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EU plays down reports of large-scale aid for Ukraine

Source: Reuters - Mon, 3 Feb 2014 18:29 GMT
Author: Reuters
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* EU will not get into bidding war with Russia - Barroso

* EU is not talking about extra money, EU source says

* EU offer to Ukraine to sign trade pact remains on table

By Adrian Croft

BRUSSELS, Feb 3 (Reuters) - The European Union played down reports on Monday that it was working on a large aid package to help Ukraine through its economic crisis, saying it had no intention of getting into a bidding war with Moscow to buy Ukraine's loyalty.

European Commission President Jose Manuel Barroso said the EU was discussing with partners if it could do something to help Ukraine through its current difficulties but that it was wrong to think the EU must pay to entice countries such as Ukraine into a closer relationship.

"We are not going to a bidding competition to say who pays more" for Ukraine's signature on an agreement, Barroso told reporters.

EU foreign policy chief Catherine Ashton was quoted by the Wall Street Journal on Monday as saying that the EU and the United States were working on a plan for significant short-term financial assistance for Ukraine.

But several EU officials, speaking on condition of anonymity, said there was no new plan for Ukraine apart from the promise of financial help that Brussels had held out if it signed a trade and cooperation agreement with the EU.

President Viktor Yanukovich's last-minute decision to turn his back on the EU agreement last November in favour of closer trade ties with Russia has triggered months of increasingly violent demonstrations in Ukraine.

The EU has made clear that its offer to Ukraine to sign the trade agreement and the financial benefits that go along with it remain on the table.

"We are not talking about extra money. She (Ashton) mentioned several options ... but it was always very clear that it is part of one package that covers the short-term and long-term needs (of Ukraine)," one EU source said.

EU aid remains conditional on Ukraine carrying out reforms and reaching agreement with the International Monetary Fund, the source said.

NO NEW MONEY

Another source said the EU's resources over the next few years had been allocated and there was no pot for the EU to draw on to give more money to Ukraine.

A third EU source said the U.S. State Department had been in touch with the EU diplomatic service to say it was unaware of an EU-U.S. package for Ukraine and pointing out that Ukraine is in Europe's backyard.

After Yanukovich turned his back on the EU agreement, he won a $15 billion bailout promise from Russia to help Ukraine's struggling economy. Having lent $3 billion so far, Moscow suspended a further tranche of $2 billion after Ukrainian Prime Minister Mykola Azarov resigned last week.

That could exacerbate the financial difficulties of Ukraine's government, which needs more than $17 billion this year to pay its foreign bills, including for Russian gas.

EU officials said last December they were in discussion with the IMF, the World Bank and other major financial institutions on ways to help Ukraine if it decided to sign the free-trade agreement with the EU.

The EU had promised Ukraine a 610 million euro loan if it reached an agreement with the IMF. Altogether, Ukraine could have been in line to receive at least 19 billion euros in EU loans and grants over the seven years if it had signed the accord, according to internal EU estimates.

That remained the only package on the table, EU sources said, although Barroso said on Monday the EU was discussing with its partners "if we can do something more" in the short term to help Ukraine with its difficulties.

"We don't agree with the idea that for a country to join this agreement (with the EU), we should pay something ... In fact our big offer to Ukraine is the agreement itself. We are offering Ukraine access to the biggest market in the world that is the European Union internal market," Barroso said.

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