EU capitals approve €1B in aid to Ukraine

EU finance ministers Tuesday approved a European Commission proposal for €1 billion in macro financial assistance to Ukraine, to be provided as a long-term concessional loan.

The amount will be backed by an EU budget guarantee, and the EU budget will subsidize interest payments. The aid is part of an international effort to plug Ukraine’s budget deficit and avert a financial crisis in the war-torn country.

“This will give Ukraine the necessary funds to cover urgent needs and ensure the operation of critical infrastructure,” said Czech Finance Minister Zbyněk Stanjura. Prague is holding the rotating presidency of the Council of the EU.

But a broader aid package of up to €9 billion backed by EU countries’ guarantees, proposed by the Commission in May and endorsed by EU leaders, failed to gather the support of Germany. Berlin argues that loans add to Ukraine’s debt sustainability issues and advocates instead for grants. It has provided a €1 billion grant to Kyiv.

After months of haggling, the Commission went ahead with a smaller amount to raise and disburse funds in July, after agreeing with Ukraine on conditions including “enhanced transparency and reporting on the use of funds.”

Discussions on further assistance and broader plans on financing Ukraine’s reconstruction continue, and the Commission will likely present proposals after the summer break, said an EU diplomat.