Late Thursday night, EU leaders admitted defeat on a plan many had once hailed as groundbreaking. The proposal aimed to convert frozen Russian central bank assets into a zero-interest reparations loan for Ukraine, an idea without precedent in modern European history. Supporters framed it as morally clear and politically bold, while critics warned it carried immense financial and legal risks. By the final negotiations, enthusiasm had given way to caution, and leaders turned to a safer, more familiar solution.
Rather than risk legal and financial uncertainty, the EU decided to raise €90 billion through joint borrowing on financial markets. The €210 billion in frozen Russian assets will remain immobilised until Moscow ends the war and pays compensation to Ukraine. This choice abandoned the complex funding structure the European Commission had promised Kyiv, demonstrating the limits of ambition when liability and exposure threaten consensus.
Belgian Prime Minister Bart De Wever played a decisive role in halting the plan. He repeatedly argued that using Russian assets exposed Europe to enormous risk and would weaken the EU’s leverage over Moscow. He insisted that governments naturally seek certainty when facing unpredictable consequences, particularly when financial stability could be endangered. Over time, his caution resonated with other hesitant capitals, ultimately dooming the reparations loan.
From Bold Proposal to Controversial Debate
The idea first entered the public eye on 10 September, when Ursula von der Leyen presented it in her State of the EU speech in Strasbourg. She proposed using profits from frozen Russian assets to finance Ukraine’s defence and recovery, arguing that Russia should bear the cost of its aggression rather than European taxpayers. While her speech carried strong political symbolism, it lacked technical details, which became a source of ongoing debate and concern among member states.
German Chancellor Friedrich Merz soon amplified the proposal in a Financial Times opinion piece, portraying it as both feasible and necessary. Diplomats were caught off guard by the move, with some accusing Germany of pushing the bloc toward a decision without proper consultation. The Commission followed with a short theoretical document outlining the plan, which further heightened unease among cautious governments.
Belgium reacted strongly, emphasizing that it holds roughly €185 billion of frozen Russian assets through Euroclear. Officials argued that their early exclusion from discussions undermined trust, and De Wever publicly warned that using the assets would destroy Europe’s strongest leverage over Moscow. He demanded full legal certainty and shared responsibility, and an October summit ultimately failed to secure agreement, with leaders instead requesting alternative options while von der Leyen continued to frame the reparations loan as the preferred path.
Collapse and Retreat
In November, von der Leyen presented three options for raising €90 billion: voluntary contributions, joint debt, or the reparations loan. She openly acknowledged that none of the choices came without risk. Her letter sought to address Belgian concerns, promising stronger guarantees and broad international participation, while also cautioning that the scheme carried reputational and financial risks for the eurozone.
External developments briefly boosted the proposal. US and Russian officials circulated a controversial peace framework proposing to exploit frozen assets for shared commercial benefit, which European leaders quickly rejected. For a short time, the reparations loan seemed to regain momentum.
That momentum evaporated when De Wever sent a sharply worded critique, calling the plan fundamentally flawed and dangerous. In December, the Commission released detailed legal texts, but the European Central Bank declined to provide liquidity support, and Euroclear warned the plan appeared fragile and highly experimental. While some northern and eastern states defended the loan, opposition grew when Italy, Bulgaria, and Malta called for safer, more predictable financing methods.
At the 18 December summit, leaders confronted the possibility of unlimited guarantees and liabilities tied to Belgian banks. Faced with that reality, they abandoned the reparations loan and opted for joint EU borrowing instead. De Wever later reflected that the outcome confirmed his expectations: no financial solution comes without real costs, and the idea of free money was always an illusion.
