Why European funding has become critical for Ukraine

AWANI

European funding is critical as Ukraine faces a looming fiscal crunch next year, but EU leaders remain deadlocked over using Russia’s frozen assets to finance the country.

Transcript

00:00Even as negotiators claim progress in talks to end the war in Ukraine,

00:05the European Union remains deadlocked over how to sustain funding for the country's defence.

00:10With Ukraine's budget deficit projected to hit nearly 19% of GDP,

00:15the country could face a fiscal crunch as early as next year.

00:19Alexander Kolienda from the Centre for European Policy Analysis

00:22explains why European funding is now critical.

00:25Well, the problem is that the Americans stopped bankrolling Ukraine.

00:33And the whole idea now is that Europe must shoulder the bill.

00:39Without the European money or without the European financial guarantees,

00:45Ukraine would not be able to survive financially

00:48because the IMF is not prepared to lend money to Ukraine

00:53without the European guarantees.

00:55Because the Ukrainian budget runs a huge deficit

00:59and we are not even mentioning the needs of the army.

01:05So the bottom line is this money is vital for Ukraine

01:09and the Europeans must find a way of providing money to Ukraine.

01:17EU leaders are in the final stretch of talks

01:20ahead of a European Council meeting in Brussels on Thursday,

01:23where they must decide whether to use frozen Russian assets

01:26to back a reparations-style loan for Ukraine.

01:30But with less than 24 hours to go, there is still no agreement.

01:34Belgium is pushing back against the European Commission's proposal,

01:38citing concerns over potential legal challenges from Russia.

01:41And the Belgians are saying that, okay, it all looks fine at the moment,

01:48but let's not forget that Russia might retaliate,

01:55that Russia may and will challenge the decisions in the courts.

02:02And most importantly, what happens if the sanctions against the central bank

02:09are not extended, thanks to, say, a position from Hungary or Slovakia,

02:18or the final settlement between Russia and Ukraine

02:22doesn't mention the reparation.

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