«On the brink»: European Central Bank set to hit Ukraine’s financial stability
Danylo Hetmantsev called the European Central Bank’s refusal to act as a guarantor for a reparations loan secured by Russia’s frozen assets in Euroclear «a truly bad piece of news.»
Follow us on Google
Hetmantsev commented on the ECB’s refusal to support a reparations loan for Ukraine / © TSN.ua
The head of the Financial Committee of Ukraine’s Verkhovna Rada, Danylo Hetmantsev, described, as «a truly bad piece of news» the European Central Bank’s (ECB) decision not to support a scheme for providing Ukraine with a major reparations loan backed by frozen Russian assets.
Hetmantsev emphasized that the situation is «genuinely on the brink.»
Reacting to the ECB’s decision, Danylo Hetmantsev voiced serious alarm over Ukraine’s financial stability. He said that although he avoids heightening tensions, this news places Ukraine in an extremely precarious position.
«This is truly bad news — the European Central Bank has refused to back the disbursement of a reparations loan to Ukraine… The situation is really on the brink, ” Hetmantsev wrote.
What’s behind the blocked «reparations loan»
The European Central Bank (ECB) has declined to serve as guarantor for roughly €140 billion intended for Ukraine and planned to be raised using frozen Russian assets as collateral. A large share of those reserves is stored in the Belgian clearing giant Euroclear.
The plan rejected by the ECB:
European officials approached the ECB with a request to act as a «lender of last resort» for Euroclear.
The ECB was expected to provide liquidity guarantees for a mechanism that would allow Euroclear to issue a large loan to Ukraine to fund needs arising from Russia’s invasion.
According to sources, the ECB concluded that such a scheme falls outside its mandate. Under EU treaties, central banks are prohibited from directly financing government expenditures or acting as guarantors for such loans.