The European Union is preparing to support Ukraine with a new financing package of up to 90 billion euros in the two-year period 2026-2027, through a common EU debt mechanism guaranteed by the European budget.
Issues on the markets and European common debt
The loan will be financed through issues on the markets under the EU’s diversified financing strategy, using the full range of available instruments – long- and short-term securities and other liquidity management tools – without resorting to issues dedicated exclusively to Ukraine.
Non-recourse loan and war reparations issue
The debt will be formally borne by the European Union and will not be charged to the national budgets of the member states, explains Commission officials. From a legal and financial point of view, the loan is conceived as a non-recourse loan: Ukraine is required to repay only when any war reparations are paid from the currently immobilized Russian assets.
No final deadline in the absence of a political solution
In the absence of such repairs, the debt may be renewed over time, without a final deadline being set at the moment, pending a political or financial solution. The ultimate guarantee for investors is represented by the EU budget, in particular by the so-called headroom, i.e. the space between the own resources ceiling and the spending ceilings of the multiannual financial framework.
The guarantee mechanism and the exclusion of three countries
In an extreme case, this mechanism allows the Union to call on additional contributions from Member States to honor its commitments. According to the agreement reached yesterday, Hungary, the Czech Republic and Croatia are excluded from this commitment. Their share, which is worth 3.64% of European income, will be redistributed among the 24 remaining countries.
The impact on the EU budget 2028-2034
The new instrument will have a direct impact on the next multiannual financial framework 2028-2034. In addition to interest coverage, the debt will lead to the inclusion of a potential liability of up to 90 billion euros within the fiscal margin.
Costs, interests and distribution between Member States
To preserve the current spending architecture, it will therefore be necessary to increase the guarantee space of the European budget in the next financial cycle. As for costs, current estimates indicate around 3 billion euros per year in interest when fully operational, with an overall burden that could reach around 20 billion in the period 2028-2034, depending on market trends and collection times. The interest will be covered by the EU budget and distributed among the member states according to the ordinary contribution rules.