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EU plans to raise €90 billion in joint debt for Ukraine — here’s how

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EU plans to raise €90 billion in joint debt for Ukraine — here’s how

Reparations loan is out, joint debt is in. That is the agreement that the 27 leaders of the European Union reached at their make-or-break summit this week.

With the reparations loan ruled out for good, the bloc turns to common borrowing to raise €90 billion to meet Ukraine’s budgetary and military needs for the next two years.

It is a simpler, faster and more predictable solution compared to the high-risk scheme of using the immbolised Russian assets. But joint debt is expensive, and immediately so.

Here’s what you need to know about the plan.

Back to the markets

Since neither the EU nor its member states have €90 billion at their disposal at the moment, the European Commission will go to the markets and raise the money from scratch by issuing a mix of short-term and long-term bonds.

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The €90 billion will be gradually dolled out to ensure a steady flow of assistance to Ukraine, which needs a fresh tranche as early as April. The country will be able to use the funds for both military and budgetary purposes for greater flexibility.

In the meantime, the EU budget will absorb the interest rates to spare Ukraine, already heavily indebted, from any additional burden. The Commission estimates that, under current rates, the interest payments will amount to €3 billion per year. This means the next EU budget (2028-2034) will have to make space for about €20 billion.

Member states will share the interest according to their economic weight. Germany, France, Italy, Spain and Poland will carry the highest costs.

According to Commission officials, the €90 billion will not count towards domestic levels of debt because the issuance will be done exclusively at the EU level.

Forever roll-over

Under a non-recourse loan agreement, Ukraine will be asked to pay back the €90 billion only after Russia ceases its war of aggression and agrees to pay war reparations.

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Given that Moscow has emphatically ruled out the possibility of any compensation, the Commission is already prepared to roll out the liability over time so that Ukraine does not have to pay out of pocket, which will be painful after suffering so much devastation.

“The assumption is, today it’s a non-recourse loan to Ukraine that is only paid back when reparations are there, and therefore this debt is going to be rolled over up until then,” a senior Commission official explained.

But will the roll-over continue for eternity?

That seems unlikely. At some point in the future, the EU will have to settle the fate of the €90 billion to stop paying interest rates. The go-to method will be the EU budget, which will act as the ultimate guarantor to ensure investors are always paid back.

The three opt-outs

The reason why joint debt for Ukraine is now possible is that, as first reported by Euronews during the summit, Hungary, Slovakia and the Czech Republic agreed to refrain from vetoing in exchange for being exempted.

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This is key because under current rules, the EU budget cannot be used to raise money for a non-EU country. Any changes to that effect will require unanimous approval.

Hungary, Slovakia and the Czech Republic will commit to that unanimity. In return, the bloc will activate the so-called “enhanced cooperation” mechanism to spare them from any costs and responsibilities associated with the €90 billion.

The other 24 countries will take over their share of the interest. But the change will be minimal because the three opt-outs only amount to 3.64% of the bloc’s GNI.

The exemption will also be institutional. Once the budget rules are amended and the “enhanced cooperation” is triggered, the three countries will lose their voting rights to approve the regulation that will establish the new assistance programme.

In practice, they will be strictly removed from the initiative.

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Strings attached

The Commission intends to recycle the now-discarded proposal of the reparations loan to set up the €90 billion common borrowing.

As a result, Ukraine will be subject to the same conditions to receive the funds.

One of them is a “no rollback” clause that will link the aid to the anti-corruption measures that Kyiv must implement to advance in its EU accession bid. The country was recently shaken by a corruption scandal in the energy sector that precipitated numerous resignations, including that of Andriy Yermak, President Zelenskyy’s chief of staff.

If Kyiv takes a step back on the fight against corruption, as it briefly did in the summer when it undermined the independence of two anti-corruption agencies and prompted widespread protests, payments will be suspended.

There will also be safeguards to strengthen oversight on how Ukraine allocates defence contracts, which have been a source of controversy in the past.

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Additionally, there will be “Made In Europe” criteria to ensure the €90 billion fosters Ukraine’s and Europe’s domestic defence industries. Only when the equipment is not readily available on the continent will purchases outside Europe be allowed.

Assets still on the table

Resorting to joint debt means the cash balances from the Russian assets will not be touched, as was originally planned in the reparations loan.

However, in their conclusions, EU leaders say they reserve “the right” to tap the assets, or at least try, sometime in the future, as a way to repay the €90 billion borrowing.

“For me, it’s very difficult and very premature today to say how this will be translated in actual terms,” a senior Commission official said when asked about the meaning.

“I think the message is pretty political, which is to say that the option to use the cash balance assets of the Russian Central Bank is not off the table.”

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The addition of the assets into the final wording is considered a way to placate those countries that were most vocally supportive of the reparations loan, particularly Germany, and had publicly ruled out the idea of common borrowing.

President Zelenskyy hailed the decision as an “important victory” for his country.

“Without these funds, it would be very difficult for us. In any case, this is tied to Russian reparations,” he said. “For us, this is a reinforcement. It is a signal to the Russians that there is no point for them to continue the war because we have financial support, and therefore, we will not collapse on the front line. We will support our army and our people.”

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What Middle Powers Fear from the Trump-Xi Summit

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What Middle Powers Fear from the Trump-Xi Summit

Poland will soon host production lines for South Korean tanks. Australia is buying warships from Japan. Canada will send uranium to India, while India offers cruise missiles to Vietnam, and Brazil builds military transport planes for the United Arab Emirates.

All of these deals were sealed in the past few weeks. Each one represents an attempt by middle powers to protect themselves as the conflict in Iran throttles global energy supplies, and as a high-stakes summit between President Trump and Xi Jinping of China looms.

Global polls show the world has little trust in the United States and China. Mr. Trump and Mr. Xi have both used their enormous leverage over trade and security to coerce or punish. And in response, smaller nations are behaving as if they are stuck in “Godzilla” or “Dune” — moving quietly in small groups, trying not to provoke the wrath of petulant giants.

“It’s fifty shades of hedging,” said Richard Heydarian, a Filipino political scientist at Oxford University. Or, as Ja Ian Chong, a security analyst in Singapore put it, “No party wants to cross Beijing and now Washington, too.”

For countries watching from afar, dread and hope hover over the Trump-Xi meeting in Beijing, which is scheduled for this week. In Asia, which has been hit hardest and fastest by oil shortages caused by the war and China’s tight control of oil-product exports, the mood is particularly grim. Interviews with officials, and statements from leaders traveling the globe to secure trade and defense deals, suggest that most middle powers feel overwhelmed by the deteriorating world order.

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Many believe the summit carries more potential for harm than help. And Mr. Trump’s gut-driven approach to complex issues is the main source of anxiety.

For months, officials in Asia have worried that the president might be too eager to make a deal with Mr. Xi, ending weapons sales to Taiwan or agreeing to softened policy language that could make it easier for China to undermine the democratic island.

“That would be the biggest nightmare,” said one Taiwanese official who spoke on condition of anonymity to discuss internal government matters. He insisted that reduced support from the U.S. was unlikely.

But any concession on Taiwan could lead other American partners to fear abandonment. Beijing’s push for compliance on contested territory elsewhere would be bolstered, from the border with India to the South China Sea.

Vietnamese officials said that if President Trump makes a conciliatory gesture or flatters Xi, even without bigger compromises, China will gain leeway to press harder on smaller countries.

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Another concern being discussed across the region: that Mr. Trump might alter long-term security plans in exchange for better economic terms with China.

Mr. Trump’s decision to redirect a carrier strike group from the Pacific and munitions from South Korea for the war in Iran may have created momentum for broader redeployments. When the Pentagon announced it would pull at least 5,000 troops from Germany after Mr. Trump expressed annoyance with the German chancellor, allies in Asia were again reminded how quickly collective deterrence can be weakened.

Mr. Trump has threatened in the past to make troop withdrawals from Japan, which hosts around 53,000 American military personnel — more than any other country — and South Korea, where another 24,000 Americans are stationed. If he could get something big from Mr. Xi for a drawdown, would he turn down the deal?

Analysts noted that plans opposed by China, such as AUKUS, a pact between Australia, England and the U.S. designed to counter Beijing’s influence by equipping Australia with nuclear-powered submarines and advanced technology, could also be suddenly canceled.

“The sense that U.S. allies have to look to one another because they can no longer look to America is very real,” said Hugh White, a former Australian intelligence official who teaches strategic studies at the Australia National University.

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That sentiment is much stronger than “the cautious public language” of national leaders might suggest, he added.

European and Asian officials often talk privately in frank terms about giving up their faith in America, prompting a no-turning-back effort to diversify away from the United States. In casual discussions with reporters, they can sound a lot like Prime Minister Mark Carney of Canada, who received a standing ovation in Davos this year for a speech that declared, “We are in the midst of a rupture, not a transition.”

But in public, they’re more circumspect. Some officials admit their countries are trying to buy time and evade Mr. Trump’s fits of pique, while continuing the performance of imperial fealty.

South Korean officials have simply expressed resignation over American military diversions, after making clear they felt betrayed in 2004, when President George W. Bush announced plans to move troops from Asia to the war in Iraq. Australia, Taiwan and Japan publicly and repeatedly stress the value of American leadership without caveats — even as U.S. tariffs and the war Mr. Trump started with Iran kneecap their economies.

No one wants to be seen stepping out of line.

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Japan’s new prime minister, Sanae Takaichi, has been bolder than most in trying to foster stronger relationships with other countries. Yet even as she crisscrossed the region promoting military cooperation, officials in Tokyo worried about how Washington would view her efforts.

“The Japanese don’t want Takaichi’s security cooperation and tour, especially to Australia, to be seen as a version of Mark Carney,” said Michael J. Green, the author of several books on Japan, and chief executive of the United States Study Centre at the University of Sydney.

Others have apparently reached the same conclusion. Mr. Carney’s recent visits to India and Australia did not yield strong statements from their leaders echoing his criticism of great power rivalry or his warning that if middle powers are “not at the table, we’re on the menu.”

At the same time, many countries — including some that are benefiting from the thickening of middle-power bonds — have been careful not to anger the world’s other hegemon, China.

Nations managing their own disputes with Beijing, such as Indonesia, have done less to rally around Japan than some in Tokyo would have liked, since Ms. Takaichi became embroiled in a diplomatic crisis after telling her Parliament that if China attacked Taiwan, Japan could respond militarily.

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Vietnamese officials even pressed Ms. Takaichi to avoid directly criticizing China in her speech at a university on May 2 in Hanoi, according to diplomats who spoke on condition of anonymity to describe sensitive discussions. It is not clear if adjustments were made. Chinese officials later condemned her diplomatic efforts as “war preparation.”

And yet, in a sign of how middle powers are still doing more while saying less, the two countries signed six cooperation agreements, including one on satellite data sharing and another to secure deliveries for Vietnam’s largest oil refinery, potentially easing shortages.

“The U.S. has become more unreliable, so it makes sense to try to develop alternatives,” said Robert O. Keohane, an international relations professor at Princeton University. Even if what’s been formed so far is insufficient, he added, “having a weak alternative is better than having no alternative at all.”

Reporting was contributed by Tung Ngo from Hanoi, Vietnam; Javier C. Hernández from Tokyo; Amy Chang Chien from Taipei, Taiwan; Jim Tankersley from Berlin; Ian Austen from Ottawa; and Matina Stevis-Gridneff from Toronto.

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Remains recovered of US soldier who went missing in military exercises in Morocco, 2nd soldier still missing

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Remains recovered of US soldier who went missing in military exercises in Morocco, 2nd soldier still missing

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The remains of a U.S. Army officer who went missing during military exercises in Morocco were recovered from the Atlantic Ocean, while the search continues for a second missing soldier, according to military officials.

The remains of 1st Lt. Kendrick Lamont Key Jr., 27, of Richmond, Virginia, were recovered Saturday, U.S. Army Europe and Africa announced Sunday. Key, a 14A Air Defense Artillery officer, was one of two U.S. soldiers who reportedly fell from a cliff during an off-duty recreational hike near the Cap Draa Training Area on May 2.

A Moroccan military search team found Key in the water along the shoreline at about 8:55 a.m. local time Saturday, roughly one mile from where both soldiers reportedly entered the ocean, the Army said.

“Today, we mourn the loss of 1st Lt. Kendrick Key, whose remains were recovered in Morocco,” Brig. Gen Curtis King, commanding general of the 10th Army Air and Missile Defense Command, said in a statement. “Our hearts are with his Family, friends, teammates, and all who knew and served alongside him. The 10th Army Air and Missile Defense Command Family is grieving, and we will continue to support one another and 1st Lt. Key’s Family as we honor his life and service.”

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LONG-LOST SOLDIER’S GRAVE DISCOVERED AT REMOTE US NATIONAL PARK AFTER 150 YEARS

The remains of 1st Lt. Kendrick Lamont Key Jr. were recovered. (U.S. Army Europe and Africa)

Key and the second soldier were reported missing on May 2 after participating in African Lion, an annual multinational military exercise hosted across Morocco, Tunisia, Ghana and Senegal.

The two were reported missing around 9 p.m. near the Cap Draa Training Area outside Tan-Tan, a terrain featuring mountains, desert and semi-desert plains, the Moroccan military said.

The disappearance of the two soldiers led to a search-and-rescue mission involving more than 600 personnel from the U.S., Morocco and other military partners. Ships, helicopters and drones were deployed as part of this operation.

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Search efforts will continue for the second missing soldier.

PENTAGON HONORS AMERICAN TROOPS KILLED IN OPERATION EPIC FURY: ‘NEVER BE FORGOTTEN’

The two soldiers were reported missing after participating in African Lion, an annual multinational military exercise held in Morocco. (AP Photo/Mosa’ab Elshamy)

A U.S. contingent remained in Morocco after the military exercises ended on Friday to provide command and control and to support the ongoing search and rescue mission.

Key was assigned to Charlie Battery, 5th Battalion, 4th Air Defense Artillery Regiment, 10th Army Air and Missile Defense Command, according to the Army.

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His decorations include the Army Achievement Medal and Army Service Ribbon.

He entered military service in 2023 as an officer candidate and earned his commission through Officer Candidate School the following year as an Air Defense Artillery officer. He later completed the Basic Officer Leader Course at Fort Sill, Oklahoma.

Key is survived by his parents, his sister and his brother-in-law.

Search efforts will continue for the second missing soldier. (Abdel Majid BZIOUAT / AFP via Getty Images)

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African Lion 26 is a U.S.-led exercise that began in April across Morocco, Tunisia, Ghana and Senegal, with more than 5,600 civilian and military personnel from more than 40 nations.

For more than 20 years, it has been the largest U.S. joint military exercise in Africa.

In 2012, two U.S. Marines were killed, and two others injured during an MV-22 Osprey crash near Cap Draa while participating in Exercise African Lion.

The Associated Press contributed to this report.

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Trump says Iran’s reply to US peace plan ‘totally unacceptable’

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Trump says Iran’s reply to US peace plan ‘totally unacceptable’
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