According to a document of the European Central Bank, the ECB is prepared to organise a programme allowing millions of Ukrainian immigrants to exchange their hryvnia money for euros if the EU provides the bank with a guarantee that would cover the bank’s risk.
Almost 4 million Ukrainians have fled the Russian invasion into the EU, but they are having difficulty converting money because few banks want to buy a country’s currency that is in the midst of a civil war.
The ECB has been working on a currency conversion facility since earlier this month, according to Reuters sources, but the document lays out the choices for the first time.
“The preferred option would be that the ECB and Eurosystem National Central Banks act as fiscal agents for the Union,” said the ECB paper, sent to the European Commission last week and seen by Reuters.
In this scenario, EU countries would instruct the ECB to carry out the programme and, in order to comply with the bank’s restriction on monetary financing of governments, they would give the bank with the funds required to carry out that mandate.
“The alternative option is based on a mandate given to the ECB by the central bank of Ukraine,” the ECB paper said.
The ECB would sign an agreement with Ukraine’s central bank to function as its agent, and the EU would provide a guarantee through its budget to cover the risk that the Ukrainian central bank would be unable to honour the agreement due to the war.
The agreement would specify the exchange rate for hryvnias to euros, as well as the maximum quantity and duration of the scheme’s operation.
While the ECB’s idea is for euros, it may be expanded to cover EU countries that do not use the euro, according to the bank.
The majority of the refugees have made their way to Poland, which has so far welcomed 2.3 million people.
Romania, Slovakia, and Hungary, all EU members, have also seen a huge influx of migrants. Only Slovakia is a member of the single currency.
According to an EU official, there is widespread support among EU members for the ECB’s proposed EU-wide guarantee because it would spread the scheme’s risks more evenly among EU countries.
Currently, they are mostly affecting national central banks in nations with the highest refugee populations.
The ECB idea is distinct from another plan now being considered by EU states, under which each Ukrainian refugee might exchange up to 10,000 hryvnias (311 euros) into an EU currency for three months, with each EU country taking responsibility for its own financial risk.
(Adapted from Reuters.com)