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EU proposes debt-based solution to fund Ukraine, bypass Hungary's objections

by Lance Luo December 27, 2023 1:51 AM 2 min read
President Volodymyr Zelensky speaks to the press in Kyiv in December 2023. (Andrew Kravchenko/Bloomberg via Getty Images
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The European Union is creating a debt-based plan worth up to 20 billion euro to fund Ukraine and circumvent Hungary's promised veto, the Financial Times reported on Dec. 26.

EU leaders early in December failed to reach a deal on aid for Ukraine worth 50 billion euros after Hungarian Prime Minister Viktor Orban vetoed the package. As wartime expenditures continue to balloon, Kyiv needs more and more aid to stave off a fiscal crisis.

Washington is also struggling to secure more funding for Ukraine as a $61 billion package intended for Kyiv remains bogged down in Congress. The U.S. has so far approved $113 billion in aid to Ukraine, including nearly $47 billion in direct military aid.

The new EU strategy  involves member states issuing sovereign guarantees to the EU budget, allowing the European Commission to issue 20 billion euro in fresh debt earmarked for Kyiv.

The scheme is similar to the structure used in 2020 when the EU sought to secure cheap financing for funding responses to the Covid pandemic.

President Volodymyr Zelensky in Kyiv on Dec. 19 told reporters he plans to reduce government expenditures because significant funding will be needed for fresh mobilization efforts.

Ukraine risks a serious economic downturn in 2024 unless its Western supporters can muster enough funds to fill a massive hole in its budget, Finance Minister Serhii Marchenko told Politico in November.

Ministry of Finance raises $532 million via military bond issuance
The Ministry of Finance on Dec. 26 successfully issued new debt instruments worth about 21 billion hryvnia, or $532 million, it announced.

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