European Commission outlines Ukraine financing options – POLITICO

The European Commission outlined three ways for EU countries to financially support Ukraine amid the war with Russia ahead of a meeting of finance officials on Thursday.

“Ukraine will continue to experience high short-term funding needs for the foreseeable future,” according to an option paper viewed by POLITICO and dated Oct. 28. “That is why it is essential that additional EU support is mobilized as quickly as possible and provided. on a regular and predictable basis.”

The Commission wants to raise up to €18 billion in loans and grants to help finance around half of Ukraine’s projected budget deficit in 2023, or $38-40 billion. Disbursements would be made quarterly starting in January “if possible”, according to the draft.

The first option, which the Commission describes as the most beneficial, is to borrow money against so-called headroom, or the difference between the maximum amount the bloc can call on EU countries and spending real EU.

This would allow the Commission to go to market without needing to collect guarantees from EU countries, a process that blocked financial aid to Kyiv for months over the summer. The first option would require all EU countries and the European Parliament to agree, and targeted changes to EU regulations.

The second option is a repetition of the method used so far, whereby countries provide budgetary guarantees to the Commission. But this time, national guarantees should cover 100% of the amount – instead of 61% previously – because “there is no further budgetary cover” in the EU budget, the document says. EU countries should also provide counter-guarantees in the event of default by their peers in the event of losses.

The second option “may take several months before safeguards are in place”, the Commission warned.

The EU executive also wants to bundle borrowing for Ukraine with its existing debt issuance program to fund the bloc’s post-pandemic recovery fund, to secure optimal terms and be able to offer Ukraine a 10-year repayment grace period. This would be possible under options one and two.

The third and final option is similar to the second, but without the provision of counter-guarantees.

Instead, in the event of a default, the Commission would have to cut planned EU spending. Furthermore, it would require the Commission to borrow and lend back-to-back, meaning that “the maturity and terms of any loans to Ukraine would be determined by the transaction used to fund them”.

EU finance envoys are expected to discuss options and choose a way forward at a meeting on Thursday, after which the Commission will present proposals next Wednesday, according to diplomats and EU officials.


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