Tuesday

6th Dec 2022

EU aims to ramp up financing for Ukraine

  • Ukrainian president Volodymyr Zelensky adressing EU leaders at the EU summit via videoconference (Photo: European Union)
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It is a high priority for the Czech EU presidency to "quickly approve a new package" of €18bn of EU financial assistance for 2023 for Ukraine, so that the remaining €3bn from previous pledges can be disbursed in January, Zbyněk Stanjura, Czech finance minister said on Tuesday (8 November).

The urgent call for a political push on financial assistance comes as the EU prepares to agree on a new package for Ukraine, despite failing to transfer already agreed funds to the war-torn country.

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EU Commission vice-president Valdis Dombrovskis said EU economy ministers meeting on Tuesday agreed to "move ahead with an assistance package" of €18bn.

He also said there had been "extensive discussion" on previously promised €9bn of funds.

On Wednesday, the EU commission is expected to lay out detailed plans on the new €18bn package.

The plan involves using the EU budget as a guarantee to raise funds for Kyiv, which requires the unanimous support of 27 member states.

However, on Monday, Hungary's foreign minister Péter Szijjártó said his country would not support this move.

"We are ready to continue financial support on a bilateral basis [...] but we will certainly not support any kind of joint EU borrowing in this area," Szijjártó said.

In an appeal to EU countries, Stanjura on Tuesday asked member states "not to look back, but to make sure we can look forward, and provide effective help because Ukraine really needs this money".

The decision to give Kyiv €1.5bn a month in 2023 was endorsed by EU leaders last month.

Kyiv estimated its monthly needs at €3-4bn "for the basics", EU Commission president Ursula von der Leyen said at the time.

Delayed funds

The commission has already run into trouble with previously promised funds to Ukraine.

In May, the commission announced plans to provide Ukraine with €9bn in financial assistance to cover the country's budget deficit and help keep its economy running.

However, the package is stuck in negotiations between EU countries, with just €3bn sent to Kyiv.

Meanwhile, Russia has been focusing its assault on destroying key infrastructure in Ukraine, leaving cities without electricity, and running water.

"Work on the remaining €3bn is ongoing," a commission spokesperson said on Monday, adding that €1bn in August and in October €2bn was paid, and aims to transfer another €3bn before the end of the year, totalling €6bn from the first package.

The commission also transferred €1.2bn in emergency micro-financing assistance in the beginning of the year that has not yet been part of the €9bn package.

Czech minister Stanjura said that "it is very difficult to look Ukrainian ministers in the eye".

"We promised help," he told reporters after the council meeting on Tuesday.

"It is difficult to explain to them why we are incapable of honouring the commitment made by heads of state and governments so that money is disbursed by the end of the year," he added.

'Critically needed'

The extraordinary financial assistance doesn't come from the budget, but is being raised on the markets by the commission on behalf of EU countries.

The aid is then transferred to Ukraine in favourable loans, and linked to achieving policy goals.

Some EU countries have been arguing to add bilateral aid to the EU's total calculation, and others have argued for transforming loans to grants, fearing Ukraine will not be able to repay.

Ukraine's president Volodymyr Zelensky told EU leaders last month that the remaining €6bn is "critically needed" this year.

Over the weekend, von der Leyen sought to assure Zelensky that help is on its way.

"Both leaders recognised the importance of ensuring predictable and regular funding of essential state functions," a commission statement said after their phone call.

The support will come in the form of "highly concessional long-term loans" that would also work to support Ukraine's reforms and its path toward EU membership, a statement added.

Analysis

Will Europeans' support for Ukraine survive the winter?

Europeans "are split about the long-term goals" with regards to Russia's invasion of Ukraine, a study shows, with hardline and opportunist political groups trying to exploit the emerging divide. Will EU unity hold?

EU seeks to ease Ukraine export woes

The EU wants to expand its so-called 'solidarity lanes' to help Ukraine exports its goods towards member states. EU officials briefing reporters say around 2.6 million tonnes of Ukrainian agricultural goods were exported via such lanes in August.

Nato renews membership vow to Ukraine

Ukraine foreign minister Dmytro Kuleba on Tuesday asked for air defence systems and generators, as Russia has been pounding Ukraine's vital energy infrastructure.

Opinion

Serbia now has no choice but to join EU sanctions on Russia

Vladimir Putin himself is somewhat suspicious of Serbia's leader, as are most who deal with the opaque Aleksandar Vucic. The Russian president has preferred to keep his Serbian counterpart compliant, via a tight rein of annually-reviewed gas pricing.

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