The European Central Bank (ECB) has refused to provide a backstop for a proposed €140 billion loan to Ukraine, undermining an EU proposal to fund a “reparations loan” using frozen Russian assets.
Brussels wanted EU countries to guarantee the huge €140 billion Ukraine loan, but officials admitted those governments wouldn’t be able to cough up cash fast enough in a crisis — a delay that could rattle markets. The ECB then poured cold water on the whole plan, warning it would break EU rules by effectively bankrolling member states, a form of banned “monetary financing.”
The ECB said: “Such a proposal is not under consideration as it would likely violate EU treaty law prohibiting monetary financing”.
The Commission is now looking for other ways to provide short-term liquidity for the loan. Euroclear, which holds most of Russia’s frozen assets, declined to comment. Belgium has raised legal concerns and warns that Russia could seek repayment if EU sanctions are lifted.
Meanwhile, as the EU considers the loan, Slovak prime minister Robert Fico and Hungarian prime minister Viktor Orbán have openly opposed the plan. Fico criticized the proposal, asking: “Do we want to end the war or are we stoking it? We are going to give €140 billion to Ukraine to keep the war going. So what does that mean? That the war will go on for at least another two years.”
EU officials say discussions are ongoing and a final decision is expected before the end of the year.
