Late Thursday night, EU leaders conceded that their most ambitious plan to fund Ukraine could not succeed. After months of negotiation, the proposal to transform frozen Russian central bank assets into a zero-interest reparations loan collapsed under political, legal, and financial pressure. Advocates had hailed it as morally clear and historically unprecedented, while critics warned it carried massive liabilities and untested risks. As discussions reached their final stage, caution replaced ambition, and leaders chose a path they understood rather than a leap into the unknown.
Instead of moving forward with the reparations loan, the EU will now raise €90 billion through joint borrowing on markets. The €210 billion in frozen Russian assets will remain immobilised until Moscow ends its war and compensates Ukraine. This decision marked a clear retreat from the European Commission’s original promise, showing how fragile political consensus can be when exposure and legal uncertainty collide.
Belgian Prime Minister Bart De Wever played a decisive role in blocking the plan. He repeatedly argued that seizing Russian-linked funds would expose Europe to unpredictable financial consequences and reduce leverage over Moscow. He emphasized that governments naturally prefer certainty when stakes rise and banking systems could be affected. Over time, other member states shared his concern, leaving the plan without the backing it needed to move forward.
The Proposal Gains Early Momentum
The idea first surfaced 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 fund Ukraine’s defence and reconstruction. Her message was politically compelling: Russia should pay for the destruction it caused. However, she offered few concrete technical details, leaving key questions unresolved and sparking months of debate.
German Chancellor Friedrich Merz quickly pushed the idea further, endorsing it in a Financial Times opinion piece. He framed approval as achievable and politically necessary, suggesting broad support existed. Diplomats reacted with surprise, and some accused Germany of setting the agenda without consulting smaller states. When the Commission circulated a short, theoretical outline of the proposal, Belgium reacted strongly.
Belgium holds approximately €185 billion of frozen Russian assets through Euroclear, giving it the largest financial exposure. Belgian officials felt excluded from early discussions and feared the plan would weaken Europe’s leverage over Moscow. De Wever publicly demanded airtight legal guarantees and shared risk across all member states. An October summit ended without agreement, and leaders asked the Commission to explore multiple funding options, even as von der Leyen continued to present the reparations loan as the preferred path.
Why the Loan Collapsed
In November, von der Leyen outlined three ways to raise €90 billion: voluntary contributions, joint debt, and the reparations loan. She acknowledged that each option carried serious drawbacks. Her letter attempted to address Belgian concerns by offering stronger guarantees and broader participation, while warning of potential reputational and financial risks to the eurozone.
External events briefly strengthened the plan’s appeal when US and Russian officials circulated a controversial peace framework proposing shared commercial use of frozen assets. European leaders immediately rejected the idea, insisting that Europe must retain full control over its assets. For a brief moment, momentum appeared to return to the reparations loan.
That momentum disappeared when De Wever sent a sharply critical letter, calling the plan fundamentally flawed and dangerous. In December, the Commission released full legal texts, but the European Central Bank refused to provide a liquidity backstop. Euroclear publicly criticised the plan as fragile and experimental, raising investor concerns. Opposition grew as Italy, Bulgaria, and Malta demanded safer, more predictable financing methods.
At the 18 December summit, leaders faced the prospect of unlimited guarantees and massive potential liabilities for Belgian banks. They shelved 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 cost and that the idea of free money had always been unrealistic.
