European Union leaders agreed on Friday to provide a massive interest-free loan to Ukraine to meet its military and economic needs for the next two years.
The 27-nation bloc’s heads of state had planned to use some of the 210 billion euros ($246 billion) worth of Russian assets that are frozen in Europe, mostly in Belgium. But despite working through the night into Friday morning, they failed to convince Belgium that the country would be protected from any Russian retaliation if it backed the “reparations loan” plan.
They settled on an alternative: borrowing $106 billion on capital markets.
After almost four years of war, the International Monetary Fund estimates that Ukraine will need 137 billion euros ($161 billion) in 2026 and 2027. The government in Kyiv is on the verge of bankruptcy, and desperately needs the money by spring to pay for everything from ammunition to infrastructure repairs.
Here’s what to know about the loan.
EU to shoulder debt
European Commission President Ursula von der Leyen had brought to Thursday’s summit two proposals to keep Ukraine afloat.
The first plan had been to use some of the 210 billion euros ($246 billion) worth of Russian assets that are frozen in Europe, mostly in Belgium. The money has been frozen under EU sanctions slapped on Moscow after its launched its full-scale war in 2022.
Leaders like German Chancellor Friedrich Merz and French President Emmanuel Macron backed this first option, especially since that method of funding would require support from two-thirds of the 27 EU nations.
That majority was expected to be far easier politically to reach than the total unanimity required by the EU foundational treaty for the second option: borrowing money from capital markets.
But throughout the long night, Belgium’s Prime Minister Bart de Wever refused to budge on the reparations loan. It was Hungary, whose leader Viktor Orbán has long objected to Brussels’ embrace of Ukraine, that compromised.
The European Council said it would use Article 20 of the Treaty of Europe to allow the EU to shoulder debt for a zero-interest loan to Ukraine.
It’s a simpler and possibly safer solution compared to the reparations loans. It is also akin to how the EU took on 750 billion euro in debt in the wake of the COVID-19 pandemic for a gigantic economic recovery fund. Large borrowing has become a hallmark of the administration of von der Leyen.
Outliers protected from financial burdens
