Germany warns of economic consequences if Ukraine’s loan is not backed

(MENAFN) Germany has warned EU member states that opposing the proposed “reparations loan” for Ukraine, backed by frozen Russian assets, could lead to severe economic repercussions. German Europe Minister Gunther Krichbaum said countries rejecting the plan risk negative impacts on their credit ratings and higher interest rates, potentially forcing budget cuts and creating a “vicious circle.”

The EU last week invoked Article 122 of its treaty, allowing a qualified majority to approve use of frozen Russian central bank assets, bypassing unanimity requirements. The move has sparked criticism within the bloc and from legal experts, while Moscow labeled any attempt to use its assets as “theft.”

Several EU nations, including Hungary, Slovakia, and Belgium, have opposed the scheme. Belgium, which hosts Euroclear holding the majority of the frozen assets, warned that using the funds as collateral could destabilize the eurozone, scare investors, and push borrowing costs higher.

Krischbaum stressed that alternatives to the “reparations loan” would be costly for member states, while Moscow reiterated its opposition. Russian Foreign Ministry spokeswoman Maria Zakharova said any attempt to tap the funds would violate international law, regardless of Brussels’ legal maneuvers.

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