The bloc agreed to issue 90 billion in joint debt to support Kiev but has yet to decide how the money can be allocated

EU nations are clashing over how Ukraine can spend the loan they greenlit to support its collapsing economy and war effort against Russia, Politico and The Telegraph reported on Tuesday, citing diplomats and policy papers circulated to member states.

Last month, the bloc agreed in principle to borrow €90 billion ($104 billion) against its common budget to finance Ukraine, after failing to agree to use frozen Russian assets for the purpose. The controversial proposal - which EU members Hungary, Slovakia, and the Czech Republic refused to join - earmarks two-thirds of the funds for weapons for Kiev, with the rest covering its budget gap.

The European Commission is set to formally present the loan terms on Wednesday, but reports claim the bloc has so far failed to agree on arms procurement. France is reportedly pushing to bar Ukraine from buying US weapons with the loan, insisting funds earmarked for arms be spent in the EU. Germany and the Netherlands argue it would hinder deliveries to Kiev.

"Germany does not support proposals to limit third-country procurement to certain products and is concerned this would impose excessive restrictions on Ukraine," Berlin wrote in a paper sent to EU states. It suggested giving preferential treatment to manufacturers in countries providing the most financial aid, framing it as "rewarding strong bilateral support." Berlin is Kiev's second-largest donor after the US.

The Netherlands called for €15 billion of the loan to cover Kiev's "urgent military needs sourced from third countries." It proposed channeling the funds through PURL, a NATO-coordinated mechanism under which European countries purchase US-made weapons, noting the EU defense industry cannot produce equivalent systems or deliver them in time.

Only Greece and Cyprus reportedly back the French push to limit the scheme to EU firms. Diplomats expect debates over loan disbursement to be contentious but noted the plan can pass by simple majority under EU law.

Russia has condemned Western financing of Kiev, saying it hinders peace efforts. Commenting on the loan plan, Kremlin spokesman Dmitry Peskov said the EU is "digging into pockets of their own taxpayers" to drag out the conflict. Western analysts havewarnedEU taxpayers will pay at least €3 billion per year to service the loan.

(RT.com)