This has been a big week for the European Commission and for the future of the Union. The greatest leaders of the EU gathered in a summit in Brussels, to decide over the best ways of financing (the war in) Ukraine.
Before the meeting, some declarations of the participants:
Tusk (Poland): "Either money today or blood tomorrow"
Orbán (Hungary) - "Giving money to Ukraine means prolonging the war”
Chancellor Merz (Germany) - “The use of Russian assets is the only way out. I think we will be able to find a common solution for the EU”
Ursula von der Leyen, with a strong background in profitable investments (like in Pfizer safe and effective vaccines during the Covid era), still wanted to grab the Russia assets held by the Euroclear in Belgium. Prime Minister Bart De Wever made it clear this is such a bad idea, and no matter how you sugar coated it, and there is no chance in hell that Belgium will take one for the team in this matter. Several other countries opposed.
The main option failed.
The so-called Plan B—a reparation loan backed by Russia's immobilised assets—also made no sense and failed.
But to save face, a new "solution" emerged:
- Ukraine will receive a loan of €90 billion
- This money will be borrowed by European states from the financial markets, with some possible exceptions: Hungary, the Czech Republic, Slovakia, and Italy.
- Ukraine will pay 0 interest on it.
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Ukraine will pay it back when Russia pays Ukraine for war reparations—safe to say, right after hell freezes over.
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European countries will pay back the loan and the interest. This money will be included in their budgets, meaning more taxes and austerity down the road.
Everyone's happy.
And the final result?
It is unclear where this money will go. The war continues, and we cannot yet speak of reconstruction. Even that would most likely be done with the assistance of the United States, BlackRock, etc. Some are even speaking of repaying a previous loan given by G7 countries.
How long will it help Ukraine?
Judging by the numbers being discussed, probably not even a year. Therefore, by the end of next year, another round of borrowing will be necessary unless the EU finds a clever way to seize the Russian assets. Or maybe this will continue until Germany decides to openly join the war in Ukraine with its own troops.
On the other side of the fence:
... according to the ECB's estimates, European investments worth 438 billion dollars were "stuck" in Russia. Of this amount, 276 billion were direct investments (factories, banks, retail), 83 billion were loans, deposits, and trade financing, and 70 billion were portfolio investments (stocks and bonds).
Over three years, Europeans managed to withdraw less than 10% of the money - about 20 billion through business sale transactions and another 10 billion from securities in the first quarter of 2022 before the blockade.
About 256 billion remained in Russia.
