Europe once again finds itself with its back against the wall on the Ukrainian question. According to IMF estimates, Kyiv will need 135 billion euros over the next two years to keep its economy afloat, ensure continuity of state services, and pursue its war effort.
In the current geopolitical configuration, there is no doubt that it falls to the EU and Europeans to provide the bulk of this financial support. On 3 December, the Commission proposed a reparations loan to Ukraine. This proposal is dividing Europeans.
How Is The Financial Package Structured?
With the budgetary position of many European states already strained, the Commission is betting on an alternative source of financing: frozen Russian assets held in Europe — most notably the 185 billion euros belonging to the Central Bank of Russia currently blocked at Euroclear, the Brussels-based central securities depository.
The structure proposed is both innovative and, at least on paper, cost-free for the EU. Under the reparations loan, Euroclear and other European financial institutions holding frozen Russian assets would be required to lend these assets to the EU, up to a ceiling of 210 billion euros.
The funds would transit via the Commission and then be on-lent to Ukraine. Repayment would be required only once Russia has ended its war of aggression and paid reparations.
This loan would therefore constitute an advance on the financial reparations to which Ukraine would be entitled under international law.
The Package’s Legality In Question
While debate continues, many experts argue that the plan is compatible with international law. As long as the operation is structured as a loan rather than an outright confiscation, and remains temporary and reversible, it can be characterised as a countermeasure and is therefore, prima facie, lawful.
Nevertheless, the reparations loan raises significant financial, legal, and reputational concerns. These have been voiced most forcefully by Belgium, as the host state of Euroclear.
For several weeks, Prime Minister Bart De Wever has repeatedly expressed his reservations to European partners. Although his government enjoys unusually broad domestic consensus on the issue, Belgium’s resistance to the Commission’s plan has been poorly received elsewhere in the EU.
With a crucial European Council meeting scheduled for 18–19 December, Belgium appears increasingly isolated. Yet the risks it highlights are far from hypothetical.
Financial Risks
Belgium fears it could be left alone to bear the financial consequences of the operation if sanctions were lifted and Russia demanded the return of assets that had meanwhile been lent to Ukraine.
Belgium therefore insists that any potential losses be fairly shared among Member States, in line with the principle of European solidarity. While one of the Commission’s proposed regulations provides for a system of national guarantees, participation would be voluntary, and Belgium considers the mechanism insufficiently robust.
Legal Risks
One of the legal bases for the plan, Article 122 TFEU, is fundamentally contested.
Article 122 TFEU, sometimes referred to as the emergency clause of the EU Treaties, allows the adoption of exceptional measures intended to protect the European economy in times of crisis.
In the context of the reparations loan, it is used both to make the freeze on Russian assets permanent and to compel their availability for the operation.
This reliance on Article 122 reflects a broader trend toward its increasingly expansive use since the pandemic, the energy crisis, and the deterioration of the European security environment — a trend that has not gone unchallenged.
The European Parliament, largely sidelined under the procedure provided for in Article 122 TFEU, has denounced what it sees as an abusive use of the provision. It recently brought an action before the Court of Justice of the EU against the SAFE regulation adopted in May 2025 to finance defence investments, arguing that it was unlawfully based on Article 122.
In the context of the reparations loan, the Commission justifies recourse to this provision in the name of European economic stability and the macroeconomic disruptions that a sudden deterioration of the security situation in Ukraine would cause. This approach was endorsed by the Council last Friday.
Article 122 also conveniently allows the Commission to bypass potential vetoes by pro-Russian Member States such as Hungary or Slovakia, as it operates under qualified-majority voting rather than unanimity, which normally applies in the field of foreign and security policy.
This is a very borderline use of the provision. If the plan is adopted, this aspect is highly likely to be challenged before the courts — by Belgium, Hungary, or even Euroclear itself.
Reputational Risks
It is reasonable to expect the operation to spook foreign investors and erode the credibility of European financial institutions, and by extension the attractiveness of European capital markets.
At a time when, in the wake of the Letta and Draghi reports, the EU is seeking to bolster the appeal of its markets in order to finance the investments it so badly needs, this would amount to shooting itself in the foot.
Moment Of Choice
Contrary to what the EU seeks to suggest, it is illusory to think that Russia will one day pay reparations sufficient to guarantee full repayment of the funds lent under the reparations loan.
One way or another, European taxpayers will ultimately bear all or part of the financial burden. A more direct form of EU financing — backed by a new common borrowing operation modelled on NextGenerationEU — would likely be less risky, more transparent, more politically honest, and ultimately more genuinely solidaristic with Ukraine.
The institutional obstacles, starting with the requirement of unanimity, are considerable. Yet recent experience shows that, in times of crisis, they can be overcome.
This is therefore a moment of existential choice for the European Council. The decisions taken next week will weigh heavily not only on Ukraine’s future, but also on the future trajectory of the European Union itself.