EU to loan $160 billion to cover Ukraine’s military needs for two years

Brussels: EU leaders have unanimously decided to provide Ukraine with an interest-free loan of €90 billion ($60 billion), to cover its military and budgetary needs for the next two years, German Chancellor Friedrich Merz said on Friday.

Ukraine will only have to repay the loan if Russia pays reparations for its war, Merz said after a long meeting of EU leaders in Brussels, while the EU reserves the right to use Russian assets immobilised in the EU for repayment if Russia fails to pay compensation.

Germany’s Chancellor Friedrich Merz, left, and European Commission President Ursula von der Leyen at the EU Summit in Brussels on Thursday.Credit: AP

“We have a deal,” EU summit chairman Antonio Costa posted on social media in the early hours of Friday morning after hours of talks.

Costa did not specify the source of the funding but a draft text of the summit’s conclusions, seen by Reuters, said it would come from borrowing on capital markets, secured against the EU budget.

The deal will not affect the financial obligations of Hungary, Slovakia and the Czech Republic, which did not want to contribute to the financing of Ukraine, the text said.

At the same time, EU governments and the European Parliament would continue working on setting up a loan for Ukraine that would be based on the frozen Russian central bank assets, it said.

Ukraine’s President Volodymyr Zelensky speaks during a media conference at the EU Summit on Thuirsday.Credit: AP

The loan to Ukraine based on the joint borrowing would only be repaid by Ukraine once it receives war reparations from Moscow.

Until then, the Russian assets would remain immobilised and the EU reserved the right to use them to repay the loan, according to the text.

“It’s good in the sense that Ukraine will secure funding for two year years,” one EU diplomat said.

The move follows hours of discussions among leaders on the technical details of a loan based on the frozen Russian assets, which turned out to be too complex or politically demanding to sort out at this stage, diplomats said.

“We have gone from saving Ukraine, to saving face, at least that of those who have been pushing for the use of the frozen assets,” a second EU diplomat said.

The main difficulty in the use of the Russian money was providing Belgium, where 185 billion of the total 210 billion euros of Russian assets in Europe are held, with sufficient guarantees against financial and legal risks from potential Russian retaliation for the release of the money to Ukraine.

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