The felling of the “reparations loan” proposal, which would have recycled Russian assets that are mostly frozen in a clearing bank in Belgium, deprives Ukraine of guaranteed funding for the next two years.
It was Belgium’s legal anxieties over the loan, along with French President Emmanuel Macron’s and Italian Prime Minister Giorgia Meloni’s reluctance to join German Chancellor Friedrich Merz in championing the proposal, that doomed it. And all that, despite weeks of wrangling and overblown expectations by the plan’s advocates, including European Commission President Ursula von der Leyen.
Fortunately, the EU will still provide a sizable funding package for Ukraine, after agreeing to jointly borrow €90 billion from capital markets secured against the EU’s budget, and lend it on a no-interest basis.
But while this will prevent the country from running out of money early next year, the package is meant to be spread out over two years, and that won’t be sufficient to keep Ukraine in the fight. According to projections by the International Monetary Fund, due to the reduction in U.S. financial support, Ukraine’s budgetary shortfall over the next two years will be closer to $160 billion.
Simply put, Ukraine will need much more from Europe — and that’s going to be increasingly difficult for the bloc to come up with.
Still, many European leaders were rather optimistic once the funding deal was struck last week. Finnish President Alexander Stubb noted on Sunday that the agreed package would still be linked to the immobilized Russian assets, as the scheme envisions that Kyiv will use them to repay the loan once the war ends. “The immobilized Russian assets will stay immobilized … and the union reserves its right to make use of the immobilized assets to repay this loan,” he posted on X.