Tessa Walther

12/19/2025December 19, 2025

The EU’s late-night compromise ensures Ukraine’s budget for the next two years, but shifts the burden onto EU finances while postponing a decisive test of how far Europe is willing to go to use Russian frozen assets

After more than 16 hours of negotiations, EU leaders left Brussels on Friday with a deal they had promised to deliver: a €90 billion ($105 billion) loan to Ukraine to cover much of Kyiv’s financing needs for 2026 and 2027. For a country warning of severe budgetary shortfalls — brought on by the ongoing war — as early as next spring, the agreement provides a crucial lifeline.

“We committed, we delivered,” European Council President Antonio Costa said after the summit, visibly relieved to be able to present results in the early hours of Friday morning.

At the same time, the summit highlighted the growing difficulty for the European Union to translate political ambition into common action, particularly when legal risks, diverging national interests and geopolitical pressure collide.

Joint borrowing instead of frozen assets

Instead of using Russia’s frozen assets, the final agreement relies on joint EU borrowing. The money will be raised on financial markets, backed by the EU budget, and passed on to Ukraine as an interest-free loan. Kyiv would only be required to repay it once Russia pays war reparations. It remains far from clear, however, whether Russia would ever agree to pay reparations.

Relying on joint borrowing was not the preferred option of the European Commission and several major capitals such as Berlin, which had pushed for using Russia’s frozen central bank assets for months. These assets are held mostly at the Belgium-based financial services firm Euroclear. The idea was to fund Ukraine while avoiding new burdens on EU taxpayers and increasing pressure on Moscow.

That plan failed primarily because of concerns raised by Belgium. As the host country of Euroclear, Brussels argued that it faced disproportionate legal and financial risks if Russia retaliated or pursued litigation. Belgian Prime Minister Bart De Wever demanded far-reaching guarantees from other EU states, demands that France, Italy and others were unwilling to meet.

What does that mean for Europe’s ability to act?

The division, as well as the current agreement, reveal a more fundamental question: If the legal and political obstacles to using Russian assets are too great now, under what circumstances might they ever become manageable later?

In an interview with DW, Jana Kobzova, co-director of the European Security Programme at the European Council on Foreign Relations (ECFR), was equally critical. “We had an option of using our leverage vis-à-vis the Russians, and vis-à-vis the US, and we didn’t go for that,” she said. This, Kobzova argued, put Europe’s ability to act as an independent and influential global player into question.

Tinatin Akhvlediani, a researcher at the Brussels-based Centre for European Policy Studies (CEPS), agreed that the result is not the optimal solution, but argued that it preserved the EU’s credibility as a political actor, able to reach decisions and finance Ukraine, even when under pressure. “Ukraine will get the money, and that was the most important thing,” she said.

Members of the European Parliament were more critical. Iratxe García Pérez, first vice-president of the Socialists and Democrats group, said the agreement “falls short” because it doesn’t establish a sustainable funding model and leaves the financial burden with the EU rather than shifting it to Russia. She argues that while the €90-billion loan “is necessary, it cannot be the final solution.”

Unity, but with objections

The summit outcome allowed all sides to claim partial success. Ukraine receives funding, supporters of legal caution avoided a precedent-setting use of frozen assets, and others ensured that the assets in question remain immobilized and could still, in theory, be used in the future to repay the loan if Russia refuses to pay reparations.

But questions about unity remain. Three member states — Hungary, Slovakia and the Czech Republic — secured exemptions from the financial guarantees linked to the loan. While they will not block the package, they will not carry direct liability for it, either.

These opt-outs underline what many analysts see as a trend towards a more fragmented form of EU solidarity. Rather than all 27 countries taking decisions together and sharing risks equally, coalitions are increasingly formed on a case-by-case basis.

Akhvlediani pointed out that the EU was searching for agility in a fast-changing world. She argued that a deal — even an imperfect one — was preferable to paralysis. “We may not have full unity across all 27 member states, but we have unity across the majority of them, and that at least allows the European Union to act,” she explained.

EU’s role in the world put into question

The decision comes at a time when European leaders are keen to assert influence over any future peace talks on Ukraine, particularly as the United States sends mixed signals about its long-term engagement.

Both experts agree that continued financial support strengthens Europe’s claim to relevance in the peace process. However, the failure to mobilize Russia’s frozen assets weakens the EU’s leverage and hinders its ability to move from a simple “payer” to an actual “player,” as Akhvlediani put it.

This has strategic consequences, Kobzova from the ECFR added, because Russian President Vladimir Putin will continue to view European leaders as secondary actors. “He is willing to talk business with them, but not security. On that, he is very keen on keeping them out, and the Americans in,” she told DW.

Beyond Ukraine: EU leadership under strain

The Ukraine funding debate was not the only issue that proved divisive at the summit. Plans to finalize the long-negotiated Mercosur trade agreement with South American countries were again delayed after objections from France and Italy.

The postponement prompted criticism from former EU trade commissioner Cecilia Malmström, who said the EU had “missed an opportunity to show strength and unity,” stressing that the agreement “is not only about trade but also geopolitics.”

Under the Ukraine deal, the European Commission is now expected to move quickly to issue EU-backed bonds on financial markets, using the EU budget as a guarantee. Once approved by member states, the funds could begin flowing to Kyiv in early 2026, providing predictable financing over the next two years.

For now, the immediate crisis has been contained. Ukraine has funding, and the EU avoided an outright failure to agree. But the summit also left a lingering question: whether Europe can match its strategic ambitions with the unity and tools needed to act decisively in a rapidly hardening geopolitical landscape.

Edited by: Maren Sass

© DW