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EU leaders are going to try something they’ve never tried before. The potential for failure is significant. Their actions this week could set a dangerous precedent and one wrong move could undermine trust between the bloc’s 27 member states for years to come.
At the summit starting Thursday, several leaders will push to use tens of billions of euros of Russian assets frozen in Europe to meet Ukraine’s economic and military needs for the next two years.
ukraine On the verge of bankruptcy. International Monetary Fund It is estimated that it will need a total of 137 billion euros ($160 billion) in 2026 and 2027. It should get the money by spring. The EU has promised to raise funds one way or another.
“One thing is very, very clear,” European Commission President Ursula von der Leyen told EU lawmakers on Wednesday. “We have to decide in this European Council how to fund Ukraine for the next two years.”
European Council President Antonio Costa, who will chair the summit, has vowed to keep talks with leaders until an agreement is reached, even if it takes days.
high risk loan
The European Commission has proposed that leaders use some of the frozen assets – a total of 210 billion euros ($246 billion) – to grant Ukraine a 90 billion euro ($105 billion) “compensation loan.” UK, Canada and Norway will fulfill this shortfall.
The plan is controversial. The European Commission insists that its arguments and legal basis are solid. But the European Central Bank has warned that international confidence in the euro single currency could be damaged if leaders are suspected of freezing assets.
Most of the seized assets belong to the Russian Central Bank and are held at the financial clearing house Euroclear, which is located brussels, belgium There is fear of Russian retaliation through the courts or other more nefarious means.
Euroclear fears for its reputation. She believes the Commission’s idea is legally untenable and that if it transfers Russian assets to an EU debt instrument, as von der Leyen’s plan demands, international investors may look elsewhere.
Last week, the Russian Central Bank announced it was suing Euroclear in a Moscow court. The chances of the case succeeding appear limited, but the move increases pressure on all sides ahead of the summit.
Unlikely Plan B
The Commission, the EU’s powerful executive branch, has proposed another option. It may try to raise funds from international markets, just as it outlined a major economic recovery fund after the start of the coronavirus pandemic.
Belgium prefers this option. But Plan B would require the consent of all 27 leaders to work, and Hungary refused to fund Ukraine. Hungarian Prime Minister Viktor Orban sees himself as a peacemaker. He is also Russian President Vladimir Putin’s closest ally in Europe.
In contrast, Plan A – reparations loans – only requires a majority of about two-thirds of member states to pass. Hungary alone cannot veto this. Slovakia might say no. Belgium, Bulgaria, Italy and Malta are still confident.
Even if all six countries reject the loan to Ukraine – which would only be repaid if Russia ends its war and pays hundreds of billions of euros in war damages, something many Europeans doubt Putin would do – he would still not have a blocking minority.
Running a steamroller on Belgium, which has huge stakes in the outcome and deep concerns about the debt, could undermine the entire European project, making it extremely difficult to win a voting majority on other issues in the future.
But on the eve of the summit, it remained unclear how the plan would work, what kind of guarantees each country would provide to reassure Belgium that it would not have to face Russia alone, and even whether leaders could actually approve it in full this week.
“This is really a new approach. Everyone has questions,” according to a senior EU diplomat involved in the talks that continued on Wednesday. “You are talking about raising public finances. Parliaments may need to consider this. It is not easy.”
The diplomat was deputed to brief journalists on the latest developments on the condition that his name not be revealed.