EU Unveils New Financial Route for Ukraine, approves €90 Billion Joint Loan

By: The Trek News Desk

The European Union has agreed on a new financial mechanism to support Ukraine, approving a massive €90 billion joint loan to help Kyiv meet its economic needs over the next two years. The decision follows EU member states’ failure to reach a consensus on an earlier proposal to finance Ukraine using reparations linked to frozen Russian assets. Notably, Hungary, the Czech Republic and Slovakia will remain outside this new arrangement.

Why the Reparations-Based Loan Collapsed

Initially, the EU had explored an unprecedented plan to lend money to Ukraine by leveraging frozen assets of the Russian Central Bank. The idea was politically symbolic, making Russia financially accountable for the damage caused by its invasion of Ukraine.

However, the proposal ran into strong resistance, particularly from Belgium. The Belgian government raised serious concerns over potential legal and financial risks linked to Euroclear, the Brussels-based financial institution that holds a significant share of the frozen Russian assets. Belgium insisted on “uncapped guarantees” to shield itself and Euroclear from any possible Russian retaliation.

Several EU capitals found this demand unacceptable. Diplomats involved in the talks stated that the lack of clarity over who would ultimately bear unlimited financial liability rendered the proposal unprovable. As a result, the reparations-based loan plan was abandoned.

The New Plan: Joint Borrowing from Markets

Following intense overnight negotiations, EU leaders agreed to raise €90 billion through joint borrowing on international financial markets. The funds will be used to cover Ukraine’s financial needs in 2026 and 2027 and will be backed by the EU’s common budget.

European Commission President Ursula von der Leyen said the bloc’s main objective had been achieved, ensuring continued financial stability for Ukraine. Danish Prime Minister Mette Frederiksen echoed this sentiment, stating that Europe’s commitment to supporting Kyiv is now firmly secured.

Why Hungary, Czechia and Slovakia Opted Out

Hungarian Prime Minister Viktor Orbán has long opposed EU financial assistance to Ukraine, arguing that the war cannot be won militarily and will ultimately require political compromise. Alongside Slovakia and the Czech Republic, Hungary proposed an alternative solution that allowed the rest of the EU to move forward without their participation.

Under the final agreement:

• Hungary, the Czech Republic and Slovakia will bear no financial responsibility linked to the €90 billion loan.
• The remaining member states will proceed through an “enhanced cooperation” framework.

Orbán openly criticised the deal, warning that Ukraine would likely never be able to repay the loan and that it could effectively turn into a grant, leaving participating countries to shoulder the long-term financial burden.

Support from Major EU Powers

Germany and France strongly backed the joint borrowing approach. German Chancellor Friedrich Merz, French President Emmanuel Macron and European Council President António Costa described the loan as the quickest and most efficient way to safeguard Ukraine’s economy during a critical phase of the war.

Merz added that while the immediate plan to use Russian assets had been delayed, those assets could still play a role in securing the loan in the future.

Reparations from Russia Remain Uncertain

Despite EU hopes that future reparations from Russia could eventually help Ukraine repay the loan, there is no guarantee that such payments will ever materialise. Financial analysts suggest that, in practical terms, the €90 billion loan may ultimately function as long-term aid rather than a recoverable debt.

Source: News Agencies