Late on Thursday night, EU leaders finally acknowledged that their most daring financial plan for Ukraine had collapsed. They had spent months debating an unprecedented proposal to use frozen Russian central bank assets to issue a zero-interest reparations loan. Supporters hailed the idea as morally compelling and strategically bold, while critics warned it carried legal uncertainties, financial risks, and political liabilities. As the process reached its climax, hesitation replaced ambition, and leaders retreated from untested financial territory.
Instead of moving forward with the risky plan, governments chose a familiar and safer solution. The European Union will now raise €90 billion through joint borrowing on the markets, leaving roughly €210 billion in frozen Russian assets untouched. Those funds will remain immobilised until Russia ends its war and compensates Ukraine for the damages. This shift marked a clear departure from the European Commission’s original promise and illustrated how fragile consensus becomes when exposure and accountability loom large.
Belgian Prime Minister Bart De Wever played a decisive role in derailing the plan. He repeatedly argued that accessing Russian-linked funds would expose Europe to serious financial consequences and weaken leverage over Moscow. He emphasized that governments naturally seek certainty when risks grow uncontrollable, especially when banking systems could be affected. Over time, his caution resonated with other hesitant capitals, tipping the balance away from the reparations loan.
From Idea to Proposal: The Ambitious Start
The concept first entered public debate on 10 September during Ursula von der Leyen’s State of the EU address in Strasbourg. She suggested using profits from frozen Russian assets to fund Ukraine’s defence and recovery. Her speech underscored a simple political message: Russia should bear the financial cost of its aggression, not European taxpayers. However, she offered few technical details, leaving questions unresolved and opening the door for months of debate and negotiation.
German Chancellor Friedrich Merz then amplified the proposal with a Financial Times opinion piece, presenting approval as both realistic and necessary. Diplomats across the bloc were surprised by his confidence, and some accused Germany of setting the EU agenda unilaterally. The Commission followed with a short document outlining the loan in theoretical terms, which only fueled concerns among cautious member states.
Belgium reacted sharply, noting that it holds around €185 billion of the frozen assets through Euroclear and felt excluded from early consultations. De Wever warned publicly that spending Europe’s strongest leverage over Moscow would diminish future bargaining power, demanding ironclad legal certainty and shared financial responsibility. An October summit failed to deliver agreement, and leaders asked the Commission to explore multiple funding options, even as von der Leyen continued framing the reparations loan as the preferred solution.
The Collapse: From Momentum to Retreat
By November, von der Leyen presented three options to leaders: voluntary national contributions, joint debt, or the reparations loan. She acknowledged that none offered an easy path and tried to address Belgian concerns with stronger guarantees and broader international participation, while also warning of reputational and financial risks to the eurozone.
External events briefly revived political momentum. US and Russian officials circulated a controversial peace framework suggesting shared commercial use of frozen assets. European leaders rejected this outright, emphasizing that decisions over European-controlled funds required full EU oversight. For a moment, the reparations loan regained traction.
Momentum quickly evaporated when De Wever sent a sharply critical letter, calling the plan fundamentally flawed and dangerously hasty. In December, the Commission released detailed legal texts, but the European Central Bank refused to provide a liquidity backstop. Euroclear publicly described the proposal as fragile and experimental, raising concerns about investor confidence. Although several northern and eastern states defended the loan, Italy, Bulgaria, and Malta joined Belgium in pushing for safer, more predictable alternatives.
At the 18 December summit, leaders confronted the prospect of unlimited guarantees and massive liabilities tied to Belgian banks. The reparations loan was shelved, and the EU turned to joint debt instead. De Wever later confirmed that the outcome matched his expectations, emphasizing that no financial solution comes without significant costs and that free money does not exist in reality.
