Late on Thursday night, EU leaders quietly acknowledged that their most ambitious funding plan for Ukraine had failed. After months of intense debate, the proposal to turn frozen Russian central bank assets into a zero-interest reparations loan could not overcome legal, financial, and political obstacles. Supporters framed it as both morally right and strategically groundbreaking, while critics warned it carried enormous financial risk and untested legal consequences. As discussions stretched into the final hours, caution overtook ambition, and leaders opted for a safer, more familiar path.
Rather than risk uncharted financial exposure, the EU decided to raise €90 billion through joint borrowing on financial markets. The €210 billion in Russian assets will remain frozen until Moscow ends the war and compensates Ukraine for its losses. This shift represented a clear retreat from the European Commission’s original promise to Kyiv and highlighted how fragile consensus becomes when large-scale liability and risk enter the equation. Belgian Prime Minister Bart De Wever emerged as a decisive figure, repeatedly warning that tapping Russian funds would expose Europe to unpredictable financial fallout. He argued that governments prefer certainty when stakes escalate and that his caution reflected the position of many hesitant capitals.
How the Loan Idea Took Shape and Gathered Momentum
The concept became public on 10 September during Ursula von der Leyen’s State of the EU address in Strasbourg. She proposed using profits from frozen Russian assets to support Ukraine’s military and reconstruction efforts. Her message carried political clarity, emphasizing that Russia should pay for the destruction it caused, but she provided few technical details, leaving crucial questions unresolved. German Chancellor Friedrich Merz quickly amplified the idea in a Financial Times opinion piece, framing it as both achievable and politically necessary, which surprised many diplomats. Some viewed Germany as pushing the bloc toward a decision without adequate consultation, while the Commission circulated a brief, theoretical document outlining how the scheme might operate.
Belgium reacted strongly, noting it holds roughly €185 billion of the frozen Russian assets through Euroclear and felt sidelined despite its large exposure. De Wever publicly warned that using the assets would destroy Europe’s strongest leverage over Moscow and demanded airtight legal certainty and shared financial responsibility. An October summit ended without agreement, with leaders instead instructing the Commission to explore multiple funding options, even as von der Leyen continued to present the reparations loan as the preferred solution.
Why the Proposal Ultimately Collapsed
In November, von der Leyen presented three possible paths to raise €90 billion: voluntary national contributions, joint debt, or the reparations loan. She acknowledged that none of the options were without consequences, and her letter attempted to respond to Belgium’s concerns by promising stronger guarantees and broad international participation while also highlighting potential risks to eurozone financial stability and reputation. External events briefly bolstered the plan when US and Russian officials circulated a controversial peace framework suggesting frozen assets could be used commercially, but European leaders immediately rejected that approach and emphasized full European control.
Momentum faltered again after De Wever sent a scathing letter, describing the reparations loan as fundamentally flawed and dangerous. In December, the Commission released detailed legal texts, but the European Central Bank refused to provide a liquidity backstop, and Euroclear publicly criticised the plan as fragile and overly experimental. While several northern and eastern member states defended the proposal, opposition grew as Italy, Bulgaria, and Malta called for safer, more predictable financing methods.
At the 18 December summit, leaders confronted the reality of unlimited guarantees and potential liabilities tied to Belgian banks. Faced with those risks, they abandoned the reparations loan and chose joint EU debt instead. De Wever later said the outcome confirmed what he had expected, arguing that no financial solution comes without real costs and that free money has never existed.
