EU to provide guarantees on savings of Ukrainians – POLITICO

FRANKFURT — The EU’s nascent efforts to ensure Ukrainian refugees can exchange their savings for euros will likely result in tax authorities offering a backstop to the European Central Bank guaranteeing payments, three officials POLITICO said on Friday.

Refugees who had emptied their bank accounts before fleeing are either charged exorbitant exchange rates up to 90% higher than before the war, or face outright refusals.

“Crossing the border from Ukraine to Poland in Zosin, there was a lot of help offered – free food, free nappies,” a Ukrainian refugee told POLITICO. “But nobody wanted to exchange money.”

The problem is that the huge uncertainty over Ukraine’s economic outlook means refugees are struggling to find someone willing to buy their currency. This is not only true for cash, but also for payment cards. And the banks fear that they will not be reimbursed for payments made by the Ukrainian banks that issued the card.

For European banks to accept the hryvnia, they would need collateral to cover potential losses, as they doubt they can obtain payments at the official exchange rate.

An option currently being considered by the Commission, the ECB and EU countries would be a so-called buy-back agreement between the ECB and the Ukrainian central bank, in which the ECB would make euros available to the National Bank of Ukraine against guarantee. As the war-torn country cannot post the guarantee itself, EU countries would do so – thus also taking into account exchange rate risk, officials said, suggesting the process could be s eternalize.

It remains unclear, however, how many safeguards would be put in place, or when. EU leaders discussed the plan at their summit in Versailles last week, and representatives of member countries, the ECB and the Commission continued their efforts on Friday in Brussels. Leaders will return to the issue at their summit next week in Brussels, an official said.

While EU authorities stress they are aware of the urgency, technical and legal challenges have prevented a quick solution.

“Solutions are being explored at European level to help Ukrainian refugees exchange their currency,” an ECB spokesman said.

For its part, the National Bank of Ukraine told POLITICO it was working with EU central banks to resolve this issue, but added that “it may take some time.”

ECB President Christine Lagarde said last week she hoped Europe could come up with a solution within days, but on Thursday she hinted at difficulties, stressing that the ECB needed to get creative while staying within legal limits in its efforts to help Ukraine. refugees exchange their money.

“The simple question is: who will bear the exchange rate risk? said a central bank official. “It can’t be the central bank.”

Since this kind of support would not constitute a monetary policy operation, any ECB loss could be considered a form of monetary financing—short for central bank support for national finances. This is prohibited by the Maastricht Treaty, which means that national treasuries should ultimately be on the hook.

Other countries outside the euro zone are already changing. In Poland, the first destination for refugees, the central bank is working on a similar program to convert the hryvnia into the złoty. The central bank will allow cash exchanges up to 10,000 hryvnia per person (about 1,400 złoty, or €300) through the state-controlled bank PKO BP, it said in a press release on Thursday. .

An alternative would be to only distributing money to refugees, a much simpler and legally straightforward operation. But authorities fear this could send a worrying signal to Ukrainians that Europe has no confidence in the future of the Ukrainian currency.