Late on Thursday night, EU leaders conceded that their most daring financial proposal for Ukraine would not succeed. After months of discussion, the plan to turn frozen Russian central bank assets into a zero-interest reparations loan collapsed under political and legal pressures. Supporters hailed it as morally compelling and strategically bold, while critics warned it carried serious financial and legal risks. As negotiations reached their final stage, bold ambition gave way to caution, and leaders opted for the familiar certainty of joint borrowing instead.
Rather than risk untested legal and financial territory, the bloc agreed to raise €90 billion through joint EU debt. The €210 billion in frozen Russian assets will remain immobilised until Moscow ends the war and provides compensation to Ukraine. The shift marked a retreat from the European Commission’s original promise and highlighted the fragility of consensus when exposure and liability are so high. Belgian Prime Minister Bart De Wever played a decisive role, repeatedly warning that using Russian assets could expose Europe to massive, unpredictable financial consequences and weaken its leverage over Moscow. Over time, his concerns resonated with other capitals, many of which became increasingly wary of the scale of guarantees the loan would require.
From Ambition to Controversy
The idea first emerged publicly 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 help finance Ukraine’s defence and reconstruction, arguing that Russia should bear the costs of the war it started. The speech emphasized political clarity but left technical details vague, sparking months of debate among member states.
German Chancellor Friedrich Merz soon added momentum by endorsing the plan in a Financial Times opinion article, framing it as both achievable and necessary. Diplomats were caught off guard, with some accusing Germany of pushing the bloc’s agenda unilaterally. The Commission then circulated a short, theoretical outline of the plan, which further alarmed more cautious member states. Belgium reacted strongly, noting it holds around €185 billion of the frozen assets through Euroclear and felt sidelined despite carrying the largest exposure. De Wever publicly warned that spending Europe’s strongest leverage over Moscow would be a mistake and demanded full legal certainty and shared risk. An October summit failed to deliver agreement, and leaders asked the Commission to explore alternative funding methods, even as von der Leyen continued to champion the reparations loan as the preferred path.
Why the Plan Collapsed
In November, von der Leyen presented three options for raising €90 billion: voluntary contributions, joint debt, or the reparations loan. She acknowledged that none of the options came without serious consequences. Her letter sought to address Belgian concerns with stronger guarantees and broader international participation, while also warning of reputational and financial risks for the eurozone.
External events briefly revived the loan’s appeal when US and Russian officials circulated a controversial peace framework that proposed exploiting frozen assets for shared commercial benefit. European leaders immediately rejected the plan and insisted that decisions about European assets remain under EU control. Despite this temporary momentum, De Wever sent a sharply critical letter, calling the reparations loan fundamentally flawed and potentially dangerous to future peace negotiations.
In December, the Commission released detailed legal texts, but the European Central Bank refused to provide liquidity support. Euroclear publicly criticised the proposal as fragile and experimental, raising concerns about investor confidence. Although some northern and eastern states defended the loan, opposition widened when Italy, Bulgaria, and Malta urged safer, more predictable financing alternatives.
At the 18 December summit, leaders faced the reality of unlimited guarantees and massive liabilities tied to Belgian banks. Confronted with that risk, they abandoned the reparations loan and opted for joint debt instead. De Wever later stated that the outcome confirmed his expectations, arguing that no financial solution comes without real costs and that free money was never a realistic option.
