EU leaders and the European Central Bank (ECB) are locked in a dispute over the implementation of a windfall tax on Russian assets that have been frozen under EU sanctions. This disagreement was disclosed by anonymous sources cited in a report by Bloomberg on Friday.
Since the outbreak of Moscow’s military operation in Ukraine, the EU has frozen Russian state assets and reserves, amounting to approximately €207 billion ($217 billion). It is estimated that these frozen assets will generate around €3 billion in interest. The majority of these funds are held by Euroclear, a major Belgian settlement company, which reported taxable profits of nearly €750 million in the first quarter of this year.
The EU leaders have repeatedly called for the use of these funds to support the reconstruction of Ukraine. In line with this, they reached an agreement last month to work on a windfall tax to obtain the interest generated from the frozen assets.
However, ECB President Christine Lagarde expressed concerns during a recent meeting, stating that implementing a windfall tax could potentially undermine the stability of the euro and prompt reserve holders to reconsider their positions. Lagarde emphasized that the potential impact of this decision is far greater than the few billions of euros that would be generated for Ukraine. She argued that any decision should only be made with the agreement of the G7 nations, including Canada, Japan, the United Kingdom, and the United States, as cited by sources familiar with the discussions.
European Commission Vice President Valdis Dombrovskis reportedly countered Lagarde’s arguments by stating that the windfall tax would not affect Russia’s assets themselves and would not interfere with the EU’s role in safeguarding securities. However, Lagarde shook her head in disagreement with Dombrovskis’ counterarguments, indicating a strong difference of opinion among EU leaders and the ECB.
The ongoing disagreement highlights the challenges faced by the EU in finding consensus on how to handle frozen Russian assets. While some member states support Lagarde’s position, others believe that it is a matter of how to proceed, rather than whether to implement the windfall tax.
It’s worth noting that Moscow has repeatedly condemned any seizure of its assets by Western governments, considering it to be theft and a violation of international law.
Overall, this dispute between the EU leaders and the ECB underscores the complexity of the decision-making process surrounding the use of frozen Russian assets. The outcome of this disagreement will have significant implications for Ukraine’s reconstruction efforts and the stability of the euro.
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