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European Commission proposes €5B in aid for Ukraine

European Commission proposes €5B in aid for Ukraine

‘The EU is again demonstrating its commitment’ to supporting Kyiv, says Valdis Dombrovskis.
The European Commission on Wednesday proposed €5 billion in concessional loans to help keep Ukraine from financial ruin.

"Ukraine urgently needs short-term support to maintain essential public services and to achieve a degree of economic and financial stability. By providing a further €5 billion in exceptional macro-financial assistance, the EU is again demonstrating its commitment to support Ukraine," said Commission Executive Vice President Valdis Dombrovskis.

That's the second installment of a bigger package of up to €9 billion in macro-financial assistance announced in May, which was stalled due to reluctance by Germany to provide guarantees for loans, instead arguing in favour of grants. That led the Commission in July to eke out €1 billion in loans backed by the EU budget, but it needs EU countries to provide budgetary backup for further tranches.

Under the tranche announced Wednesday, the EU budget would subsidize interest and fees, and EU countries' guarantees would cover 70 percent of the capital. The repayment period would be up to 25 years. The Commission will agree with Ukraine on the conditions linked to the aid, including "enhanced transparency and accountability regarding the use of budgetary resources," it wrote.

EU finance ministers meeting Friday in Prague are expected to give their unanimous nod of approval, a precondition for the Commission to tap the markets. Hungary raised reservations at a meeting last week, but officials are confident these can be resolved by Friday. The Parliament also needs to give its consent.

If all goes well, that would allow the Commission to disburse the loans "in a small number of installments," the EU executive wrote, starting with a €2 billion tranche in early October, an EU official said. But the rest may take longer as in many countries parliamentary approval is needed to provide guarantees. Dombrovskis called on EU countries to "provide additional guarantees swiftly."

There are ongoing discussions on whether the final €3 billion should be disbursed as grants, and whether bilateral donations by EU countries should be counted — something pushed for by Germany, which already disbursed €1 billion in grants to Kyiv. The Commission said the last €3 billion would be disbursed "as soon as possible," without giving a timeline.
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