Published by Global Banking and Finance Review
Posted on December 19, 2025
By Andrew Gray
BRUSSELS, Dec 19 (Reuters) - European Union leaders claimed victory after agreeing a 90 billion euro ($105 billion) loan to keep Ukraine financially afloat and in the fight against Russia’s invasion for the next two years – but it came at the EU’s own expense rather than Moscow’s frozen assets.
The deal has the virtue of being straightforward. The EU will borrow money on the financial markets, secured against the EU budget, and cash should flow quickly to Kyiv. It sends a message to Russian President Vladimir Putin that the bloc can step up as a geopolitical actor.
But it also dented the reputation of powerful EU figures such as German Chancellor Friedrich Merz and European Commission President Ursula von der Leyen, who had championed a more audacious and complex “reparations loan” funded by Russian assets frozen in the EU.
"A lot better than no package but at the end of the day the EU stared down Russia and blinked. Fear triumphed over reason," Michael Carpenter, former senior director for Europe at the U.S. National Security Council, declared on X.
INTENSE PRESSURE TO REACH A DEAL
The leaders, meeting at a summit in Brussels that began on Thursday and stretched into the early hours of Friday, had been under intense pressure to come up with a deal to bankroll Kyiv.
President Donald Trump has cut U.S.-funded military aid to Ukraine and recently dismissed European leaders as weak. President Volodymyr Zelenskiy warned the leaders in person that if they did not deliver, Ukraine would run short of funds within months, hampering its war effort.
But the reparations loan proposal faced strong resistance from Belgium, home to the bulk of the 210 billion euros of Russian assets in the EU. By failing to win over Belgium and others, the project's champions handed a central role to Hungary’s Moscow-friendly, Trump-supporting Prime Minister Viktor Orban.
Orban stated weeks ago he would not back an EU-funded loan to Ukraine, which would require unanimity among the bloc’s 27 members. But he was also strongly against using Russian frozen assets.
At the summit, he opened the way for a deal by declaring he would support an EU-backed loan after all, as long as it did not financially impact his country.
The agreement came at the end of what some diplomats saw as a crunch week for the EU's geopolitical aspirations, as it also included attempts to finalise a trade deal with South America's Mercosur bloc.
There too, the EU's results were mixed. Von der Leyen had to drop plans to travel to Brazil for a signing ceremony on Saturday after Italian Prime Minister Giorgia Meloni said she needed more time before signing off. But EU leaders expressed confidence the deal would be sealed within weeks.
ORBAN DECLARES REPARATIONS LOAN DEAD
Although some leaders insisted they would keep working on the reparations loan, Orban told reporters after the summit that the idea had “died”. He also stressed that Hungary, Slovakia and the Czech Republic had secured an opt-out from the financial costs of the new plan.
Other EU leaders said the frozen Russian assets could later be used to repay the loan. But any attempt to do so would likely revive many of the same contentious legal and political debates that surrounded the reparations loan idea.
Still, an EU decision in the run-up to the summit to freeze the assets indefinitely means they will not return to Russia without the bloc’s agreement, giving Europe valuable leverage in ongoing U.S.-led peace talks.
A draft U.S. 28-point peace plan last month proposed $100 billion of the frozen funds be invested in a U.S.-led effort to rebuild Ukraine, with the U.S. receiving 50% of the profits.
In the early hours of Friday morning, Merz, von der Leyen and other leaders rushed to praise the EU borrowing plan - an outcome they had previously made clear was not their preferred option.
"I am delighted we were able to take this decision unanimously today, after intense negotiations. This way we can resort to tested and proven European instruments and support Ukraine immediately, without further delays,” Merz said.
Not everyone was impressed. "We have gone from saving Ukraine, to saving face, at least that of those who have been pushing for the use of the frozen assets," said an EU diplomat.
($1 = 0.8532 euros)
(Additional reporting by Lili Bayer, Andreas Rinke, Bart H. Meijer, Philip Blenkinsop and Jan Strupczewski; Writing by Andrew Gray;Editing by Tomasz Janowski)
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