London Daily

Focus on the big picture.
Thursday, Dec 18, 2025

The EU is leading Ukraine into a sovereign debt crisis

The EU is leading Ukraine into a sovereign debt crisis

Brave and economically ravaged Ukraine needs a debt deal to win the coming peace — and grants rather than loans.
European leaders haven’t been shy about trumpeting their €18 billion in loans to Ukraine in 2023 as a tool for“maintain[ing] the macro-financial stability of the country.”For European Council President Charles Michel, such aid shows that Brussels is “very committed to supporting Ukraine as much as we can.”

However, as the war rages and pressure on Ukraine’s economy mounts, basic economics — and centuries of history — paint a much less optimistic portrait of the real impact of Europe’s financial support.

Sometimes in Brussels, ignorance really is bliss.

The reality is that brave, bombarded and economically ravaged Ukraine needs a debt deal to win the coming peace. And if Kyiv is to have a realistic chance of a post-war recovery, this deal should include significant debt restructuring and the transfer of tens of billions of euros in non-repayable grants.

With an inflation rate of 26 percent, interest rates of 25 percent and a one-third decline in Gross Domestic Product (GDP) in 2022, Ukraine is reaching the limits of existing, conventional economic policy.

Soon, Kyiv will have to resort to the printing press to finance daily public services. And as the Germans, the Dutch and others often like to remind Europe, this will lead to economic catastrophe.

Ukraine has already deferred payments until 2024 on up to €20 billion of its debt held by international investors. And while the approximate €6 billion that the country has saved through this action is important, it pales in comparison to its expected budgetary shortfall of approximately €40 billion in 2023 alone.

Ukraine needs a debt write-off — unfortunately, the EU just wants it to keep borrowing.

The €18 billion worth of loans from the EU will eventually have to be repaid, starting in 2033, and loading on more debt — even of the long-term, practically zero interest variety — reduces Ukraine’s potential for quick recovery from the war. It’s also a nonsensical economic approach, given that Kyiv has already suspended payment on some of its existing obligations.

Overall, the EU’s strategy is simply a recipe for a future Ukrainian sovereign debt crisis.

Remarkably, for all the bombast in Europe about a “Marshall Plan for Ukraine,”it is the United States — not the EU — that has correctly learned from its economic history.

The U.S. has already provided over $13 billion in non-repayable grants to Ukraine, with a further $14.5 billion due in 2023. And this U.S. aid is in addition to the tens of billions of dollars it is spending on military support.

As uncomfortable as it may be, Brussels — and Berlin — know all too well that it was the debt relief granted to Germany in the late 1940s, which laid the foundation for Europe’s post-war economic miracle: A return to economic growth, which eventually led to the creation of a prosperous European Economic Community in 1957.

This “inner core” of the original Marshall Plan wrote off Germany’s post-1933 debts and enabled West Germany to start off with a debt-to-GDP-ratio of under 20 percent, following the London Debt Agreement of 1953. Originally designed as a temporary arrangement, it was solidified upon German reunification in 1990.

It was understood, at the time, that a wartime economic crisis required a pragmatic and flexible political response — just as it does now.

Alas, the EU’s response to financing Ukraine has been anything but historic.

The bloc has allowed its internal splits on economic policy — which were ironically crystallized by German reunification and the creation of the euro — to undermine its strategic objectives in Ukraine. And while it continues to be haunted by the ghosts of Greece and stalked by Hungary, the European Council is unlikely to ever approve a meaningful grant-aid, debt-reduction package for Ukraine.

As a result, the country’s long-term financial sustainability remains compromised by the EU’s decision-making dissonance.

In this context, it is individual EU member countries that should be taking the lead in supplying bilateral grant aid to Ukraine. Although the European Commission is eager to place itself at the head of all EU aid efforts, this is a case of aspirational leadership rather than actual discernible effectiveness, particularly given the delays — and member country squabbling — in distributing existing support.

Direct bilateral grant aid to Ukraine should thus be exempt from the eurozone’s self-imposed budgetary constraints. And unused EU aid in member countries — ranging from the common agricultural policy to the Cohesion Fund — should be permitted to be sent as non-repayable financial support to Ukraine, should any member so wish.

Taking its history and economic scale into account, it’s Germany that should take the lead. And if Berlin can’t overcome its current phobias, it should — at the very least — facilitate other EU member countries that want to follow the U.S. approach.

There will come a time for the political and economic reforms so beloved by Brussels to be proactively linked to future financial support for Ukraine — but now is just not the time.

Both the EU and Germany need to acknowledge their own economic history or, failing that, step aside and let the U.S. and Britain save Ukraine’s economic future. Otherwise, one of the biggest tragedies of this war may well end up being Ukraine’s disillusionment with Europe.
Newsletter

Related Articles

0:00
0:00
Close
UK Issues Final Ultimatum to Roman Abramovich Over £2.5bn Chelsea Sale Funds for Ukraine
Rare Pink Fog Sweeps Across Parts of the UK as Met Office Warns of Poor Visibility
UK Police Pledge ‘More Assertive’ Enforcement to Tackle Antisemitism at Protests
UK Police Warn They Will Arrest Protesters Chanting ‘Globalise the Intifada’
Trump Files $10 Billion Defamation Lawsuit Against BBC as Broadcaster Pledges Legal Defence
UK Says U.S. Tech Deal Talks Still Active Despite Washington’s Suspension of Prosperity Pact
UK Mortgage Rules to Give Greater Flexibility to Borrowers With Irregular Incomes
UK Treasury Moves to Position Britain as Leading Global Hub for Crypto Firms
U.S. Freezes £31 Billion Tech Prosperity Deal With Britain Amid Trade Dispute
Prince Harry and Meghan’s Potential UK Return Gains New Momentum Amid Security Review and Royal Dialogue
Zelensky Opens High-Stakes Peace Talks in Berlin with Trump Envoy and European Leaders
Historical Reflections on Press Freedom Emerge Amid Debate Over Trump’s Media Policies
UK Boosts Protection for Jewish Communities After Sydney Hanukkah Attack
UK Government Declines to Comment After ICC Prosecutor Alleges Britain Threatened to Defund Court Over Israel Arrest Warrant
Apple Shutters All Retail Stores in the United Kingdom Under New National COVID-19 Lockdown
US–UK Technology Partnership Strains as Key Trade Disagreements Emerge
UK Police Confirm No Further Action Over Allegation That Andrew Asked Bodyguard to Investigate Virginia Giuffre
Giuffre Family Expresses Deep Disappointment as UK Police Decline New Inquiry Into Andrew Mountbatten-Windsor Claims
Transatlantic Trade Ambitions Hit a Snag as UK–US Deal Faces Emerging Challenges
Ex-ICC Prosecutor Alleges UK Threatened to Withdraw Funding Over Netanyahu Arrest Warrant Bid
UK Disciplinary Tribunal Clears Carter-Ruck Lawyer of Misconduct in OneCoin Case
‘Pink Ladies’ Emerge as Prominent Face of UK Anti-Immigration Protests
Nigel Farage Says Reform UK Has Become Britain’s Largest Party as Labour Membership Falls Sharply
Google DeepMind and UK Government Launch First Automated AI Lab to Accelerate Scientific Discovery
UK Economy Falters Ahead of Budget as Growth Contracts and Confidence Wanes
Australia Approves Increased Foreign Stake in Strategic Defence Shipbuilder
Former UK Prime Minister Boris Johnson proclaims, “For Ukraine, surrendering their land would be a nightmare.”
Microsoft Challenges £2.1 Billion UK Cloud Licensing Lawsuit at Competition Tribunal
Fake Doctor in Uttar Pradesh Accused of Killing Woman After Performing YouTube-Based Surgery
Hackers Are Hiding Malware in Open-Source Tools and IDE Extensions
Traveling to USA? Homeland Security moving toward requiring foreign travelers to share social media history
UK Officials Push Back at Trump Saying European Leaders ‘Talk Too Much’ About Ukraine
UK Warns of Escalating Cyber Assault Linked to Putin’s State-Backed Operations
UK Consumer Spending Falters in November as Households Hold Back Ahead of Budget
UK Orders Fresh Review of Prince Harry’s Security Status After Formal Request
U.S. Authorises Nvidia to Sell H200 AI Chips to China Under Security Controls
Trump in Direct Assault: European Leaders Are Weak, Immigration a Disaster. Russia Is Strong and Big — and Will Win
"App recommendation" or disguised advertisement? ChatGPT Premium users are furious
"The Great Filtering": Australia Blocks Hundreds of Thousands of Minors From Social Networks
Mark Zuckerberg Pulls Back From Metaverse After $70 Billion Loss as Meta Shifts Priorities to AI
Nvidia CEO Says U.S. Data-Center Builds Take Years while China ‘Builds a Hospital in a Weekend’
Indian Airports in Turmoil as IndiGo Cancels Over a Thousand Flights, Stranding Thousands
Hollywood Industry on Edge as Netflix Secures Near-$60 Bln Loan for Warner Bros Takeover
Drugs and Assassinations: The Connection Between the Italian Mafia and Football Ultras
Hollywood megadeal: Netflix acquires Warner Bros. Discovery for 83 billion dollars
The Disregard for a Europe ‘in Danger of Erasure,’ the Shift Toward Russia: Trump’s Strategic Policy Document
Two and a Half Weeks After the Major Outage: A Cloudflare Malfunction Brings Down Multiple Sites
UK data-regulator demands urgent clarity on racial bias in police facial-recognition systems
Labour Uses Biscuits to Explain UK Debt — MPs Lean Into Social Media to Reach New Audiences
German President Lays Wreath at Coventry as UK-Germany Reaffirm Unity Against Russia’s Threat
×