ECB holds back on loans to Ukraine with Russian assets. Brussels: “We are looking for alternative solutions to ensure liquidity”

Brussels – Not only Belgium, but the European Central Bank is also taking a sideways stance on the European Commission’s plan to guarantee economic assistance to Ukraine for the next two years, using Russian assets frozen in the EU. After the revelation by the Financial Times—according to which the ECB would refuse to provide guarantees for the 140 billion loan for Kiev—the “imminent” legislative proposal is back in the pits. “We are looking for alternative solutions to secure the necessary liquidity,” the EU executive confirmed today. 

Under the Commission’s plan, it would be up to Member States to provide guarantees against the risk of reimbursement to Euroclear, the Belgian financial services company that holds most of the Russian Central Bank’s assets frozen on European soil. However, the British newspaper reported this morning the claims of several EU officials that European chancelleries would not be able to provide rapid financial cover in the event of an emergency, and that, therefore, to avoid unsettling the markets, the Commission would ask the ECB to “act as lender of last resort” for Euroclear. Moreover, the Financial Times reports that the European Central Bank “concluded that the European Commission’s proposal violates its mandate.”  

On 17 November, the President of the European Commission, Ursula von der Leyen, put three options on the table in a letter to the capitals to address Ukraine’s monstrous needs over the next two years. Bilateral subsidies from the member states, some form of joint borrowing on the financial markets, or the use of funds from Moscow. “I don’t see any scenario in which European taxpayers will foot the bill alone,” she told the European Parliament in Strasbourg a few days ago, reiterating her preference for the third option. 

Time is running out. Next spring, Kyiv’s coffers will be empty, at which point Russia would have a huge advantage at the negotiating table. Yesterday, the EU High Representative for Foreign Affairs, Kaja Kallas, assured that at the European Council on 18 December, the leaders will find a solution. However, cornering Belgium and its Prime Minister Bart de Wever is less of a challenge than overcoming the European Central Bank’s negative assessment. 

The European Commission’s chief spokeswoman, Paula Pinho, confirmed today that Brussels is “looking for a viable solution that addresses the concerns raised in the discussions on the repair loan; we are contacting all those who might be interested in any solution we propose.” The member states, the financial institutions involved, and the European Central Bank. “In the light also of the position of the ECB, we are pursuing discussions on how to ensure that this liquidity can be secured: we are basically looking for alternative solutions, and this is part of all the work that is going on right now on the Repair Loan,” she explained.