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In a recent address to the European Parliament, Ursula von der Leyen, the President of the European Commission, has proposed alternative strategies to finance Ukraine’s ongoing war efforts. With the EU’s initial plan to utilize frozen Russian assets facing significant hurdles, particularly from Belgium, the Commission is exploring other financial avenues to ensure that Ukraine receives necessary support.
Challenges in accessing frozen Russian assets
The EU had aimed to leverage approximately €140 billion in frozen Russian state assets, which have been immobilized since Russia’s full-scale invasion of Ukraine in February. However, this initiative is currently stalled due to concerns raised by Belgium, which hosts Euroclear, the financial firm that manages most of these assets. Belgian authorities are apprehensive that the plan may introduce legal and financial risks to the firm and its operations.
Belgium’s reluctance has prompted the EU to consider alternative solutions. During her speech, von der Leyen emphasized that utilizing these frozen assets is the most effective method to bolster Ukraine’s defense capabilities and economic stability, highlighting the need for swift action.
Joint borrowing as a potential solution
As a fallback, von der Leyen mentioned the possibility of the EU collectively borrowing funds to support Ukraine. This would involve issuing common EU debt that member states would eventually repay. Such a move could alleviate some of the financial pressure on national budgets, especially for nations grappling with their own high debt levels, like France and Italy.
Moreover, another suggested approach involves each member state contributing to Ukraine’s funding through their respective national budgets. However, this alternative is likely to be less favorable for countries already facing financial constraints.
Urgency of the situation
The urgency to finalize these funding strategies is underscored by the expectation that Ukraine could exhaust its financial resources by next spring. As a result, the EU is under mounting pressure to establish a coherent and rapid agreement to ensure that Ukraine can maintain its defense and support its economy during these challenging times.
Negotiations with EU finance ministers
On the same day von der Leyen addressed Parliament, EU finance ministers convened in Brussels to discuss these pressing issues. The discussions are critical, as they aim to devise a plan that accommodates both the financial needs of Ukraine and the apprehensions of member states regarding the risks associated with the use of frozen assets.
In her address, von der Leyen reiterated that the frozen Russian assets represent the most straightforward and effective means to assist Ukraine. She argued that this approach would send a clear message to Russia about the urgency of the situation and the necessity for them to reconsider their military actions.
Future implications for EU budgeting
This funding dilemma also reflects broader implications for the EU’s financial framework, especially as the Commission prepares for negotiations on the next multiannual financial framework. The Commission is keen to ensure that the new budget not only supports Ukraine but also reinforces the EU’s strategic autonomy in a rapidly changing global landscape.
Von der Leyen’s proposal, which entails a budget of nearly €2 trillion, is designed to provide a robust financial foundation for Europe’s future challenges. It encompasses a flexible structure that adapts to evolving priorities while ensuring that core values remain intact, particularly in areas like cohesion and agricultural policy.
As the EU navigates this complex landscape, von der Leyen’s leadership will be pivotal in balancing the needs of member states with the urgent demands of supporting Ukraine in its time of crisis.