The European Commission has proposed three separate financial instruments to aid the recovery and reconstruction process of the Ukraine economy until 2026-2027. These new financial instruments come into play as the term of the present Ukraine Facility draws to a close. The urgent need for financial decisions arises for the EU Member States. EU President, Ursula von der Leyen, urged Member States to make the necessary financial decisions.
Three financial tools provide varying financial options
The commission’s broad proposal highlights the bilateral grants that would be financed by the individual EU nations as the first option for the future financial support of Ukraine. This traditional method would require the EU nations to provide financial support through their national budgets, thereby enabling the government to focus on controlling the disbursement levels. This would give the EU nations the flexibility to provide financial support based on their capabilities.
The second option uses the limited recourse loan scheme that relies on borrowed funds from the international financial markets, as in the case of the Ukraine Facility. This method takes advantage of the high credit rating of the European Union to gain favorable borrowing conditions. The scheme has been effective as it has already dispersed more than €24.8 billion to Ukraine since the beginning of the scheme’s operation in 2024.
Commission estimates Ukraine needs over €71 billion in 2026
The European Commission’s estimates are that Ukraine would require over 71 billion euros of external funds for 2026 alone, of which over 51 billion euros would go to military spending. These estimates are based on the assumption that the Ukrainian struggle against the invasion by Russia would come to an end by the latter part of 2026, but there would be significant needs for reconstruction and modernization.
Frozen Russian assets prove a contentious source of funds
The third source of funds would see the use of frozen Russian funds as collateral for Ukrainian loans, but there are major legal and political hurdles here as well. This method has been halted due to the resistance of Belgium, which currently hosts most of the frozen Russian funds, as it sees potential legal troubles for itself here. This is because the government of Belgium worries about potential revenge from Russia.
EU representatives report that the use of frozen assets is an active consideration, and the final decisions are expected during the December 2025 European Council meetings. This tool would provide significant financial support without having to borrow money, which makes it politically palatable despite the legal difficulties. Unanimous approval by the EU members and the proper engagement of international laws are necessary for the enactment of the tool.
December deadline pressures member states for commitment
This provides background information on the topic and explains that, as stated by Von der Leyen, there needs to be an urgent agreement on the financial support for Ukraine before the European Council meeting scheduled for December. The delay would jeopardize efforts by the resistance of Ukraine, and it needs immediate responses regarding financial support for Ukraine, while pressuring Russia financially, which requires urgent actions.
The present Ukraine Facility has already disbursed more than €24.8 billion of funds since 2024, which affirms the efficacy of the harmonized financial support provided by the EU. The Commission’s record of effective management of such huge financial programs, without jeopardizing budgetary sustainability and finances, instills confidence concerning the present financial facility arrangement for Ukraine, divided into three pillars.
The European leaders are faced with difficult decisions regarding financial sustainability, legal obligations, and their objectives regarding their support for the resistance offered by the Ukrainian government. The proposals put forward by the Commission provide for flexibility and maintenance of the constant Ukrainian resistance against Russia.
