The European Central Bank rejected the idea of a loan to Ukraine for frozen Russian assets: what is the reason?

The European Central Bank did not agree to become a guarantor for the so-called “reparations loan” to Ukraine, which was planned to be secured at the expense of frozen Russian assets.

This is reported by The Financial Times, citing internal documents and sources in European institutions.

According to the publication, the European Commission proposed to involve the ECB as a reserve lender for Euroclear Bank, so that it could pay Ukraine 140 billion euros for future reparations. The reason for this proposal is that EU member states are unable to quickly collect the necessary amount of state guarantees.

However, the ECB rejected the initiative, believing it to go beyond its mandate. The regulator’s analysis suggests that if the bank were to cover member states’ liabilities, it would effectively be direct financing of governments – a practice that is strictly prohibited in the EU. Such a mechanism is called “monetary financing”, and it could undermine confidence in the central bank and create risks for inflation.

After the ECB’s refusal, the European Commission, according to the FT, began working on other temporary liquidity options that would allow it to support the proposed 140 billion euro loan without violating the Union’s regulatory norms.

As a reminder,the European Union is preparing an alternative financing scenario for Ukraine in case the leaders fail to agree on using frozen Russian assets to create a reparations loan.

As reported, the European Union has suspected Belgium of misappropriating proceeds from frozen Russian assets that were supposed to be sent to Ukraine . Diplomats claim that the country could have credited taxes on these funds to its own budget, violating its obligations.

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