The European Commission has proposed a €90 billion EU-backed loan for Ukraine for 2026 and 2027, splitting the package between budget support and military procurement and linking disbursements to reform and oversight conditions.

The Commission says it wants the first payments to start in the second quarter of 2026, with officials aiming for an initial disbursement as early as April if the legislation is adopted quickly.

Under the Commission’s plan, around €30 billion would go to general budget support to help keep the Ukrainian state functioning and maintain basic public services. The remaining €60 billion would be directed to military assistance, structured as procurement funding intended to strengthen Ukraine’s defence capabilities while also tying Ukraine more closely into Europe’s defence-industrial ecosystem.

The Commission describes the package as a “limited recourse” loan. It would be financed through common EU borrowing on the capital markets, with the borrowing guaranteed by the “headroom” in the EU budget under the current Multiannual Financial Framework (2021–2027). Alongside the loan regulation, the legislative package includes amendments to the Ukraine Facility and to the MFF regulation to provide the budgetary guarantee framework required for the borrowing.

A central feature is the use of enhanced cooperation. The Commission says the scheme is being established through a mechanism that allows a group of member states to proceed when agreement at 27 cannot be reached in a reasonable period. Reporting around the plan indicates that 24 member states are participating in the guarantees, with Hungary, Slovakia and the Czech Republic excluded from bearing the financial risk in order to secure the necessary unanimity for key elements of the package.

The Commission and EU leaders have also kept the question of immobilised Russian assets in view. The Commission states that the Union reserves the right, in accordance with EU and international law, to use Russian assets immobilised in the EU to repay the loan. Separately, the Commission’s earlier “reparations loan” concept—based on cash balances linked to immobilised Russian sovereign assets—has not been withdrawn, and could still be pursued by the co-legislators.

On repayment, reporting on the new instrument describes a non-recourse structure in which Ukraine would pay back the principal only after Russia ends its aggression and reparations are agreed, while EU member states would shoulder the borrowing costs in the meantime. Euronews reported interest costs of roughly €3–4 billion a year, falling on the participating member states, and noted that the Commission is already signalling that longer-term arrangements would have to be addressed in the next EU budget cycle beyond 2027.

The military-procurement component is designed to prioritise purchases from Ukraine, the EU and the wider EEA/EFTA area. The Commission’s approach includes an allowance for procurement outside Europe where equipment is not available quickly enough on the continent, including via NATO channels in some cases. An EU official cited by Euronews said Ukraine would need to submit requests to deviate from “Made in Europe” requirements when buying from third countries, with an expert group envisaged to assess and accelerate such requests.

That flexibility is politically sensitive inside the EU. Reporting has highlighted differing national positions over how strict any “buy European” preference should be, with some member states arguing for wider latitude to source from non-European suppliers if speed and availability are decisive. The Commission’s proposal seeks to keep a European preference while providing an exceptions process where European supply is constrained.

The Commission says the package will be underpinned by “strong conditionality mechanisms”, including measures on rule of law and anti-corruption embedded in the Ukraine Plan used under the Ukraine Facility framework. This is intended to provide an oversight structure for budget support and to anchor reform-related conditions to disbursement decisions.

The scale of the package reflects forecasts of Ukraine’s financing needs for 2026–27. The Commission says the €90 billion would cover about two-thirds of Ukraine’s overall financing requirement for the two-year period, citing IMF assessments, and argues that coordinated contributions from international partners will remain necessary. The Commission also states that, since the start of Russia’s full-scale war, the EU and its member states have provided €193.3 billion in overall support to Ukraine and Ukrainians, including €3.7 billion drawn from proceeds linked to immobilised Russian assets.

Next, the proposals move to the European Parliament and the Council. The Commission says swift adoption is required if financing is to start in the second quarter of 2026, after which implementing decisions and operational arrangements with Kyiv would follow.

First published on eutoday.net.