European Union Approves €35 Billion Loan for Ukraine

Financial Support Package for Ukraine

The Council of the European Union has given the green light to a financial aid package for Ukraine. This package includes an extraordinary macro-level loan of up to €35 billion. Additionally, a credit cooperation mechanism will be established to assist Ukraine in repaying €45 billion of loans, according to the EU council.

Details of the Macro-Level Financial Assistance

The newly approved macro-level financial assistance (MFA) will enable interest income from the funds of the Russian central bank, which are currently frozen in EU banks, to be made accessible to Ukraine. The aim of these funds is to help Ukraine cover the costs of the EU loan and loans provided by G7 partners, and to facilitate the repayment of these loans. However, it is up to Kyiv to decide how to use the funds from the MFA.

Past Financial Aid to Ukraine

It is worth noting that just a year ago, the EU approved a €66 billion aid package for Ukraine. The Kiel Institute Ukraine Support Tracker shows that Europe, including individual member states and the EU itself, has allocated €118 billion in aid to Ukraine. An additional €74 billion is yet to be allocated but is intended for Ukraine. These figures do not include substantial amounts sent to Ukraine from the United States and other countries.

Disbursement of the New Macro-Level Financial Support

The funds from the new MFA will be disbursed until the end of 2025. However, the disbursement of the loan is contingent on Ukraine's ongoing commitment to maintaining effective democratic mechanisms and upholding human rights.

EU Sanctions Against Russia

In response to the sanctions imposed by the EU against Russia, the assets of the Russian central bank held in the financial institutions of EU member states, worth approximately €210 billion, have been frozen since February 2022. The profit generated from these assets is estimated to be between €2.5 billion and €3 billion annually, depending on the interest rate. According to the EU, these revenues are not state assets and are not required to be made available to the Russian central bank even after the freeze ends. The Council of the European Union approved the text through a written procedure following its adoption by the European Parliament. The aim is to make the MFA loan available in 2024, disbursed in 2025, and repaid within a maximum of 45 years. The decree will come into effect the day after its promulgation.

Bottom Line

The European Union's decision to provide substantial financial support to Ukraine is a significant move. It not only demonstrates the EU's commitment to supporting Ukraine during challenging times but also underscores the importance of maintaining democratic mechanisms and respecting human rights. What are your thoughts on the EU's financial aid package to Ukraine? Share this article with your friends and let us know your views. Don't forget to sign up for the Daily Briefing, which is delivered every day at 6pm.