BRUSSELS, (Reuters) – Wednesday’s proposal by the European Commission to increase EU loans for Ukraine to 9 billion euro ($9.5 billion) was made. This is to maintain the country’s functioning and establish a ‘RebuildUkraine Facility’ of loans and grants that’s modeled on the EU’s recovery fund.

To keep Ukraine afloat until June, the Commission would borrow the money on the open market in exchange for guarantees from EU countries under the macro-financial aid programme.

According to estimates by the International Monetary Fund Ukraine will need $5 billion each month for its basic operations, and the EU anticipates that the United States of America and other G7 nations Japan, Canada and Canada will contribute. It will be discussed at the Bonn meeting of G7 on Thursday and Friday.

Ursula von der Leyen (Commission head) stated that the EU would continue to support Ukraine’s short-term needs to keep its services operating.

We are ready to play a leadership role in international reconstruction efforts for a prosperous and democratic Ukraine. She stated that investments would go hand in hand with reforms to support Ukraine’s European journey.

Since Russia’s invasion on February 24, 2014, the EU has provided Ukraine with 4.1 billion euro in military and financial aid.

EU MIGHT BORROW TO REBUILD UNITED KINGDOM

Rebuilding Ukraine following the war will present a greater challenge. Some economists put the cost at 1 to 2 trillion Euros, but it is impossible to make a reliable estimate while there are still fighting.

According to the Commission, it is proposed that the EU establishes the ‘RebuildUkraine Facility’ as its main instrument through grants and loans. This will also be integrated in the EU budget.

This would draw on EU experience with its post-COVID recovery center, but it would be tailored to meet the “unprecedented” challenges of rebuilding Ukraine.

According to the Commission, “The Facility” would include a governance structure that ensures full ownership by Ukraine.

EU’s Recovery and Ressilience Facility forms part of an 800 billion program of loans and grants to assist EU countries in rebuilding their economies. It is notable that money borrowed jointly by the 27 EU members can be repaid.

Other contributions, including those from third or EU countries, could also be used to finance Ukraine’s additional grants.

The Commission stated that “Given how large the loans are expected to be, there are options such as raising funds on behalf of EU members or with national guarantees.”

Because some EU countries like Germany oppose any new EU joint borrowing, it is unclear how much support this financing plan will receive.

The EU could also confiscate assets that are frozen in Russia and hand them to Ukraine. However, officials caution that such an action is not legal and could prove to be costly as there are no laws in the EU. ($1 = 0.9507 euros)