EU countries and the Commission remain at an impasse over who should provide guarantees for a European Central Bank-run program to convert Ukrainian refugees’ cash into local currencies.
The consequence for the millions of war refugees is that they have no way of converting their savings.
The question of how to convert Ukrainian hryvnias into euros or other EU currencies has been under discussion among EU leaders since early March, POLITICO reports, but no solution has yet been found. The point of contention is the current inability of the National Bank of Ukraine to post collateral that would cover potential losses.
For the time being, the ECB has presented the Commission with two options to move forward, according to a paper seen by POLITICO on Tuesday.
Under option one, which the central bank prefers, EU countries would give the ECB a mandate to work with EU countries’ central banks to convert the hryvnia. To circumvent the bloc’s monetary financing ban — when a central bank provides fiscal support to states — the EU must “provide [the ECB and EU central banks] with the resources to fulfill the mandate,” wrote the ECB.
In other words, the EU would have to post the collateral for the currency exchange to cover potential losses.
In particular, the program could be extended to countries outside the euro zone, which are currently hosting the majority of Ukrainian refugees – over 2.3 million in Poland, over 600,000 in Romania, almost 360,000 in Hungary, the authorities said United Nations.
Then there would be option two of the ECB, according to which the National Bank of Ukraine would give the ECB a mandate on a different legal basis. In this way, the ban on monetary financing would be circumvented, since “the ban on monetary financing of a mediation agreement between the [National Bank of Ukraine] and the ECB/Eurosystem, as the [National Bank of Ukraine] is not part of the public sector,” the bank wrote. Option two would also require the EU to act as guarantor.
But the underlying dispute over who should post those guarantees, which are expected to come with a guarantee estimated at €300-400 million, according to an official with knowledge of the discussion.
There are two possibilities: The Commission could act as guarantor through the EU budget. This option has broad support from EU countries and the ECB – but the Commission resists, arguing that the EU budget is already stretched, according to central bank and Commission officials and diplomats who spoke to POLITICO.
Alternatively, the EU countries would provide the collateral from their own budgets. However, this process can take weeks or even months, as budget guarantees in many EU countries have to be approved by parliament.
“To be honest, when it comes to the European budget, it’s easier because the national budgets are coordinated [is] quite complex,” said a senior EU diplomat. “But the European budget is not easy either because it is in high demand at the moment.”
“We have identified the needs, but we have no solution,” added the diplomat.
A spokesman for the Commission did not answer why the EU executive will not provide guarantees from its own budget, but said the Commission is in contact with the ECB and the central banks of EU countries “to find solutions and to show our solidarity.” also in this regard towards Ukrainian refugees.”
The issue is expected to be discussed at ministerial level at next week’s meeting of EU finance ministers in Luxembourg.
https://www.politico.eu/article/eu-infighting-delays-cash-conversion-ukrainian-refugees/?utm_source=RSS_Feed&utm_medium=RSS&utm_campaign=RSS_Syndication EU fighting delays cash conversion for Ukrainian refugees - POLITICO