EU will probably have to give new loan to Ukraine, Estonian PM Michal says

By Andrew Gray

BRUSSELS, Oct 16 (Reuters) - The European Union will probably have to provide a new loan to Ukraine to help cover a budget gap for next year and keep up Kyiv's fight against Russia's invasion, Estonian Prime Minister Kristen Michal told Reuters in an interview on Friday.

"European financial assistance has to be there," Michal said before the start of the second day of an EU summit in Brussels. "Financial assistance in the war of attrition is the alpha and omega. You have to keep it up... That has to come from the European Union."

EU leaders agreed in December last year to provide a €90 billion ($101 billion) loan to Ukraine to cover much of its financial needs for 2026 and 2027. But Kyiv has said it now faces a gap of more than $70 billion for defence and regular budget spending next year.

Some European governments have pushed to fund Ukraine by using Russian assets frozen in the EU but that idea has been blocked by Belgium, where most of the assets are held, and several other EU nations.

Michal said another EU loan was the probable solution this time around too. "This is the mechanism that Europe has used many times so for Europe it's a quite understandable mechanism," he said.

Michal said he hoped EU leaders could decide on additional funding for Ukraine for 2027 before the end of this year, ahead of a year of elections in many European countries.

To fund the €90 billion loan, the EU is borrowing money against its common budget. Asked how another loan would be funded, Michal replied: "We will find a way because Europe usually finds a way. You get to the darkest hour and then you find a way." ($1 = 0.8894 euros)

(Reporting by Andrew Gray, Additional reporting by Olena Harmash; Editing by Charlotte Van Campenhout and Alex Richardson)