The European Commission suggested on May 18 an additional 9 billion euros ($9.5 billion) in EU loans to Ukraine in 2022 to keep the country going and establish a ‘RebuildUkraine’ Facility of grants and loans, designed on the EU’s own recovery fund.
This money would be taken by the Commission on the market against guarantees from EU governments under its macro-financial assistance program to keep Ukraine running until the end of next month as it strives to resist Russia’s invasion.
The International Monetary Fund (IMF) evaluates that Ukraine requires about $5 billion each month for basic operations and the EU expects the U.S. and other G7 countries Japan, Britain, and Canada to make contributions.
Commission head Ursula von der Leyen said:
“The EU will continue to provide short-term financial support to Ukraine to meet its needs and keep basic services running.” We stand ready to take a leading role in the international reconstruction efforts to help rebuild a democratic and prosperous Ukraine. This means investments will go hand-in-hand with reforms that will support Ukraine in pursuing its European path.”
The EU has already given Ukraine 4.1 billion euros since Russia invaded the country on February 24, including military aid.
EU MIGHT BORROW TO REBUILD UKRAINE
The rebuilding of Ukraine after the war will be a far greater challenge, which some economists estimate at between 1 and 2 trillion euros, although no estimate can be accurate while the war continues.
The Commission suggests establishing the ‘RebuildUkraine’ Facility as the main instrument for the EU, through a mix of loans and grants and put in the EU budget.
It would enhance the EU’s experience of its own post-COVID recovery facility, but be adjusted to the “unprecedented challenges” of reconstructing Ukraine.
The commission stated:
“The Facility itself would have a governance structure ensuring full ownership by Ukraine.”
The EU’s Recovery and Resilience Facility is part of an eight hundred billion scheme of grants and loans to help EU countries reconstruct economies greener and more acclimated to the digital age. The scheme’s major difference is that the money is jointly borrowed and refunded by all 27 EU countries.
Extra grants for Ukraine could be financed either by additional contributions from EU members or EU programs as well as developing countries. The Commission stated:
“Given the scale of the loans that are likely to be required, options include raising the funds for the loans on behalf of the EU or with member states’ national guarantees.”
It is not evident how much support the financing scheme will receive because some EU countries, like Germany, dispute new joint EU borrowing.
Another option could be to seize frozen Russian assets in the EU and put them within Ukraine’s reach. But officials warn this is legally obscure as the EU lacks laws for such a move.
($1 = 0.9507 euros)
