ECB says cannot backstop Ukraine loan plan
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The bank said proposal would amount to providing direct funding to governments, which is banned under European Union treaties.
PHOTO: REUTERS
Follow topic:
- The ECB refuses to backstop the EU's plan to use frozen Russian assets to fund Ukraine, citing that it would "likely violate treaties on prohibiting monetary financing".
- Belgium seeks guarantees from EU states to share risks related to legal reprisals from Moscow amid concerns about the EU Commission’s emergency funding capabilities.
- The EU Commission is now "looking for alternative solutions" due to the ECB's stance, as pressure mounts for agreement at the upcoming EU leaders' summit on December 18.
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FRANKFURT – The European Central Bank (ECB) said on Dec 2 that it cannot backstop a European Union plan to use frozen Russian assets to fund Ukraine, casting further doubt on a push to agree on the move in December.
The EU executive and multiple member states are pressing for the bloc to tap immobilised Russian central bank assets to provide Kyiv with a €140 billion (S$211 billion) loan
But Belgium – which hosts international deposit organisation Euroclear, where the vast bulk of the assets are held – has pushed back on the initiative,
It has called for cast-iron guarantees from other EU states that they will share the risk.
According to the Financial Times, however, the European Commission, the EU executive, is concerned that countries may not be able to raise the money fast enough if there is an emergency.
It asked the ECB whether it could act as a lender of last resort to Euroclear to avoid a liquidity crisis, the paper said, citing people briefed on the discussions.
But the central bank for the 20-nation euro zone said this was impossible.
“Such a proposal is not under consideration as it would likely violate treaties on prohibiting monetary financing,” an ECB spokesman told AFP.
The ECB concluded that the commission proposal would amount to “monetary financing” – providing direct funding to governments – as it would be covering the financial obligations of member states, the FT said. This practice is banned under EU treaties.
A commission spokeswoman told a press briefing that in the light of the ECB’s position, “we are having discussions on how to ensure that this liquidity can be insured”.
“We’re basically looking for alternative solutions.”
The central bank’s stance is another blow for supporters of the plan, who are pushing for agreement at a crunch EU leaders’ summit on Dec 18.
Last week, Belgium’s Prime Minister Bart De Wever said he would agree to the plan only if binding guarantees “are delivered and signed by member states at the time of decision”.
Clamour to harness the Russian assets has grown in the EU after a US plan to stop the war in Ukraine that emerged recently suggested the assets should be unfrozen.
Proponents argue that if the bloc does not act now to use the money, then it risks losing control of it under a potential US-backed peace deal. AFP
