Late Thursday night, EU leaders conceded that their most ambitious financial proposal for Ukraine could not move forward. They had spent months debating a plan to turn frozen Russian central bank assets into a zero-interest reparations loan. Supporters hailed the proposal as morally compelling and strategically innovative, while critics warned it carried extreme financial and legal risks. As negotiations stretched into the final hours, caution replaced ambition, and leaders returned to a solution they could manage with more certainty.
Rather than risk legal and financial fallout, governments agreed to raise €90 billion through joint EU borrowing. The €210 billion in frozen Russian assets will remain untouched until Russia ends its war and compensates Ukraine. The move marked a clear retreat from the European Commission’s original promise and demonstrated how fragile consensus becomes when enormous financial exposure is involved.
Belgian Prime Minister Bart De Wever emerged as the plan’s most vocal opponent. He repeatedly argued that using Russian-linked funds would expose the EU to unpredictable risks and potentially weaken leverage over Moscow. He emphasized that governments naturally prefer certainty when facing high stakes, particularly when banking systems might be affected. Over time, his position gained traction as other member states hesitated over the scale of guarantees required, making the reparations loan politically unviable.
From Proposal to Controversy
The idea first appeared publicly on 10 September during Ursula von der Leyen’s State of the EU speech in Strasbourg. She suggested using profits from frozen Russian assets to finance Ukraine’s defence and reconstruction. The proposal carried strong symbolic weight, underscoring that Russia should pay for the war it had started, but it offered few technical details. That lack of clarity would become a central challenge in the months that followed.
German Chancellor Friedrich Merz soon pushed the plan into the spotlight. In a Financial Times opinion piece, he strongly endorsed the loan and implied broad support already existed. Diplomats reacted with surprise, and some accused Germany of trying to steer the bloc without proper consultation. The European Commission then circulated a short, theoretical document explaining the plan, which intensified unease in cautious capitals.
Belgium reacted sharply, highlighting that it controls roughly €185 billion of the frozen assets via Euroclear. Officials felt sidelined despite holding the largest exposure. De Wever publicly warned that spending Europe’s strongest leverage over Moscow would be reckless. He demanded airtight legal certainty and shared risk arrangements. An October summit ended without agreement, and leaders asked the Commission to examine alternative funding approaches, even as von der Leyen continued to advocate for the reparations loan as the preferred path.
The Final Collapse
In November, von der Leyen presented three options to raise €90 billion: voluntary contributions from member states, joint debt, or the reparations loan. She acknowledged that none of the options offered an easy path. Her letter addressed Belgian concerns by promising stronger guarantees and broader international participation, while also highlighting potential risks to eurozone stability and reputation.
For a brief moment, external events seemed to bolster the plan. US and Russian officials circulated a controversial peace proposal suggesting frozen assets could be used for joint commercial benefit. European leaders immediately rejected this idea and stressed that any decisions regarding European assets must remain fully under European control. Momentum for the loan briefly returned.
That momentum ended when De Wever sent a sharply critical letter to the Commission, calling the proposal fundamentally flawed and dangerous. In early December, the Commission released full legal texts, but the European Central Bank refused to provide liquidity support. Euroclear criticized the plan as experimental and fragile, raising fears about potential investor reactions. Although northern and eastern states defended the proposal, opposition grew when Italy, Bulgaria, and Malta called for safer, more predictable funding methods.
At the decisive 18 December summit, leaders faced the reality of unlimited guarantees and massive financial exposure to Belgian banks. Confronted with the risks, they shelved the reparations loan and chose joint debt instead. De Wever later reflected that the outcome had been predictable, emphasizing that no financial solution comes without costs and that free money simply does not exist.
