site.btaUPDATED EU Leaders Reach Agreement on Granting Ukraine EUR 90 Bln Interest-Free Loan

EU leaders reached an agreement in the early hours of Friday to grant Ukraine an interest-free loan of EUR 90 billion, instead of using frozen Russian assets.

“We approved a decision today to provide EUR 90 billion to Ukraine,” European Council President Antonio Costa said early this morning at a press conference after hours-long negotiations among European leaders in Brussels. “As an urgent matter, we will provide a loan guaranteed by the EU budget,” Costa added.

The loan for Ukraine will be raised only by those EU Member States that wish to take part, European Commission President Ursula von der Leyen clarified at a press conference following the final European Council meeting of the year in Brussels. She said the EUR 90 billion loan will be raised on international markets under the EU’s so-called enhanced cooperation procedure, whereby participating states join voluntarily while others may opt in later if and when they wish. “Our clear objective is to achieve a just and lasting peace in Ukraine,” von der Leyen said.

EU leaders also mandated the European Commission to continue work on the so-called reparations loan, backed by funds linked to Russian assets frozen in European banks. For the time being, however, this option has proved unworkable, primarily due to resistance from Belgium, where most of the assets are held. 

The idea of providing EU funding initially appeared unfeasible because it requires unanimity, and Hungarian Prime Minister Viktor Orban opposed granting a large interest-free loan to Ukraine. Hungary, Slovakia and the Czech Republic, however, agreed to give the scheme the green light on the condition that it would have no impact on their financial obligations.

European leaders said Russian assets in the EU, with a total value of around EUR 210 billion, will remain frozen until Moscow pays war reparations to Ukraine. If Moscow were ever to take such a step, Ukraine could use the funds to repay the loan.

Using Russian assets too difficult at this stage

“This is good news for Ukraine and bad news for Russia, and that was our intention,” German Chancellor Friedrich Merz said at a press conference Friday morning.

The stakes in finding funding for Kyiv were high because, without EU financial assistance, Ukraine would have run out of money in the second quarter of next year and would most likely have lost the war against Russia, Reuters notes.

The decision followed hours of discussions among European leaders on the technical details of a possible unprecedented loan backed by frozen Russian assets. Taking such a step, however, has for now proved too complex.

EUR 185 billion of the frozen Russian assets are held at the Belgian depository Euroclear, and it is very difficult to provide Belgium with guarantees against the financial and legal risks of potential Russian retaliatory measures if the seized Russian property were used in Ukraine’s favour.

“There were so many questions about the reparations loan that we had to move to plan B. Reason prevailed,” Belgian Prime Minister Bart De Wever said at a press conference. “The EU avoided chaos and division and remained united,” he added.

Hungary claims victory

Public finances across the EU are already under pressure due to high levels of debt, which is why the European Commission proposed using Russian assets to grant a loan to Kyiv or to raise joint borrowing from the EU budget.

Accepting the second option allowed the Hungarian Prime Minister to claim a victory.

“Orban got what he wanted – no reparations loan. And the EU will act without the participation of Hungary, the Czech Republic and Slovakia,” an EU diplomat told Reuters.

“We cannot afford to fail”

Several EU leaders said it was imperative to find a solution to finance Ukraine and continue its fight over the next two years. They were determined to demonstrate the strength and resolve of European countries after US President Donald Trump last week called them “weak”.

“We simply cannot afford to fail,” EU High Representative for Foreign Affairs and Security Policy Kaja Kallas said.

Ukrainian President Volodymyr Zelensky, who also attended the summit, urged the EU to agree to use Russian assets to secure the funds he said would allow Ukraine to continue fighting.

“The decision now on the table – to fully use Russian assets to defend against Russian aggression – is one of the clearest and most morally justified decisions ever taken,” Zelensky said.