The European Commission is accelerating discussions with the Belgian government to secure a vital €140 billion reparations loan aimed at supporting Ukraine, which is facing an imminent financial crisis. As spring approaches, Ukraine is projected to exhaust its financial resources, necessitating urgent action from the EU.
Belgian government faces internal pressures
Belgium’s Prime Minister, Bart De Wever, is currently preoccupied with a domestic budget crisis, complicating the approval process for the significant EU loan. The European Parliament is also expected to play a role in the loan’s approval, which could further delay the timeline. The negotiations are reaching a critical point as high-ranking officials from both the Commission’s economic and budgetary departments are set to meet with the Belgian leadership to address any financial and legal concerns regarding the loan.
De Wever’s reservations about the loan stem from worries that Belgium might be held liable for repaying Russia should the war conclude unfavorably for Ukraine, or if legal actions are raised against the Belgian government for utilizing the frozen Russian assets. These assets are currently managed by the Brussels-based financial institution, Euroclear.
“The longer we now run delays, the more challenging it will become,” Economy Commissioner Valdis Dombrovskis stated, emphasizing the urgency of the situation.
Implications of delayed approval
If Belgium ultimately consents to the loan agreement, the Commission plans to submit formal legislation in the coming weeks. However, the involvement of the European Parliament could significantly elongate the process, jeopardizing the goal of securing the €140 billion before April, when Ukraine is anticipated to deplete its funds.
Adding to the urgency is the fact that the International Monetary Fund’s continued assistance to Ukraine is contingent upon the EU loan. The Belgians are demanding that EU member states provide national guarantees exceeding €170 billion to safeguard the loan, which would be available for immediate payout if necessary. De Wever also insists on legal assurances regarding the deployment of cash derived from the frozen Russian assets.
To mitigate potential financial risks for Belgium, Dombrovskis assured that the Commission’s legal team has thoroughly evaluated the associated risks and considers them manageable. He reiterated that guarantees would be established to protect Belgium from any legal repercussions stemming from the loan.
The overarching objective is to implement national guarantees to support the loan for at least the next two years, with a transition to EU-wide guarantees coinciding with the commencement of the next seven-year EU budget in 2028. Another complexity in the negotiations involves addressing the veto power over EU sanctions held by countries aligned with the Kremlin, such as Hungary and Slovakia.
Currently, the Commission is exploring legal avenues to maintain the freeze on Russian state assets until the conclusion of the war, as the EU is required to unanimously renew sanctions against Russia every six months. Should these assets be unfrozen, Euroclear would be obligated to return all sanctioned funds to the Kremlin.