EU moves toward budget-backed loan for Ukraine – EU leaders agree in principle

Summary

• EU agrees in principle on Ukraine loan
• Funding to be backed by EU budget headroom
• Unanimity among member states appears possible

European Union leaders have agreed in principle to provide a new loan to Ukraine, funded through EU borrowing on capital markets and backed by unused EU budget headroom, according to draft conclusions seen by Reuters.

Under the proposal, the European Commission would raise funds on financial markets, with the loan guaranteed by the EU’s budgetary capacity rather than direct national contributions. An EU official said there appears to be a pathway toward unanimity among member states to use the headroom of the EU budget to provide funding for Ukraine, according to draft text seen by Reuters.

The draft also specifies that any mobilisation of EU budget resources used as a guarantee for the loan would not affect the financial obligations of the Czech Republic, Hungary or Slovakia, addressing concerns from some governments about potential fiscal exposure, the draft text showed.

EU leaders further agreed that work should continue on the technical and legal aspects of the instruments establishing what has been described as a “reparations loan,” according to the draft seen by Reuters, as discussions continue over longer-term funding mechanisms and the possible use of frozen Russian assets.

The agreement in principle highlights the EU’s continued commitment to supporting Ukraine while navigating internal political sensitivities. By relying on collective borrowing and budget guarantees, EU leaders aim to sustain financial assistance without placing immediate strain on national budgets.

This article was written by Eamonn Sheridan at investinglive.com.