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Markets quietly welcome EU shift to joint borrowing for Ukraine loan
Published by Global Banking and Finance Review
Posted on December 19, 2025
4 min readLast updated: January 20, 2026
Global Banking and Finance Review
Company
Published by Global Banking and Finance Review
Posted on December 19, 2025
4 min readLast updated: January 20, 2026
The EU will fund Ukraine with joint borrowing, avoiding legal issues with Russian assets, and strengthening its role as a permanent borrower.
By Yoruk Bahceli
LONDON, Dec 19 (Reuters) - Investors welcomed the European Union's decision to fund lending to Ukraine through borrowing on Friday, saying it cemented the use of joint debt as a financing solution while avoiding a legally contentious plan to use Russia's frozen assets.
EU leaders agreed on Friday to borrow cash to lend 90 billion euros ($105 billion) to Ukraine to fund its defence against Russia for the next two years, leaving out Hungary, Slovakia and the Czech Republic.
In doing so, they ditched an unprecedented proposal to use Russian assets, mostly frozen at the Euroclear depository in Belgium.
That plan, opposed by Belgium, had unnerved many in finance who were concerned about the impact on the international standing of the EU and the euro. ECB President Christine Lagarde worried a legally contentious move would have discouraged investors from holding euro assets.
"The chosen solution is the better way in terms of burden sharing," said Carsten Brzeski, head of global macro at ING.
The EU will leave Russia's funds frozen until Moscow pays war reparations to Ukraine.
Speaking before the agreement was reached, a senior executive at a large European bank had told Reuters that a "nice middle solution" would be treating the Russian assets "like the family silver", in which they were left where they were.
BOOSTING PERMANENT BORROWER PERCEPTIONS
The euro was little changed on Friday.
A longer-term benefit from Friday's agreement is that the new borrowing will add to the perception that the EU - which began issuing debt jointly on a large scale during the COVID-19 pandemic - is becoming more of a permanent borrower, analysts said, a development investors generally support.
"The nice thing about the current solution is that it establishes this idea that, well, we’re not allowed to call it a eurobond, but we're getting very close," ING's Brzeski said.
The EU already has just over 700 billion euros outstanding in joint debt following its pandemic borrowing.
While new borrowing for the recovery fund is coming to an end, it decided earlier in 2025 to borrow 150 billion euros in coming years to finance defence loans for member states. Further joint issuance on top of that to back Ukraine shows policymakers are ready to keep joint borrowing in their toolbox.
"I think it's very important, from a signalling perspective, that they continue to move in that direction," said Chris Jeffery, head of macro strategy at Britain's largest asset manager Legal & General, speaking before Friday's decision.
This would reassure markets that the bloc is willing to borrow jointly in the event of future shocks, he added.
In the near term, however, the plan means markets must absorb more borrowing at a time when they already face record funding needs as Germany increases spending.
Euro zone bond yields rose on Friday.
"I don't know if it's the best solution from the markets perspective, to pile some more supply onto markets when they already have concerns about debt sustainability," said Royal London Asset Management's head of rates and cash Craig Inches.
CONCERNS ABOUT THE IMPACT ON THE EURO
Using the Russian cash would have marked the first time that non-belligerent countries seize the assets of a belligerent country in an ongoing war to help a third nation, Sweden's Riksbank noted in a 2024 paper.
Fitch Ratings had placed Euroclear's rating on "watch negative" on Tuesday, raising the risk of a downgrade, citing legal risks.
The risk was that central banks with cash in Europe could worry their assets may one day face the same fate as Russia's, potentially denting policymakers' ambitions to boost the status of the euro as a reserve currency.
But many investors and analysts said that risks were limited, because it was clear the EU would have been seizing the cash in extraordinary circumstances and after a lengthy process.
(Reporting by Yoruk Bahceli, additional reporting by Tommy Reggiori Wilkes and Lawrence White, editing by Sharon Singleton)
Joint borrowing refers to a financial arrangement where multiple entities, such as countries or organizations, collectively borrow funds to achieve a common goal, often to share the financial burden and risks associated with the debt.
Frozen assets are funds or properties that have been restricted from use or transfer, typically due to legal actions or sanctions, preventing the owner from accessing or utilizing them.
The euro is the official currency used by 19 of the 27 European Union member countries, known as the Eurozone, and is one of the most traded currencies in the world.
War reparations are payments made by a defeated country to compensate for damages caused during a conflict, often aimed at rebuilding and restoring affected nations.
Debt sustainability refers to a country's ability to manage its debt without requiring debt relief or accumulating further debt, ensuring that it can meet its financial obligations over time.
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