Discussions are continuing in Brussels on how to close Ukraine’s growing financing gap in the medium term. According to Euractiv, the European Commission is considering two new support options: the use of joint EU debt and direct grants from member states.
Three aid mechanisms
Joint EU debt
The European Commission document proposes the possibility of new borrowing on behalf of the entire European Union. This solution has already been used during the COVID crisis (the NextGenerationEU recovery package). However, as sources note, the new debt will not be covered by the EU’s long-term budget, as there are simply no funds available.
Member state grants
The second option is direct financing from the budgets of individual countries. This approach is more politically sensitive. States will be forced to explain to taxpayers why they are financing a foreign conflict when they have domestic deficits.
‘Reparation loan’
This is the European Commission’s preferred scheme. It involves granting Ukraine a loan of $140 billion secured by frozen Russian assets (around €260 billion), most of which are located in Belgium. According to the plan, the loan will be repaid after the end of the war, when Russia compensates for the damage. Interest on frozen assets is already being transferred to Ukraine.
Despite the European Commission’s persistence, the scheme is facing resistance. Belgium already blocked it at the October summit. Germany and the Baltic states are also sceptical. Some fear legal risks, others a potential deterioration in the EU’s financial position. Using other countries’ funds as collateral for loans would set a dangerous precedent for the international financial system.
At present, the IMF estimates Ukraine’s budget deficit at €55 billion in 2026–2027. The EU is forced to look for a long-term support model because short-term transfers no longer cover Kyiv’s needs.
