the Netherlands acknowledges that European industry is well-positioned to take on a “significant portion“ of Ukraine’s military requirements. This is “legitimate”, since the EU will be guaranteeing the loan, they say.
However, the Dutch authorities add, given the urgency and nature of its military needs, Ukraine will also require equipment produced by third countries, including air defence systems, spare parts and ammunition for F-16 aircraft, as well as capabilities to strike deep into Russia. The Netherlands therefore suggests allocating “at least €15 billion” of the total €90 billion budget for purchasing this equipment, using streamlined procedures and flexible eligibility criteria.
Will the legislative proposal question the awarding of orders issued by Ukraine to the Hungarian, Slovakian and Czech military industries, since their leaders refuse to bear the loan’s associated financial risks in proportion to their EU budget contribution?
Given the state of Ukraine’s public finances, the EU budget will also bear the financial cost of the ‘support loan’ by paying the loan’s interest, expected to total around €20 billion.
As decided by the European Council, Ukraine is only expected to repay the loan after Russia has paid war reparations. In the event of a payment default, the EU budget will act as a safety net. In this case, the loan would be refinanced and repayments deferred (‘roll-over’).
The aim is to reach an agreement between EU institutions during the first half of the year so that the first payments to Kyiv can be made in early spring.
On Wednesday, the Member States’ ambassadors to the EU (Coreper) will hold an initial discussion on the ‘support loan’, as announced by the Cyprus Presidency of the EU Council. (Original version in French by Mathieu Bion)