The European Central Bank has refused to back a proposed €140 billion payout to Ukraine that would be financed with frozen Russian assets held at Euroclear in Belgium. According to the Financial Times, the ECB concluded that the European Commission’s plan falls outside the bank’s mandate.
The European Union has been trying to use frozen Russian central‑bank reserves—about $200 billion of which are held at Euroclear—to underwrite a €140 billion loan for Ukraine. The Commission’s scheme would have EU member‑state governments provide state guarantees, sharing the repayment risk of the loan. However, commission officials warned that member states might struggle to mobilise cash quickly in an emergency, which could create market strains.
To mitigate that risk, EU officials asked the ECB whether it could act as a lender of last resort to Euroclear Bank, the Belgian depository’s lending arm, to prevent a liquidity crunch. ECB officials responded that this was not possible, citing incompatibility with the bank’s mandate.
Belgium has repeatedly cautioned against the potential litigation and financial risks associated with the EU’s scheme, highlighting the complexities of using frozen Russian assets to support Ukraine. The ECB’s refusal may force the EU to seek alternative solutions to meet Ukraine’s financial needs. As the situation unfolds, the EU will likely have to reassess its approach and explore other options for assisting Ukraine while addressing the concerns and risks tied to the proposed plan.
Comments are closed for this story.