In the early hours of Friday 19 December, the heads of state or government of the European Union countries reached a unanimous agreement to grant Ukraine a loan of up to €90 billion from the EU budget to address its financial needs for 2026 and 2027.
Resources from the EU budget will be mobilised through enhanced cooperation (Article 20 TEU) so that Hungary, the Czech Republic and Slovakia do not suffer any financial impact.
“Ukraine will only start repaying this loan once Russia pays [war] reparations. The Union reserves the right to use immobilised Russian assets to repay this loan. At the same time, we have given the Commission a mandate to continue working on a reparations mechanism based on these immobilised Russian assets”, declared the President of the European Council, António Costa. He added that the EU had decided to extend the sanctions against Russia.
For French President Emmanuel Macron, the solution chosen is “the most realistic and workable”. He stressed the need to introduce a “robust European preference” to guarantee economic spin-offs for Member States’ defence industries.
However, one source questioned the signal sent by the decision. By finally agreeing to the EU’s use of the Multiannual Financial Framework, while not becoming financially involved, the three Member States closest to Moscow are preventing the Bank of Russia’s assets from being used to support Ukraine’s reconstruction and war effort.
The Hungarian Prime Minister, Viktor Orbán, who had announced the outcome of the summit 24 hours in advance, was delighted to have obtained what he wanted. “But those behind the loan will take responsibility and bear the financial consequences. We withdrew”, he declared. And he described the use of immobilised Russian assets as a “bad idea”.
Germany and the Baltic and Nordic countries were advocating the establishment of a ‘Reparations Loan’ that would tap all the Bank of Russia’s assets tied up in the EU, including €185 billion held in the Belgium-based central securities depository Euroclear(see EUROPE 13775/1).
Danish Prime Minister Mette Frederiksen stressed the urgency of finding a financing solution for Ukraine, even though she would have preferred the ‘Reparations Loan’ option. In her view, the solution chosen is “almost a combination of the two models”.
Many heads of state or government who spoke after the summit stressed the importance of the EU Council’s decision, taken by a qualified majority of Member States using an urgency procedure, to prohibit the transfer of immobilised Russian public assets outside the EU.
“The most important decision on this subject was taken a few days ago, when we froze the assets, guaranteeing that they would not be returned”, said the Italian Prime Minister, Giorgia Meloni. Italy is concerned that the ‘Reparations Loan’ will put a strain on its public finances.
By Thursday morning, the leaders had instructed their teams to continue working hard to finalise the details of the ‘Reparations Loan’. According to several diplomats, throughout the day, this option remained the only one on the table, with the agreement of Belgium, by far the most exposed country.
After 8pm, just before the first working session, a new set of draft conclusions was submitted to the leaders.
The draft conclusions, a copy of which Agence Europe obtained, listed the conditions inherent in the ‘Reparations Loan’, including the following: (1) non-confiscation of Russian public assets; (2) participation “without exception” in the financing package of private financial institutions holding Russian assets; (3) abolition of the bilateral investment treaties of 18 Member States with Russia; (4) creation of a liquidity mechanism based on “legally binding, unconditional, irrevocable, on-demand” guarantees provided by participating countries to ensure that the EU is always in a position to repay the funds; (5) creation of a dedicated debt instrument; (6) full risk-sharing, potentially uncapped, as requested by Belgium, to cover the costs inherent in Moscow’s legal dispute and Russian retaliatory measures; (7) maintaining public guarantees after the entry into force of the post-2027 EU budget; (8) burden-sharing and coordination of efforts with the G7 and like-minded partners through similar arrangements; (9) Ukraine’s continuing to uphold the Rule of law including the fight against corruption.
To see the draft conclusions: https://aeur.eu/f/k3k
After four hours of discussions, the proposal presented prompted questions from several Member States, such as France, which took a dim view of Belgium’s insistence on unlimited solidarity.
The Member States were not in a position to respond to such a request, noted a diplomat.
European leaders realised that the ‘Reparations Loan’ option was not ripe, even though a solution was urgently needed. The option of a loan secured against the EU budget, which is much easier and quicker to put in place, resurfaced.
While many diplomats had been repeating over and over for several days that unanimity among the Member States was impossible to achieve in order to mobilise the Multiannual Financial Framework, at 2am this morning unanimity seemed less unattainable, with the possibility of an opt-out by Budapest, Prague and Bratislava.
The loan against the EU budget is “a stable, legally robust and financially credible European solution”, according to Belgian Prime Minister Bart De Wever. In his view, given the “many financial and legal risks” associated with the Reparations Loan, “it is not easy to draft a text that covers the entire operation”.
To see the conclusions of the 25 EU Member States: https://aeur.eu/f/k3m and the conclusions of the European Council: https://aeur.eu/f/K3L
Russia must pay, says Volodymyr Zelensky. Present in Brussels earlier in the day, Ukrainian President Volodymyr Zelensky had mentioned a public deficit for his country of “45 to 50 billion euros”. If the EU’s macro-financial assistance continues, we will be “more confident at the negotiating table”, he said. In the event of peace, European support will be used mainly to rebuild Ukraine, but if the war is still raging, it will be used for “drone production”.
According to Mr Zelensky, the ‘Reparations Loan was “the best solution” for financing “so that everyone understands that Russia must pay” for the destruction caused in Ukraine. After bilateral talks with Mr De Wever, he said he understood the reticence of certain heads of state or government, even if some leaders oppose Ukraine, whatever it does.
To see President Zelensky’s speech: https://aeur.eu/f/k2w (Original version in French by Mathieu Bion with the editorial staff)