The leaders of the European Union have agreed on Friday to borrow money to lend a loan worth €90 billion for two years to finance the Ukrainian defence against the Russians instead of the previously proposed plan involving the frozen Russian money.
They also handed over a mandate to the European Commission to continue working on a so-called loan for reparations based on Russian frozen assets. However, the scheme turned out not to be feasible for now, being hindered mostly by Belgian hesitation, since most of the funds are kept in the country.
“As of today, we adopted a decision on providing a loan of 90 billion euros to Ukraine,” said summit president Antonio Costa at a late-night press conference after long summit talks in Brussels. “As a matter of urgency, we provide a loan covered by our Union budget,” said Costa.
Utilising Russian Resources: Too Complex at This Point
The concept of borrowing from the EU appeared to be implausible, as it was necessary that all countries agree to it, but Hungary’s Russia-friendly Prime Minister Viktor Orban was opposed to it. Finally, Hungary, Slovakia, and the Czech Republic showed readiness to allow the borrowing process to proceed if it didn’t affect them financially.
The EU leaders stated that the Russian assets worth 210 billion euros in the EU would be frozen until the war reparations had been paid by Moscow to Ukraine. Ukraine could use these funds, once Moscow makes that payment, to pay back the loan. “This is a positive signal for Ukraine and a negative signal for Russia, and that was what we wanted,” German Chancellor Friedrich Merz said.
The challenge for securing funds for Kyiv is significant because without EU support, Ukraine will run out of finances in the second quarter of next year and is likely to lose the war with Russia. The EU is concerned because this draws near to the threat posed by Russian aggression to the EU.
This comes after hours of negotiations on technicalities regarding the nature of the historic loan that would be extended based on the frozen Russian assets. This choice proved to be too difficult or politically charged to resolve at this point.
Belgium Worried About Financial Risks
However, the challenge was in giving Belgium, which houses 185 billion euros of the total Russian assets in Europe, sufficient guarantees against possible financial and legal risks in case of possible Russian attacks in exchange for the release of the funds to Ukraine.
“We had so many questions on the Reparations Loan that we had to resort to Plan B. Reason has triumphed,” said Belgian Prime Minister Bart De Wever at a news conference. “The EU has escaped chaos and division and has remained united,” he added.
Given that public finances are already stretched due to high debts, a loan using Russian assets was proposed by the European Commission for Kyiv, or borrowing collectively against the EU budget. In this way, Orban could score a diplomatic triumph using the latter. “Orban got what he wanted: a non-reparation loan. And EU action without participation of Hungary, the Czech Republic and Slovakia,” said one EU diplomat.
Leaders Say They Can’t Afford to Fail Ukraine
Some EU leaders who arrived at the summit said it is important that a solution is found to keep Ukraine financed and fighting over the next two years. There was also a desire among them to prove that European countries’ strength is well established, especially when US President Donald Trump referred to them as “weak” last week. “We simply can’t afford to fail,” EU Foreign Policy Chief Kaja Kallas said.
The President of Ukraine, Volodymyr Zelenskiy, who attended the summit, appealed to the group to agree on using the Russian assets to source the money. This would help Ukraine continue fighting, according to the.
The credit facility of 90 billion euros is equivalent to two-thirds of the funds, which altogether will help Ukraine tide over the financial crisis by 2026 and 2027. If not, Ukraine will experience a severe financial crisis, requiring it to cut back on military spending and social services.
What Belgian feared most was what Russia could do through the courts or by way of reprisal if the continent found a way to use its frozen Russian assets. The nation asked for assurances from the rest of the EU that it would not have to bear the burden alone.
Other nations like Malta, Bulgaria, and the Czech Republic also expressed reservations about this controversial project involving money from Russia. It was not possible to reach a level of agreement to proceed with this approach.
Using EU budget borrowing, however, means that European taxpayers are going to finance this borrowing. If Ukraine defaults, European countries are going to pay for it. This explains why Hungary, Slovakia, and the Czech Republic demanded that they be exempt from any funding liability.
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