Late on Thursday night, European leaders quietly accepted that their most daring Ukraine funding plan had reached a dead end. For months, they had explored a proposal without modern precedent: transforming frozen Russian central bank assets into a zero-interest reparations loan for Kyiv. Supporters viewed the idea as morally clear and politically powerful, while critics warned of legal uncertainty, financial exposure, and unpredictable consequences. As negotiations dragged into their final hours, confidence faded, and caution took over. Rather than step into uncharted territory, leaders chose a familiar approach, agreeing to raise €90 billion through joint EU borrowing and leaving the €210 billion in immobilised Russian assets untouched.
Belgian Prime Minister Bart De Wever proved central to the outcome. He consistently argued that using Russian assets would expose Europe to serious financial liabilities and weaken its leverage over Moscow. In his view, governments ultimately choose certainty when risks escalate and responsibilities become open-ended. As doubts spread among other capitals, his warnings began to resonate more widely. By the time leaders reached their final discussions, the reparations loan no longer commanded the unity needed to move forward.
How a Bold Proposal Gathered Speed, Then Fractured
The idea first entered the political spotlight on 10 September during Ursula von der Leyen’s State of the EU speech in Strasbourg. She suggested using profits generated by frozen Russian assets to support Ukraine, framing the proposal as a matter of fairness and responsibility. Russia had started the war, she argued, and should bear its financial costs. While the message struck a chord, the lack of technical detail left room for unease and speculation among member states.
Momentum accelerated when German Chancellor Friedrich Merz publicly endorsed the plan in a Financial Times opinion piece. He presented approval as both realistic and necessary, implying that broad support already existed. Many diplomats felt surprised by his confidence, and some accused Germany of trying to shape EU policy without proper consultation. Tensions deepened after the Commission circulated a short, largely theoretical document explaining how the loan might function in practice.
Belgium reacted sharply, noting that it holds roughly €185 billion of the frozen assets through Euroclear. Belgian officials felt sidelined despite carrying the greatest exposure if something went wrong. De Wever warned publicly that spending Europe’s strongest bargaining chip would erase future leverage over the Kremlin. He demanded airtight legal guarantees and genuine burden sharing. An October summit failed to secure agreement, and leaders asked the Commission to explore alternative ways to finance Ukraine, even as von der Leyen continued to present the reparations loan as the most viable option.
Why the Plan Ultimately Unravelled
In November, von der Leyen presented three options for raising €90 billion: voluntary national contributions, joint EU debt, and the reparations loan. She openly acknowledged that none offered a painless solution. Her letter sought to address Belgian concerns with stronger guarantees and broader international participation, while also warning of potential reputational and financial risks for the eurozone. For a brief moment, external events seemed to reinforce the argument, after US and Russian officials circulated a controversial peace framework proposing commercial use of frozen assets, an idea European leaders swiftly rejected.
That momentum quickly evaporated. De Wever sent a sharply worded letter to the Commission, calling the plan fundamentally flawed and warning it could damage prospects for a future peace settlement. In December, the Commission unveiled detailed legal texts, but the European Central Bank declined to provide a liquidity backstop. Euroclear then criticised the proposal as fragile and risky for investor confidence. Although several northern and eastern states defended the idea publicly, opposition widened when Italy, Bulgaria, and Malta urged safer and more predictable financing methods.
At the 18 December summit, leaders confronted the scale of commitments required, including open-ended guarantees and potentially vast liabilities linked to Belgian banks. Faced with those risks, they shelved the reparations loan and turned to joint debt instead. De Wever said the outcome confirmed his long-held view, arguing that every financing model carries a cost and that free money, in reality, does not exist.
