Apostolos Thomadakis / Jan 2026
Image: Shutterstock
The EU’s agreement to lend Ukraine EUR 90bn for 2026-27, raised in capital markets and secured against the Union’s shared budget, is a major act of delivery. It averts the financing cliff Kyiv has warned could hit in early 2026 and shows that when pressure peaks Europe can still convert political commitment into funding.
Yet it is also a revealing compromise. This is a win on delivery, not yet a win on strategy. The EU has solved liquidity, getting cash to Ukraine on time, but not liability: who ultimately bears the cost, risk and political consequences of financing a war through common borrowing.
That distinction matters because wars are fought with balance sheets as much as with weapons. Ukraine needs predictable financing to keep the state functioning, sustain essential services and retain confidence that support will not fade mid-conflict.
Yes, EUR 90bn is raisable – markets are not the constraint
Markets are not the constraint. The EU is no longer an occasional borrower. It has the issuance capacity and investor base to place large volumes. EUR 90bn over two years is significant, but not out of reach for a supranational issuer backed by a rules-based budget framework.
The constraint has been political. Agreeing the instrument, the collateral and – above all – the distribution of risk. The headline is not technical innovation but decisiveness. The EU used its public-finance credibility to stabilise Ukraine’s near-term outlook and to signal it can act as more than a regulatory power.
Why the Russian-assets route failed – and why that matters
The EU did not choose budget-backed borrowing because it was the first-best moral option. It chose it because the alternative (i.e. using immobilised Russian sovereign assets to back a reparations loan) collapsed under legal risk, retaliation fears and burden-sharing disputes, amplified by the concentration of assets in Belgium.
This may be prudent. But strategically it exposes a gap. The EU still lacks a jointly accepted doctrine and an internal insurance mechanism for deploying financial countermeasures at scale. It wants the deterrent effect of ‘Russia will pay’, without the architecture that would make that claim operational and politically durable.
What liability means in practice – the EU budget carries the bridge
The public debate needs candour about what liability means. Investors will be paid. The EU will borrow at market rates and must service that debt. If Ukraine is insulated from interest costs, the carry cost sits with the EU budget, and that budget is ultimately financed by Member State contributions and EU own resources (i.e. taxpayers).
The intention is to shift repayment to Russia through reparations, with the possibility that immobilised assets might be used later if reparations do not materialise. But until that path is legally enforceable and politically executable, the EU is effectively self-insuring: it borrows against the shared budget today, while hoping the aggressor ultimately foots the bill.
This is not an argument against the loan. It is an argument for calling it what it is: a bridge financed by Europe’s balance sheet, with the end-state unresolved.
The carve-out problem – solidarity with opt-outs is a fragile model
Most troubling is the reported carve-out for Hungary, Slovakia and the Czech Republic, under which the arrangement would not impose additional national financial obligations on them. This is a governance precedent; collective action without collective responsibility.
If some governments can opt out of marginal exposure while the EU borrows in the Union’s name, the Union drifts toward an à la carte fiscal model – without the governance to manage it. It rewards obstruction, normalises exemption bargaining and weakens the credibility of future joint commitments.
The international signal – strength on capacity, ambiguity on deterrence
Externally, the signal is mixed. On one hand, the EU showed it can deliver financing at scale despite internal division. This is important for Ukraine and for partners judging whether the EU can sustain multi-year commitments. On the other hand, the failure to operationalise the Russian-assets pathway will be read, especially in Moscow, as caution when the confrontation shifts from sanctions to fiscal enforcement. Immobilisation is not the same as imposing a predictable financial consequence. Deterrence depends on credibility and credibility depends on institutions, not intentions.
What should happen next
If the EU wants this to become a strategic win, three steps follow.
First, be transparent about the cost structure. If Ukraine is not paying interest, state clearly where the carry cost sits and how it is financed.
Second, ringfence the governance precedent. Opt-outs cannot become the template for common borrowing. If exemptions are unavoidable, they should come with explicit constraints and trade-offs.
Third, build a durable, legally robust framework for Russian assets with clear, collectively insured risk-sharing. The goal is not maximalist improvisation, but a predictable pathway that turns ‘Russia will pay’ from a slogan into an institutional capability.
The EU has delivered. That matters. But strategy is not just about mobilising money. It is about allocating responsibility credibly and sustainably, so that today’s liquidity solution does not become tomorrow’s liability dispute.
