La European Central Bank she refused to support a payment of 140 billion of euros perUkraine, which represents a serious blow to the European Union plan to get a “repair loan” guaranteed by Russian assets frozen, reports the Financial Times.
According to several officials, the ECB has concluded that the proposal of the European Commission violated his mandate, aggravating Brussels' difficulties in obtaining the huge loan against the Russian central bank's assets immobilized in Euroclear, Belgian securities depository.
This comes at a time when the EU is under pressure to finance Ukraine for the next two years, while Kiev faces a liquidity crisis due to a new Russian military attack and a US peace initiative. According to the European Commission's plan, EU countries would have to provide state guarantees to ensure that the refund risk of the 140 billion euro loan to Ukraine comes shared.
But Commission officials said countries would not be able to quickly raise the money in an emergency, which could put pressure on markets.
According to four informed people, the FT, officials asked the ECB if he could act as lender of last resort towards Euroclear Bank, the Belgian institution's lending division, to avoid a liquidity crisis. But the ECB responded to the Commission that this was impossible, according to sources, because the Commission's proposal was equivalent to provide direct funding to governments, providing coverage for the financial obligations of member states. But this practice, defined by economists as "monetary financing", is prohibited by the EU treaties because it is proven to cause ahigh inflation , loss of credibility of the central bank. According to the ECB, "this proposal is not being evaluated as it would likely violate EU treaty law prohibiting monetary financing."
The Commission is looking for alternative proposals
In response to the ECB's position, the Commission started working on alternative proposals These would provide temporary liquidity to support the €140 billion loan, according to two officials briefed on the matter. A Commission spokesperson said they had been "in close contact with the ECB" since the end of October and that the central bank had "actively participated in all discussions" regarding the loan proposal. "Securing the necessary liquidity for any asset restitution obligations to the Russian central bank is an important part of a possible reparation loan," they added. "This is crucial to ensure that the EU, its member states, and private entities can always meet their international obligations. Detailed reflections are underway on how to ensure this liquidity." Euroclear declined to comment.
Belgium wants a commitment before the EU leaders' meeting on December 18
The EU has Russian assets frozen worth approximately 210 billion euros from Russia's full-scale invasion of Ukraine in 2022. The Belgium He opposed the loan to Kiev because, if the Russian assets were unfrozen and Moscow managed to recover them, Euroclear would not be able to immediately repay the money.
Belgian Prime Minister Bart De Wever said that the EU plan is “fundamentally wrong" and asked the other 26 member states of the Union to subscribe to "unconditional, irrevocable, on-demand and joint and several, legally binding guarantees" to share the risk of repaying the loan. He said he would like a commitment before the meeting of EU leaders on 18th December, a summit that is expected to decide how the bloc should continue to finance Kiev. De Wever argues that member states' guarantees and some form of support are necessary in case the fines EU sanctions immobilizing Russian assets should be suddenly lifted. The sanctions must be renewed every six months by unanimous decision. Some countries, including Hungary, have opposed the renewal. Belgium is particularly concerned that a possible peace agreement between Washington and Moscow could lift EU sanctions and force Euroclear to immediately reimburse Russia. According to the Commission's proposal, Ukraine would only have to repay the money if Russia agreed to pay reparations to Kiev.
