The European Central Bank (ECB) did not support the idea of providing Ukraine with a loan of 140 billion euros funded by frozen Russian assets. This decision creates additional difficulties for the implementation of the European Union’s plan for the so-called “reparations loan” for Kyiv.
This is reported by Kyiv24
ECB Considers the Proposal Incompatible with Its Mandate
Internal analysis by the ECB showed that the proposed mechanism essentially means direct financing of the governments of EU member states, as in this case the central bank would have to cover their financial obligations. Such practice is prohibited by European treaties, as it could increase inflation and undermine trust in the banking system.
According to information, representatives of the European Commission acknowledged that in the event of an emergency, EU countries would not be able to quickly raise the necessary funds, which creates additional pressure on financial markets. European officials suggested that the ECB act as a lender for Euroclear Bank to avoid a potential liquidity crisis, but the bank rejected this initiative.
Searching for Alternative Financial Solutions
After the ECB’s refusal, the European Commission began working on alternative options to ensure temporary liquidity and support lending to Ukraine for the amount of 140 billion euros. Representatives noted that since the end of October, there have been close consultations between the European Commission and the regulator, and the ECB has actively participated in discussions regarding possible lending scenarios.
“The regulator’s internal analysis showed that the proposed mechanism is essentially equivalent to direct financing of governments, as the ECB would cover the financial obligations of member states in this case.”
It was previously reported that in the event of an inability to recover frozen Russian assets, EU countries are considering an alternative scenario – providing Ukraine with a “bridging” loan, which would be financed through European borrowing.