Late Thursday night, EU leaders quietly conceded that their most ambitious financial proposal for Ukraine could not succeed. After months of discussion, the idea of turning frozen Russian central bank assets into a zero-interest reparations loan collapsed under political and legal pressure. Supporters framed it as morally urgent and strategically clever, while critics warned it carried massive financial risk and untested legal challenges. As negotiations stretched into the final hours, boldness gave way to caution, and governments returned to a solution they understood.
Rather than gamble with uncertain legal and financial consequences, leaders chose the familiar path of joint EU borrowing. The bloc will now raise €90 billion on financial markets while leaving roughly €210 billion in Russian assets frozen. Those funds will remain immobilised until Moscow ends the war and compensates Ukraine for the destruction it caused. The decision marked a clear retreat from the European Commission’s original plan and exposed the fragility of consensus when liability and risk are on the line.
Belgian Prime Minister Bart De Wever played a pivotal role in blocking the scheme. He warned repeatedly that using Russian assets could expose Europe to financial instability and diminish its leverage over Moscow. He stressed that governments naturally prefer certainty when risks are high and potential consequences could touch national banking systems. Over time, his concerns found support among other member states, many of which grew wary of the guarantees required by the loan.
From Idea to Debate
The concept entered public discussion 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 finance Ukraine’s defence and reconstruction. Her message was clear: Russia should pay for the war it started. Yet, she provided few concrete details, leaving many questions unanswered and setting the stage for months of intense political negotiation.
German Chancellor Friedrich Merz quickly amplified the idea, endorsing it in a Financial Times opinion piece. He suggested the plan was achievable and implied broad support already existed. Diplomats were surprised, with some accusing Germany of trying to steer the bloc without consulting key partners. Later, the Commission circulated a short, theoretical document explaining how the reparations loan might work, which only heightened concerns among cautious capitals.
Belgium reacted sharply, pointing out it holds about €185 billion of the frozen assets through Euroclear. Belgian officials felt sidelined despite their exposure, and De Wever publicly warned against spending Europe’s strongest leverage over Moscow. He demanded airtight legal guarantees and collective risk-sharing. An October summit failed to deliver agreement, with leaders asking the Commission to explore alternative funding options, even as von der Leyen continued presenting the reparations loan as the preferred path.
Collapse Under Pressure
By November, von der Leyen offered three options to leaders: voluntary contributions, joint debt, or the reparations loan. She acknowledged that none came without heavy consequences. Her letter tried to answer Belgian concerns by promising stronger guarantees and wider international participation while warning of reputational and financial risks to the eurozone.
External developments briefly bolstered the proposal. US and Russian officials circulated a controversial peace framework suggesting frozen assets could serve mutual commercial purposes. European leaders quickly rejected that idea, insisting decisions over European assets must remain fully under European control. Momentum appeared to return to the reparations loan, but it was short-lived.
De Wever delivered a scathing letter, describing the plan as fundamentally flawed and dangerous. In December, the Commission published detailed legal texts, but the European Central Bank refused to provide liquidity support. Euroclear warned the plan was experimental and could threaten investor confidence. Even though several northern and eastern states defended the loan, opposition grew as Italy, Bulgaria, and Malta demanded safer and more predictable funding methods.
At the 18 December summit, leaders faced the reality of unlimited guarantees and massive potential liabilities tied to Belgian banks. Confronted with these stakes, they shelved the reparations loan and opted for joint debt instead. De Wever said the outcome confirmed his expectations, emphasizing that no financial solution comes without cost and that the idea of free money was always an illusion.
