By late Thursday night, EU leaders quietly accepted that their most ambitious Ukraine financing idea was no longer viable. Months of political energy had gone into exploring an unprecedented plan to convert frozen Russian central bank assets into a zero-interest reparations loan. Supporters viewed the proposal as a powerful moral statement, while critics saw a maze of legal uncertainty and financial exposure. As negotiations reached their decisive moment, confidence eroded and caution took over. Rather than push into untested territory, leaders settled on a familiar solution, agreeing to raise €90 billion through joint EU borrowing while leaving the €210 billion in immobilised Russian assets untouched.
Belgian Prime Minister Bart De Wever emerged as the pivotal figure behind the reversal. He repeatedly warned that tapping Russian assets would expose the EU to open-ended liabilities and weaken its leverage over Moscow. He argued that governments ultimately seek predictability when risks escalate beyond clear control. Over time, his arguments resonated with other hesitant capitals. By the end of the summit, the reparations loan promised to Ukraine no longer had the political backing required to move forward.
How a Bold Proposal Gained Momentum, Then Fractured
The concept first entered the spotlight on 10 September during Ursula von der Leyen’s State of the EU speech in Strasbourg. She floated the idea of using profits from frozen Russian assets to help finance Ukraine’s defence and recovery. The political message was clear and forceful: Russia started the war and should bear its costs. Yet the speech offered few practical details, leaving unanswered questions that soon became difficult to ignore.
German Chancellor Friedrich Merz soon amplified the proposal by endorsing it in a Financial Times opinion piece. He framed the plan as both realistic and necessary, creating the impression that broad agreement already existed. Many diplomats felt unsettled by that confidence and accused Germany of pushing the bloc ahead without adequate consultation. Tensions deepened when the Commission circulated a brief and highly theoretical document outlining how the scheme might function.
Belgium reacted swiftly, pointing out that it holds around €185 billion of the frozen Russian assets through Euroclear. Belgian officials felt marginalised despite carrying the greatest financial exposure. De Wever publicly warned against sacrificing Europe’s strongest bargaining chip and demanded airtight legal certainty alongside genuine burden-sharing. An October summit failed to secure consensus, and leaders instead asked the Commission to examine several funding paths, even as von der Leyen continued to frame the reparations loan as the preferred option.
Why the Loan Ultimately Collapsed
In November, von der Leyen presented three ways to raise €90 billion for Ukraine: voluntary national contributions, joint debt, and the reparations loan. She acknowledged that each option came with serious trade-offs. Her letter attempted to meet Belgian demands through stronger guarantees and wider international participation, while also warning about reputational damage and financial instability within the eurozone. Briefly, external developments appeared to strengthen the loan’s appeal after US and Russian officials circulated a controversial peace framework suggesting the commercial use of frozen assets, an idea European leaders swiftly rejected.
Momentum faded again when De Wever sent a sharply worded letter to the Commission, describing the plan as fundamentally flawed and potentially harmful to future peace efforts. In December, the Commission unveiled detailed legal texts, but the European Central Bank declined to provide a liquidity backstop. Euroclear then criticised the proposal as fragile and risky for investor confidence. Although several northern and eastern member states defended the plan publicly, resistance widened when Italy, Bulgaria, and Malta called for safer and more predictable financing methods.
At the 18 December summit, leaders confronted the prospect of unlimited guarantees and massive contingent liabilities tied to Belgian banks. Faced with that reality, they stepped back from the reparations loan and chose joint debt instead. De Wever said the outcome confirmed his long-held view, arguing that no financial solution comes without real costs and that the idea of free money remains an illusion.
