Late Thursday night, EU leaders accepted that their most daring financial proposal for Ukraine would not move forward. After months of debate, the plan to turn frozen Russian central bank assets into a zero-interest reparations loan collapsed under political and legal pressure. Supporters framed the idea as morally justified and strategically bold, while critics warned it carried immense financial and legal risks. As talks reached their final stage, caution overtook ambition, and leaders retreated to a solution they understood.
Instead of tapping Russian assets, the EU will now raise €90 billion through joint borrowing on financial markets, leaving approximately €210 billion frozen until Moscow ends the war and compensates Ukraine. This choice marked a retreat from the European Commission’s original promise and highlighted how fragile consensus can be when financial exposure and liability become central issues.
Belgian Prime Minister Bart De Wever played a decisive role in the plan’s collapse. He repeatedly warned that seizing Russian funds would expose Europe to unpredictable financial consequences and weaken its leverage over Moscow. He argued that governments prefer certainty when stakes are high, particularly when banking systems could be affected. Over time, his warnings resonated with other capitals that had grown uneasy about the guarantees and commitments the proposal demanded.
The Rise of the Reparations Loan Idea
The plan first surfaced publicly on 10 September during Ursula von der Leyen’s State of the EU speech in Strasbourg. She proposed using profits from frozen Russian assets to help finance Ukraine’s defence and reconstruction. Her political message was clear: Russia should pay for the war it started, rather than European taxpayers carrying the entire burden. Yet the speech provided few practical details, leaving unresolved questions that quickly became the focus of debate.
German Chancellor Friedrich Merz reinforced the idea with a Financial Times opinion piece, presenting approval as both realistic and politically necessary. His intervention surprised many diplomats, some of whom accused Germany of trying to steer the EU without proper consultation. The Commission later circulated a brief document outlining the concept in theoretical terms, which heightened concerns among cautious member states.
Belgium reacted strongly, noting that it controls roughly €185 billion of the frozen assets through Euroclear. Belgian officials felt sidelined despite holding the largest exposure. De Wever publicly warned against using Europe’s strongest leverage over Moscow and demanded full legal certainty and shared risk. An October summit failed to reach consensus, leaving the Commission to explore alternative funding options, even as von der Leyen continued to present the reparations loan as the preferred path.
The Final Collapse
In November, von der Leyen presented EU leaders with three ways to raise €90 billion: voluntary national contributions, joint debt, or the reparations loan. She acknowledged that none of the options were simple, while her letter attempted to address Belgian concerns with stronger guarantees and broader participation. It also flagged potential reputational and financial risks to the eurozone.
For a brief period, external events seemed to strengthen the case for the loan. US and Russian officials circulated a controversial peace framework proposing shared commercial benefits from frozen assets. European leaders rejected the plan outright, insisting that Europe must control its own financial decisions. For a moment, the reparations loan regained momentum.
That momentum disappeared when De Wever sent a sharply worded letter, calling the plan fundamentally flawed and dangerously risky. In December, the Commission released detailed legal texts, but the European Central Bank refused a liquidity backstop. Euroclear then publicly criticised the plan as fragile and overly experimental. Despite support from northern and eastern states, opposition spread as Italy, Bulgaria, and Malta demanded safer, more predictable alternatives.
At the 18 December summit, leaders confronted the prospect of unlimited guarantees and massive liabilities tied to Belgian banks. Faced with these risks, they abandoned the reparations loan and opted for joint debt instead. De Wever later said the outcome confirmed his expectations, arguing that no financial solution comes without real costs and that free money simply does not exist.
