Ukraine really stands at a critical juncture. The negotiations towards peace are ongoing. While we see that Russia is increasing its attacks, they are intensifying. And we see also in parallel the growing needs for financing of Ukraine.
The IMF estimates that Ukraine will need 135 billion EUR for the next two years, that is 2026 and 2027. This is needed to keep the state and the basic services running, so the civilian side. But also to continue enabling the brave resistance on the battlefield of Ukrainians – so the military side. As from the beginning, Ukraine can rely on the fact that Europe will remain the strongest and most steadfast partner. We all know that we can never match the sacrifice of the Ukrainian people, but what we can match is their stamina, their resolve, their staying power, and we can equip them with a means to defend themselves and to lead peace negotiations from a position of strength. And since pressure is the only language, the Kremlin responds to, we can also dial it up.
We have to increase the costs of war for Putin's aggression, and today's proposal gives us the means to do this. So, what is this proposal? Today we are proposing to cover two-thirds of Ukraine's financing needs for the next two years. This is 90 billion EUR. The remainder would be for international partners to cover.
And today we are tabling two solutions to Member States to agree on. The first solution is EU borrowing. That is basically raising capital at the capital markets and using the EU budget as a guarantee for that, and hand this capital as a loan to Ukraine. This solution must be established by unanimity. And the second solution that we are proposing today in the legal text is a so-called Reparations Loan. Here we would use the cash balances from immobilised Russian assets in the European Union. We propose to cover all financial institutions that have accumulated such cash balances, and these institutions would have to move the cash into the instrument of the Reparations Loan. So, in other words, we are taking the cash balances, we are providing them to Ukraine as a loan, and Ukraine has to pay back this loan if and when Russia is paying reparations. This solution can be established by qualified majority voting.
Then there is the question how we would use the money. First, we would use the money for Ukraine budget support, and here we would build on the success of existing instruments. You know them both. that is on one hand either macro financial assistance and or the Ukraine facility. And the second topic where we will be using this money is military support. Here the main goal is to further boost Ukraine's defence industrial capabilities and integrate their capacities into our defence industrial base. And here we would use a so-called cascading principle. In other words, the funds would be used predominantly to produce and purchase from Ukraine and the European Union and so-called EEA/EFTA countries. But if we have urgent needs that cannot be met by Ukraine or the European Union, then we allow purchasing outside.
We had an intense discussion also on the position of Belgium, where Euroclear, the main source, is situated. We have listened very carefully to Belgium's concerns, and we have taken almost all of them into account in our proposal that is today on the table of the Reparations Loan. We have very strong safeguards in place to protect Member States and to reduce the risks as much as possible. For example, to ensure that an illegitimate award outside the Union cannot be enforced inside the Union. And very important, we have created a very strong solidarity mechanism where in the very end the Union can intervene, because we want to make very sure to all our Member States, but specifically also to Belgium, that we will share the burden in a fair way, as it is the European way. Finally, with the Reparations Loan, we also aim for emulation among the friends and international partners of Ukraine.
And to conclude, we want peace, and no one wants more peace than Ukraine. Therefore, today we are sending a very strong signal to the Ukrainian people that we are in for the long haul. We can equip them with the means to defend themselves and, even more important, with the means to lead peace negotiations from a position of strength. And the message to Russia is that the Reparations Loan is increasing the cost of its war of aggression. So it's an invitation to come to the negotiation table to finally find peace.
