Good morning,
EU leaders are circling around a curious new financial fix: turning Russia’s frozen central bank reserves into a giant loan facility for Ukraine.
In theory, the €170bn “reparations loan” is elegant. It avoids the illegality of outright seizure under international law, while still using Moscow’s immobilised billions for Ukraine’s defence.
Here’s how it works (complicated, but hang on): some or all of the frozen assets at Brussels clearing house Euroclear would be shifted into a Special Purpose Vehicle (SPV), then passed to Ukraine in 2026 and 2027 in the form of zero-coupon eurobonds (loans) issued by the commission.
The bonds would be backed by guarantees from a "coalition of the willing" of EU member states and possibly other G7 countries prepared to support the plan.
Officially, Ukraine would borrow the money. But repayment would only ever happen if Russia paid reparations, which nobody really expects it will do.
EU commission president Ursula von der Leyen promises the plan is legally watertight. EU leaders will discuss whether they agree day at an informal summit in Copenhagen.
To get a sense of the playing field: German chancellor Friedrich Merz is already on board. Belgium’s prime minister refuses to even entertain the idea. And the commission is quietly courting Paris by promising that billions will be spent on European — read: French — weapons.
No deal is expected today, but Merz and von der Leyen have teamed up and are pushing for an agreement at the October summit.
- Wester van Gaal, economics journalist
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