Late Thursday night, EU leaders conceded that their most ambitious financial plan for Ukraine could not succeed. After months of debate, the proposal to turn frozen Russian central bank assets into a zero-interest reparations loan faltered under legal, political, and financial scrutiny. Supporters hailed the plan as morally compelling and strategically bold, while critics warned it carried high risks and unprecedented legal exposure. As discussions reached their climax, caution replaced ambition, and governments turned back to familiar financing methods.
Instead of touching Russian assets, EU leaders decided to raise €90 billion through joint borrowing on financial markets, leaving roughly €210 billion frozen until Moscow ends the war and compensates Ukraine. This choice marked a clear retreat from the European Commission’s original promise and highlighted the difficulty of achieving consensus on high-risk, untested proposals. Belgian Prime Minister Bart De Wever played a decisive role in blocking the plan, repeatedly arguing that using Russian-linked funds would expose Europe to unpredictable liabilities and weaken leverage over the Kremlin. His insistence on certainty resonated with hesitant capitals, ultimately dooming the reparations loan.
The Plan Takes Shape Amid Early Support
The idea first 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 fund Ukraine’s defence and reconstruction, arguing that Russia should bear the cost of its aggression. While the political message was clear, the speech offered few concrete details, leaving member states uncertain about the legal and financial implications.
German Chancellor Friedrich Merz quickly added momentum by endorsing the plan in a Financial Times opinion piece, framing it as both achievable and necessary. Diplomats reacted with surprise, some accusing Germany of pushing the bloc toward a decision without broad consultation. The Commission later circulated a short, theoretical document describing the loan’s mechanics, which heightened skepticism among more cautious member states.
Belgium reacted strongly, noting it controls around €185 billion of the frozen assets through Euroclear. Belgian officials felt excluded despite their large financial exposure. De Wever publicly warned that spending Europe’s strongest leverage over Moscow would undermine future bargaining power. He demanded airtight legal guarantees and shared responsibility for risks. An October summit failed to resolve the issue, with leaders requesting the Commission explore alternative options even as von der Leyen continued to frame the reparations loan as the preferred solution.
Why the Proposal Finally Failed
In November, von der Leyen outlined three options for raising €90 billion: voluntary contributions, joint debt, and the reparations loan. She admitted that none were without complications. Her letter attempted to address Belgian concerns by offering stronger guarantees and wider international participation, while acknowledging the potential reputational and financial risks for the eurozone.
Briefly, external events seemed to strengthen the loan’s case. US and Russian officials circulated a controversial peace framework suggesting frozen assets could serve mutual commercial purposes. European leaders rejected the plan outright, insisting that decisions regarding European-controlled assets remain fully in EU hands.
Momentum waned after De Wever sent a sharply critical letter, describing the scheme as fundamentally flawed and risky for peace negotiations. In December, the Commission released detailed legal texts, but the European Central Bank refused to provide liquidity support. Euroclear criticized the plan publicly, calling it fragile and experimental, and raising concerns about investor confidence. Opposition grew as Italy, Bulgaria, and Malta pushed for safer and more predictable funding solutions.
At the 18 December summit, leaders confronted the possibility of unlimited guarantees and enormous liabilities tied to Belgian banks. Faced with those risks, they abandoned the reparations loan and opted for joint debt instead. De Wever later said the outcome confirmed his expectations, noting that no financial solution comes without real costs and that free money simply does not exist.
