Cyprus faces €4.4M yearly interest from EU loan to Ukraine

Cyprus is expected to contribute roughly €4.4 million annually toward servicing the €90 billion loan the EU plans to raise on the markets to support Ukraine in the coming years, according to sources from Kathimerini.

For the first year, 2026, with repayment due in 2027, Cyprus’ share is estimated at around €2.2 million. This reflects the EU’s plan to fund only half of the total €90 billion loan in 2026, €45 billion, with the remainder coming later.

EU officials stress that the 24 member states participating in the loan will not need to inject “fresh money” into their national budgets in 2026. Existing funds from the 2021–2027 EU budget framework, so-called “headroom,” are expected to cover the contributions.

Contributions Could Shrink

Sources note that the 24 EU member states’ contributions “may be reduced” once the UK joins the loan scheme. In Cyprus’ case, the €2.2 million estimate will also be drawn from prior contributions to the EU budget, so no extra strain is expected on the national budget.

If additional funds are needed, the 24 participating countries (excluding Hungary, Slovakia, and the Czech Republic) would contribute proportionally. Germany and the Netherlands have coordinated to ensure that the EU will rely primarily on existing budget reserves rather than fresh allocations for 2026, a position widely supported by member states and forming the basis of the Commission’s “baseline scenario.”

Looking Ahead: 2028–2034

After 2027, when the full €90 billion loan is expected, repayment and interest obligations will be embedded in the next multiannual EU budget (MFF 2028–2034). Hungary, Slovakia, and the Czech Republic will again opt out, taking no part in either the loan or repayment obligations.

The “Hot Potato” of Full Repayment

What Brussels rarely discusses publicly is the actual repayment of the €90 billion. The EU will borrow the funds from markets and is responsible for paying the interest. Ukraine itself is only expected to repay the debt if it secures war reparations from Russia, and even then, without interest, which will be borne by the 24 member states. As the EU Council Conclusions from December 2025 note, “The loan will be repaid by Ukraine only after receiving reparations.”

This leaves open the realistic scenario in which Russia may not pay reparations. In that case, Ukraine would owe nothing directly, leaving the 24 EU states to shoulder both the interest and principal of the €90 billion loan. EU circles avoid discussing this publicly, calling it “hypothetical and premature.”

Frozen Russian assets totaling roughly €210 billion are intended to act as a backstop, held until Russia ends its war against Ukraine and compensates for damages caused.

The Battle Over Eligibility

Recent EU discussions, under Cyprus’ Council Presidency, focused on the “eligibility criteria” for defense suppliers benefiting from the €90 billion loan.

France pushed for an “EU first” approach to favor European companies, supporting its domestic defense industry. However, emergency clauses were included allowing for U.S. equipment purchases, particularly as Ukraine invests in Patriot missile systems. The UK, supported by a bloc of countries, will also participate, and Canada may supply arms under the SAFE framework.

Turkey, while generally excluded from supplying military equipment, may still participate indirectly through joint ventures with European defense companies.