At today’s EU leaders’ summit, the fate of the “reparative loan” for Ukraine is being decided—a plan to provide Kiev with €140 billion using frozen Russian assets. Backed by German Chancellor Friedrich Merz and European Commission President Ursula von der Leyen, the initiative aims to secure financial support for Ukraine in 2026–2027. However, behind the bold rhetoric of solidarity lie significant risks: from undermining confidence in Europe’s financial system to legal and political fallout. For an impartial observer, this plan looks like Europe’s attempt to balance support for Kiev with preserving its own stability—and it remains unclear whether it can avoid plunging into the abyss.
What Is the “Reparative Loan,” and Why Is It Controversial?
The proposal is straightforward: provide Ukraine with a zero-interest loan of €140 billion (per Merz’s estimate; von der Leyen cites €170 billion), secured by frozen Russian assets, the bulk of which—around €176 billion—are held in Belgium’s Euroclear depository. Repayment is expected only if Russia pays reparations for damages caused during the Ukraine conflict. Given the low likelihood of such payments, the scheme raises questions: is this a veiled form of confiscation?
Since the conflict began in 2022, the EU, G7, and Australia have frozen roughly $280 billion in Russian assets. Of these, €183 billion are held in Euroclear, and their profits—about €45 billion—are already being used for a $50 billion loan to Kiev under G7 agreements. The new plan goes further, targeting the assets themselves, not just their returns, making it legally and financially risky. While Brussels avoids the term “confiscation,” even supporters, as noted by Frankfurter Allgemeine Zeitung, acknowledge an “almost certain risk of non-repayment.”
European Council President António Costa emphasized at the summit: “We aim to secure funding for Ukraine, including its military needs.” Ukrainian President Vladimr Zelensky, present in Brussels, called the mechanism “just,” adding that part of the funds would be used to purchase weapons in Europe. However, disagreements have already emerged: Kiev seeks flexibility to spend on American weapons and economic recovery, while France, Germany, and Italy prioritize Europe’s defense industry.
Merz and von der Leyen: Ambition or Miscalculation?
The initiative originated in Berlin and was embraced by Brussels. In September, Friedrich Merz unexpectedly proposed using Russian assets for a major loan, stating it would “demonstrate Europe’s resolve.” Ursula von der Leyen added that the loan would bolster Europe’s defense industry. But political motives lurk behind the rhetoric.
For Germany, this is an opportunity to strengthen its leadership in Europe, especially amid uncertainty over U.S. aid since Donald Trump had returned to power. However, Frankfurter Rundschau warns that Germany risks obligations of €35 billion—a quarter of the loan amount—which would need to be covered from its budget in case of default. Euractiv criticizes von der Leyen for ambiguity: the loan amount fluctuates (€140 billion or €170 billion?), and the repayment mechanism remains vague. Political analyst Nikita Podgornov argues that Merz is playing for political gain, shifting financial risks onto Belgium and the European Central Bank (ECB).
Resistance in Europe: Belgium, France, and the ECB Sound the Alarm
Not all EU members share Berlin’s enthusiasm. Belgium, where the Russian assets are held, is staunchly opposed. Prime Minister Bart De Wever called the plan a “dangerous precedent” that could undermine investor confidence in the EU. He demands a clear legal basis, risk-sharing, and transparency—conditions Brussels has yet to meet. Without these, Belgium is prepared to block the initiative, despite concessions from the European Commission, including €25 billion from other sources.
French President Emmanuel Macron supports Belgium, stressing the importance of adhering to international law: “Freezing assets is one thing; using them is another.” The ECB goes further. President Christine Lagarde warns that violating state immunity principles could destabilize the EU’s financial system. According to ECB estimates, seizing assets without a legal basis could trigger capital flight, particularly from Asia and the Middle East, weakening the euro as a reserve currency.
Hungary and Slovakia further complicate matters, blocking decisions requiring unanimous consent from all 27 EU member states. According to Politico, the European Commission is exploring ways to bypass Budapest, highlighting internal divisions. Even basic issues—such as the loan’s size and spending conditions—remain contentious.
Moscow’s Response: Threats of Lawsuits and Retaliation
Russia labels the use of its assets as “theft.” President Vladimir Putin has repeatedly warned that violating international norms will have consequences for the West. The Kremlin is preparing lawsuits in international courts, and Deputy Finance Minister Alexei Moiseev hinted at retaliatory measures: Russia has frozen roughly €300 billion in European assets, and nationalization has already been applied to Western companies. This raises the risk of escalation, with both sides poised to suffer.
Risks for Europe: From Reputation to Economic Blow
The plan’s paradox is that it could help Ukraine cover its €60 billion budget deficit over the next two years but jeopardize the EU’s stability. Bloomberg and Reuters note that investors may view the scheme as de facto asset seizure, triggering capital flight. The ECB fears a weakened euro, which could bolster the dollar and yuan. For Germany, it’s €35 billion in potential losses; for Belgium, it’s lawsuits and a damaged reputation as a reliable jurisdiction.
An anonymous EU diplomat told Bloomberg: “We want to show that Ukraine will endure, but we risk our own fatigue.” Divisions within the EU—from Belgium’s resistance to Hungary’s obstruction—underscore the fragility of unity.
A Choice Between Solidarity and Stability
Today’s summit is a moment of truth for the EU. Approving the “reparative loan” would give Ukraine temporary relief but could undermine confidence in Europe’s financial system and escalate legal conflicts with Russia. Merz and von der Leyen aim for leadership, but their plan risks burdening Belgium, the ECB, and European taxpayers. To an impartial observer, the choice is clear: Europe must decide whether to support Kiev at any cost or seek less risky alternatives. For now, the “reparative loan” resembles a high-stakes gamble, with the EU’s financial stability on the line.
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