(Bloomberg) -- The European Union is considering the issuance of joint debt to finance Ukraine’s long-term reconstruction, which may end up costing hundreds of billions of euros, according to an EU official familiar with the plan. 

The European Commission is also weighing the use of loans from the EU budget -- and guaranteed by member states -- to provide urgent funds to Ukraine to pay salaries and benefits that may amount to as much as $15 billion over the next three months, said the official, who asked not to be identified because the plan is private. 

The commission, the bloc’s executive arm, will present the plan as part of a broader package addressing the financial needs of Ukraine on May 18, according to the official. The bloc wants to set up a platform with Group of Seven countries to contribute to the effort, with the EU taking the lead. 

The latest proposal comes almost two years after the EU reached a landmark agreement to fund its pandemic stimulus package with jointly backed debt. In that case, the bloc decided to distribute the funds as both loans and grants. 

Loan Guarantees

The commission has been working on an EU instrument to finance Ukraine’s reconstruction and several options are still being considered, including issuance of EU debt, said the official.   

Ukraine estimates that it needs $5 billion to $7 billion a month to fill a budget gap caused by Russia’s invasion. 

The commission is discussing additional macro-financial assistance, but wants member states to provide guarantees in the event that the war-torn country doesn’t repay the loans.

The EU is ready to contribute $9 billion for Ukraine’s financial needs over the next three months, while the U.S. may provide as much as $5 billion, the official said. Discussions are ongoing. 

EU leaders are expected to explore options to support Kyiv’s financial needs during a May 30-31 meeting in Brussels. 

©2022 Bloomberg L.P.