Commission proposes up to €35 billion MFA loan for Ukraine as the EU’s contribution to the EU-G7 support of up to €45 billion

This article is brought to you in association with the European Commission.

The European Commission today took a decisive step in reinforcing support for Ukraine by proposing a comprehensive financial assistance package, consisting of a Ukraine Loan Cooperation Mechanism of up to €45 billion, and an exceptional Macro-Financial Assistance (MFA) loan of up to €35 billion.

This package leverages extraordinary profits from immobilised Russian assets, sending a clear signal that the burden of rebuilding Ukraine will be shouldered by those responsible for its destruction. This approach will be applied for the first time in a structured way and at such a scale across EU and G7 lenders, ensuring long-term, stable financial support for Ukraine’s recovery and resilience.

Ukraine Loan Cooperation Mechanism

The Commission first proposes to establish a Ukraine Loan Cooperation Mechanism which will support the EU and G7 partners in issuing loans of up to €45 billion to Ukraine. As Ukraine continues to face unprecedented challenges due to Russia’s intensified aggression, this proposal underscores the EU’s unwavering commitment to Ukraine’s sovereignty and economic resilience.

The Ukraine Loan Cooperation Mechanism will offer to Ukraine support financed by leveraging the financial contribution raised on extraordinary windfall profits stemming from immobilised Russian Central Bank assets.  

Ukraine can use this support to repay eligible loans from the EU and other lenders participating in the G7’s ‘Extraordinary Revenue Acceleration Loans for Ukraine’ (ERA) initiative.

Exceptional Macro-Financial Assistance

As the EU’s contribution to these loans under the ERA initiative, the Commission is proposing an exceptional MFA loan of up to €35 billion. This financial support is crucial for addressing Ukraine’s urgent budgetary needs, which have considerably risen in the face of the intensified and prolonged Russian aggression, including under the IMF’s Extended Fund Facility arrangement. The remaining loan amount covered is to be provided by other G7 partners.

This comprehensive financial package fulfils the commitments made during the G7 Leaders’ Summit in Apulia on 15 June and during the European Council of 27 June.

Through this package, the European Commission reaffirms its commitment to standing by Ukraine in times of need, ensuring that the EU’s support remains steadfast and effective.

Next steps

The proposal requires approval by the European Parliament and a qualified majority of EU Member States in the Council before entering into force.

In view of the urgency of the proposal, the Commission will be working hand in hand with co-legislators to ensure a swift adoption.

Background

Since the beginning of Russia’s war of aggression against Ukraine, the EU, together with its Member States, has unequivocally condemned Russia’s actions and has offered unprecedented support to Ukraine and its people. The EU, its Member States and European Financial Institutions have together provided €118.3 billion in grants and loans, supporting the Ukrainian war effort and its economy, helping to maintain basic services and offer early reconstruction, humanitarian assistance and help to those fleeing the war in the EU.

As part of the sanctions imposed by the EU on Russia, assets of the Central Bank of Russia held by financial institutions in the Member States and worth approximately €210 billion have been immobilised since February 2022. They represent the majority of such immobilised assets worldwide.

The prohibition of transactions on these assets generates an extraordinary cash accumulation on the balance sheets of central securities depositories (CSDs) bringing a return. On a yearly basis and depending on the level of interest rates, the extraordinary revenues are currently estimated at up to €2.5-3 billion a year. These unexpected and extraordinary revenues do not constitute sovereign assets, and do not have to be made available to the Central Bank of Russia, even after the immobilisation ends.

On 12 February 2024, the EU clarified the rules on how the immobilised assets and reserves should be managed and decided that CSDs holding reserves and assets from the Central Bank of Russia worth more than €1 million should set these revenues apart. Since 15 February 2024, the CSDs are not allowed to dispose of the related net profits or distribute them to shareholders.

In May 2024, the Council decided to use these extraordinary revenues for the benefit of Ukraine. At the end of July, €1.5 billion were already made available in support of Ukraine.

For more information 

Questions and Answers on the Commission’s proposal

Macro-Financial Assistance to Ukraine

Macro-Financial Assistance

Quote(s)

Relentless Russian attacks mean Ukraine needs continued EU support. The Commission will provide a loan of up to €35 billion to Ukraine as part of the G7 pledge. This is another major EU contribution to the Ukraine’s recovery.

President Ursula von der Leyen

This unique loan package, developed alongside our G7 partners and with a strong role for the EU, will allow Ukraine to cover its immediate needs, ensure macroeconomic stability, and provide the country with the financial resources needed to withstand Russia’s intensified aggression. By using extraordinary revenues stemming from immobilised Russian assets, the Kremlin will pay directly for the damage caused by its brutal war. Today’s package further demonstrates the EU’s unwavering commitment to supporting Ukraine’s sovereignty and economic resilience.

Valdis Dombrovskis, Executive Vice-President for an Economy that Works for People

Today’s proposal marks a pivotal moment in our continued support for Ukraine. We are delivering on the agreement by G7 Leaders on a USD 50 billion loan to Ukraine to be paid back using the extraordinary windfall profits from immobilised Russian sovereign assets. It will ensure that Ukraine has the financial resources it needs to face the ongoing challenges posed by Russia’s unrelenting aggression. This package not only strengthens Ukraine’s economic resilience but also reaffirms the EU’s firm commitment to stand by Ukraine in its struggle for freedom and democracy.

Paolo Gentiloni, Commissioner for Economy