Hungary has prevented a European Commission milestone proposal which was aimed at providing financial assistance to Ukraine in 2025. It is a major blow to the EU backup funding plan for Kyiv. A possible “Plan B,” as the proposal was informally called, comprised issuing €90 billion worth of pan-European bonds to support Ukraine if the bloc didn’t agree on the use of frozen Russian assets for a loan based on reparations.
Bond Plan Effectively Scrapped
Opposition from Budapest to the effect that the alternative source of financing is practically removed from the only discussion within the European Union leaves the bloc depending on a very controversial plan to do with Russian state assets.
Russian Assets as Core Strategy
The main plan of the European Commission has been to use profits or collateral yielded from frozen Russian assets to provide a long-term loan to Ukraine. Since the time of Russia’s full-scale invasion, Western countries have put on hold hundreds of billions of euros that belong to the Russian central bank and other entities.
Legal and Political Risks Remain High
Despite that, the legal and political risks associated with the use of these assets are still quite high. While some EU countries see it as an indirect way of making Russia pay for Ukraine’s reconstruction and defense, others argue that it could lead to a raft of legal challenges and financial retaliation.
Belgium Voices Strong Concerns
Belgium, the place where the Euroclear clearing house is situated and where most of the frozen Russian funds are held, has become one of the most cautious voices in the debate. Brussels has not given its support to the Commission’s proposal as it is.
Fear of Russian Legal Action
Belgian officials are concerned that Moscow could attempt to recoup its funds through legal action that would be targeted at Belgium alone, rather than the European Union as a whole. This might expose the country to heavy financial burdens and long-lasting court battles in the international arena.
Euroclear Expresses Skepticism
Euroclear is said to have expressed a degree of doubt about the project. The organization has pointed to issues of possible legal exposure, investor confidence, and even the overall stability of the international financial system.
Hungary’s Veto Creates Funding Crisis
By deciding against the €90 billion bond plan, Hungary has put the EU in a difficult position as far as financing Ukraine next year is concerned. Financial decisions that are major in nature have to be taken by unanimous approval of the member states, hence Budapest’s veto effectively stops the initiative.
No Guaranteed Alternative for 2025
So, the EU is left without a guaranteed alternative source of funding for Ukraine other than the controversial Russian asset proposal. This creates apprehension in Brussels concerning how Kyiv will be able to make ends meet, cover military costs, and provide essential public services in 2025.
Germany Seeks to Break the Deadlock
German Chancellor Friedrich Merz was to meet Belgian Prime Minister Bart De Wever on Friday evening to try and solve the deadlock that was becoming more and more evident. They are likely to discuss legal assurances, political risks, and potential compromises that might make the Russian asset plan acceptable to the reluctant countries.
Germany Remains a Key Supporter
Within the EU, Germany is still one of the most reliable supporters of Ukraine and is advocating for a resolution that would guarantee stable financial support in the long run while at the same time decrease the legal risks for member states.
U.S. Urges Caution on Reparations Loan
Based on information from Bloomberg sources, the United States, however, is discreetly advising several EU governments against the proposed “reparations loan” tied to frozen Russian assets. American officials supposedly maintain that these assets should be kept as a bargaining chip for future peace talks with Moscow.
Washington Warns of Diplomatic Risks
According to Washington’s point of view, if the money were to be utilized right now to help the war effort, it would be detrimental to diplomatic options later and would make the issue of an eventual settlement with Russia more difficult. This standpoint complicates European decision-making that is already fragmented.
Ukraine Faces Funding Uncertainty
Uncertainty is rising as to how Ukraine will be able to get proper Western funding next year because Hungary has put a stop to the bond plan, Belgium is cautious due to possible legal risks, and the U.S. is urging restraint. Kyiv is still very much dependent on outside assistance if it is to keep its economy and military operations going.
Negotiations to Intensify
The following weeks should see more of the intense negotiations going on inside the EU as leaders try to find a way out of the deadlock. However, at present, Europe’s financial strategy for Ukraine in 2025 is still open.