On Wednesday 14 January, the European Commission presented three legislative proposals establishing the ‘Ukraine Support Loan’, which will provide new EU macro-financial assistance of up to €90 billion for 2026 and 2027, financed from the EU budget, in line with the decisions of the December European Council (see EUROPE 13784/1).
This assistance, which will be implemented “in enhanced cooperation with 24 out of 27 Member States participating”, reaffirms “Europe’s unwavering commitment to the security, defence and future prosperity of Ukraine”, Commission President, Ursula von der Leyen, told the press. She added: “We propose to split the €90 billion in two parts: two-thirds for military assistance, namely €60 billion. And one-third, that is, €30 billion for general budget support”.
Ms von der Leyen pointed out that Ukraine would only have to start repaying the future loan once Russia had paid war reparations, with the EU also reserving the right to mobilise Russian public assets immobilised in the EU for this purpose. While Moscow does not compensate Kyiv for the destruction caused, the loan instalments will be rolled over by refinancing maturing EU debt securities.
As with other macro-financial assistance granted to Ukraine, the proposal for a regulation establishing the ‘Ukraine Support Loan’ introduces preconditions for the disbursement of financial support, including respect for the rule of law and the fight against corruption, in particular the prohibition on reversing measures in this area taken in the context of previous macro-financial assistance.
The Ukrainian authorities will be asked to present a financing strategy detailing the country’s budgetary situation and their financial requirements over a 12-month period, including additional financial support to be channelled through the ‘Ukraine Facility’, another EU macro-financial loan instrument for Kyiv (see EUROPE 13344/18).
Ukraine will also present a Memorandum of Understanding (MoU) in which it commits to undertaking “robust” reforms designed to bring Ukraine closer to the EU. It would be up to the European Commission to approve this MoU.
Benefits for the European military industry. The future loan will help Ukraine to strengthen its military capabilities by manufacturing weapons itself and integrating its defence industry into the industrial base of EU countries.
It concerns the same military equipment set out in the ‘SAFE’ instrument for loans to EU countries (see EUROPE 13642/3). For this equipment, the cost of components originating outside the EU, the EEA/EFTA countries or Ukraine may not exceed 35% of the cost of the final product.
With regard to arms purchases by Ukraine, Ms von der Leyen indicated that a “European preference” with a cascading principle (firstly EU countries and then EEA/EFTA countries) should “prevail as a general rule”, even if, in certain cases, “purchases abroad should be authorised”, i.e. outside the EU and EEA/EFTA, if the military equipment requested is not manufactured or available in good time.
This includes ammunition and spare parts for US F-16 fighter jets, according to a European source.
In this case, Ukraine will have to inform the Commission of its intention to derogate from the general rule. The EU institution will analyse the request and may submit it for approval to the EU Council, acting by a qualified majority of Member States.
A second source told Agence Europe that defence companies in countries not participating in the loans - Hungary, Slovakia and the Czech Republic - will be able to benefit from procurement contracts. The source likened the situation of these countries to that of the EEA/EFTA countries, the companies of which will be able to benefit without their country contributing to the EU budget. The source also pointed out the difficulty, within the market, of precisely identifying the companies concerned in the three recalcitrant Member States.
Assistance that fits in with international support. The European Commissioner for Economy, Valdis Dombrovskis, felt that the future EU loan “complements and amplifies” the IMF programme for Ukraine. He estimates Ukraine’s need for international budget support at €43 billion for 2026.
According to the Commissioner, the European legislator should be able to finalise the legislative procedure in the first quarter so that the first payments to Ukraine can be made “at the beginning of April”. In the meantime, the G7 countries participating in the ‘ERA’ loans initiative for Ukraine have agreed to bring forward their disbursements to Kyiv in order to avoid a default by Kyiv.
As requested by the IMF in view of Ukraine’s budgetary situation, the EU will have to bear the financial cost of the ‘Ukraine Support Loan’, estimated at €1 billion for 2026 and “€3 billion or €4 billion a year” from 2027.
Finally, it should be noted that to enable the European Commission to borrow on the financial markets to grant a loan to a third country, Member States will have to unanimously agree to revise the current Multiannual Financial Framework (MFF). At the European summit in December, the leaders of Hungary, Slovakia and the Czech Republic undertook not to obstruct this process.
See the legislative package: - ‘Ukraine Support Loan’: https://aeur.eu/f/k8s ; - revision of the ‘Ukraine Facility’: https://aeur.eu/f/k8t ; - revision of the MFF: https://aeur.eu/f/k8u (Original version in French by Mathieu Bion)