The European Union is preparing to release a new funding package of 5 billion euros ($5 billion) for Ukraine as the nation battles to find resources for the war against Russia and for running the country.
The European Commission, the EU’s executive arm, will propose the loan package next week to help Kyiv cover urgent costs including salaries and benefits, according to EU diplomats familiar with the plan.
The money is part of a bigger package of 9 billion euros pledged by the bloc last May that remains largely to be transferred due to disagreement between the commission and member states over the details of the aid program.
Germany, the biggest donor, remains at odds with the commission as Berlin has been pushing to provide Ukraine with non-refundable grants, arguing that a higher debt pile would further cripple an economy nearing default.
Instead, the EU executive insisted on offering concessional loans borrowed in the markets with higher guarantees provided by member states in case the Ukrainian economy defaults.
As Brussels and Berlin remained at odds, the commission disbursed an initial 1 billion euros last August given Ukraine’s plight, using the limited space of the EU budget as a guarantee.
Envoys Blessing
Member states gave their blessing to the 5-billion euro package during a meeting of envoys Friday, while the commission and national governments continue to discuss the details of the remaining 3 billion euros promised in Spring.
During the meeting, only Hungary withheld support for the decision given its concerns about burden-sharing, an EU diplomat said. A spokesperson for the Hungarian mission in Brussels did not immediately respond to a request for comment. Formal approval of the proposal requires unanimity among the 27 national governments.
Germany still insists on conceding grants and wants to count 1 billion euros given to Ukraine bilaterally in the effort-sharing among member states, while a very large group of national governments would offer the entire remaining amount as loans, said the EU diplomat.
EU finance ministers are expected to adopt a political declaration on the margins of their meeting next week in Prague. The package must be approved by member states and the European Parliament.
Factoring Aid
Although Berlin is not opposing the concession of loans anymore, it insists on factoring in its financial aid in relation with the volume of guarantees member states should provide. In that case, other capitals would push for reflecting in the final distribution of the aid bill the bilateral assistance already given making the discussion more messy, the EU diplomat said.
The war-torn country needs around 5 billion dollars per month in external aid and had criticized European allies for under-delivering on their financial pledges.
The bloc paid out 1.2 billion euros in emergency macro-financial assistance loan to the Ukrainian government in the first half of the year. Since 2014, the EU has provided over 5 billion euros to the country to support a broad reform agenda in areas including the fight against corruption or strengthening the rule of law.