The EU’s vote on approving the €210bn Reparation Loan to fund Ukraine’s war for another two years failed after late night talks on December 18 found no compromises. The EU leaders gathered at the European Council (EUCO) summit have decided to go with a Plan B and raise €90bn by issuing collective debt instead to keep Kyiv in the fight.

"Today we approved a decision to provide €90bn to Ukraine," EU summit chairman Antonio Costa told a news conference early on December 19 after the talks. "As a matter of urgency, we will provide a loan backed by the European Union budget."

The EU reaffirmed its “unwavering” support for Ukraine and again called for an immediate ceasefire in a statement issued after the meetings ended.

Despite applying intense pressure, the deal failed after Belgium’s Prime Minister Bart De Wever and Italy’s Prime Minister Giorgia Meloni refused to vote for the measure.

Wever has objected to the deal as it exposes Belgium to being on the hook for tens of billions of euros should Russia successfully win a court order demanding its frozen money be repaid. Meloni has also come under intense US pressure to block the deal and refused to budge.

The EU has decided to raise €90bn loan by collective borrowing with the participation of 24 of the EU’s 27 member states. Hungary, Slovakia and Czechia have opted out. That should be just enough to fund the Ukrainian government in 2026 and 2027, although Ukraine remains under intense funding pressure.

"This is good news for Ukraine and bad news for Russia and this was our intention," German Chancellor Friedrich Merz said.

The decision will bring some relief for Ukrainian President Volodymyr Zelenskiy as Ukraine was facing a macroeconomic collapse in the first quarter of 2026 without fresh funds.

“We can’t let Ukraine face next year without answers on financing. The risk is real: a $45–50bn deficit, possibly more,” Zelenskiy said in his speech in Brussels. “Russia talks more about war than peace. Ukraine must stay strong — this isn’t just about the front, it’s about our ability to survive.”

The EU has successfully ringfenced the €210bn of frozen Russian cash in Europe and said the money will remain frozen until Russia pays reparations to Ukraine. That will put Brussels into conflict with Washington, which wants to use the money to fund a US-Ukraine reconstruction fund and another US-Russia investment fund.

The White House will be pleased the Reparation Loan vote failed and lobbied hard to prevent it being adopted. As part of America’s new National Security Strategy (NSS) it is now official policy to interfere in EU domestic politics.

Trump also has his eye on Russia’s frozen $300bn as included in the Witkoff-Dmitriev plan, named after its reported authors, US Special Envoy to the Middle East Steve Witkoff and the head of Russia’s sovereign wealth fund, Kirill Dmitriev, are plans for a $100bn US-Ukraine reconstruction fund and another $200bn US-Russian investment fund for commercial projects, using the CBR money.

In addition, Trump has started talks with Blackrock to revive a private capital $400bn reconstruction fund that becomes possible if a clean negotiated settlement is agreed that reduces the risks of the war restarting. The EU’s plan to perpetuate the war for at least another two years, according to Merz, creates an impossible investment climate that will attract no private capital at all for years, because of the Damoclesian threat of a renewed invasion by Russia.

Florida meeting

Trump has called for an all-or-nothing push this weekend in Miami, Florida, to close the Russo-Ukraine peace deal. Zelenskiy has already assembled his team in Miami and Trump will also travel to Florida on December 19 but it is unclear what role he will play in the upcoming talks. The Russian delegation will be led by head of Russia’s sovereign wealth fund, Kirill Dmitriev, who has been instrumental in stitching the 27-point peace plan (27PPP) together that is on the table that was thrashed out at the Moscow meeting on December 3.

Trump said on December 18 that the talks are moving toward an ending and are "getting close to something" ahead of the meeting in Miami this weekend. "I hope Ukraine moves quickly," he told the White House press pool on December 18.

The negotiations will centre on Bankova agreeing to give up control of all of the Donbas (Donetsk and Luhansk) but freezing the line of contact where it is in Zaporizhzhia and Kherson. The Crimea will also go to Russia.

The second key question is the details of the US security guarantees for Ukraine. While a US draft agreement looks like a real Article 5-like security guarantee, and includes a military action should Russia re-invade component, the devil is in the details, which are still being discussed. Zelenskiy wants to be sure the US will put boots on the ground if Russia attacks Ukraine again.

“There’s still a key question I don’t have an answer to. If Ukraine is not in Nato, how do security guarantees actually work? What exactly will the United States do if Russia attacks again? How will these guarantees function in practice?” He said in his speech in Brussels on December 18.

The EU is still refusing to offer Ukraine real security guarantees and is proposing instead mere “security assurances”. The main idea is that Ukraine take care of its own security by beefing up its standing army to 800,000 men – by far the largest army in Europe – that analysts say will be very expensive and difficult for a post-war Ukraine to pay for. The EU area also suggesting a multinational contingent of peacekeepers is stationed in Ukraine -an idea that was already rejected in April as unworkable. Both ideas are anathema to the Kremlin.

It’s decision time for Zelenskiy. The EU €90bn loan for Ukraine improves Zelenskiy’s hand in the Miami talks as he now has the option of fighting on with Europe’s help and can walk away from the US-backed deal if needed. A recent Kyiv International Institute of Sociology (KIIS) poll in Ukraine found that 75% of the population won’t back giving away territory to Russia, but 72% are open to compromise if a “just” peace deal can be struck.

Trump has also suggested that Ukraine’s EU accession bid be accelerated and Ukraine becomes a member in 2027, rather than the 2030 at earliest the EU itself has suggested is the earliest possible date. Since the end of the USSR, by far the most successful reform strategy for any formally Warsaw Pact country has been to join the EU.

Mirroring Trump’s comments that the US-Ukraine minerals deal signed on April 30 was “all the security Ukraine needs”, Zelenskiy appears to have accepted that his European partners will not give him a real security deal and that EU membership is the best he can hope for. The EU has said in the last week that a 2027 entry is “not practical” and has been dragging its heels on opening formal negotiations on the various clusters, which were supposed to kick off on July. Talks have been complicated by the mushrooming Energoatom corruption scandal.

“When it comes to US security guarantees, we’re negotiating the details. From Europe, the key guarantee is EU membership, including countries beyond the EU in the coalition of the willing. For Ukraine, EU accession means security: economic, political and geopolitical,” Zelenskiy told delegates in Brussels.

The Ukrainian president is afraid of a security deal that is similar to the Budapest Memorandum signed by Russia in 1994 that guaranteed Ukraine’s sovereignty in exchange for giving up its nucellar missiles. However, that deal was only a memorandum, not a treaty, and so has no force in international law, leaving the Kremlin free to walk away from its commitments.

Putin’s piggies

The Miami meeting will be key as it will be the first time that the feedback from a frenetic ten days of diplomacy that culminated in intense talks at the Berlin meeting on December 14-15 will put a revised version of the 27PPP deal in front of a Putin representee.

He may reject the revised deal out of hand. Russian Deputy Foreign Minister Sergei Ryabkov, who led the negotiations with former US Secretary of State Antony Blinken in January 2022 just before the war started, said in an interview this week that the Kremlin is prepared to make zero concessions on the status of Donbass, Novorossiya or Crimea.

“We are not able in any form to compromise on this, because it would be, in our view, a revision of a very fundamental element of our statehood, set forth through our constitution,” Ryabkov said.

Putin signalled this hard line by referring to Europeans as подсвинки (podsviniki), a subtle Russian colloquialism that literally means “under-pig”, but is maybe better translated as “nasty little piggies.” There is no direct English-language equivalent, but it is not as insulting as “pig” and widely used as a criticism of someone who is a “lackey”, “henchman” or “underling” for whom you have no respect.

Putin used the word to signal that he will ignore any suggestions the EU are making in the talks and that he is fully focused on the deal trashed out between Witkoff and Dmitriev. Dmitriev’s involvement and the absence of the veteran Russian Foreign Minister Sergei Lavrov also suggests strongly that business deals play a very important role in the talks.

The Kremlin has upped its rhetoric recently, as Putin referred to the “war” in Ukraine for the first time last week, using the Russian word for war, whereas he has always called it the “special military operation” (SVO) for all of the last four years.

Time running out

The Florida meeting may be the last chance for a negotiated peace deal to be agreed. Both Putin and Trump are in a rush to do a deal quickly. If it fails, then Trump has threatened to wash his hands of Ukraine and Putin has repeatedly said he is happy to settle the dispute in Ukraine by force.

The International Monetary Fund (IMF) warned that time is running out for Ukraine in a December 18 statement. The IMF said Ukraine is on the brink of bankruptcy without substantial funding. Kyiv will need a total of €137bn euros ($160bn) in 2026 and 2027 and needs the funds by spring or face collapse.

European Central Bank President Christine Lagarde also warned that the Reparation Loan idea was highly questionable. Addressing a press conference in Frankfurt after the ECB’s Governing Council meeting, Lagarde said she was “confident” that heads of government meeting in Brussels would thrash out a mechanism for lending to Kyiv, but said again that the ECB would not underwrite it, due to restrictions in its charter.

“We are an area of the world which praises itself for respecting the rule of law,” Lagarde said. “I’m sure that there are solutions that can be debated and discussed, and ... constructions that can be elaborated, but it’s not for the central bank to actually encourage [or]support a mechanism under which we would be called upon — and scheduled — to breach Article 123 of the Treaty.”

Article 123 forbids the ECB from printing money explicitly to finance government spending: something that happens if the EU lends Ukraine from its own budget, which is being proposed. “You cannot expect me to validate a mechanism under which there would be monetary financing,” Lagarde said as cited by Politico. “This is pretty obvious.”

Even if the Reparation Loan motion passed, EU action would be very slow in coming. A YES decision requires approval by the European Parliament that would only vote in January and also be subject to wrangling.

Polish Prime Minister Tusk said that "light years" would pass between the freezing of Russian funds and the potential use of these assets to rebuild Ukraine or provide military support. The same will apply to the €90bn collective loan that has been proposed to replace the Reparation Loan.

Belgium refused

In the end the EC couldn’t overcome Belgium’s objections. The Belgian government has put forward several conditions to the European Commission for the use of blocked assets for the Reparations Loan to Ukraine and the other member states refused to sign off on them.

The key demands include coverage of potential legal costs in the event of Russia's disputes with any EU country, the rejection of new investment agreements with Russia by European countries, and the termination of existing ones. Belgium reportedly wants the guarantees to be "independent and autonomous, remaining in force even if the loan is declared invalid," says CEO of Macro Advisory Chris Weafer.

Belgium’s Prime Minister Bart De Wever described the EU’s plan as a “a nice idea, stealing from the bad guy to give to the good guy. But stealing the frozen assets of another country has never been done.”

He added: “Even during the second world war, we did not confiscate Germany’s money. In a war, you freeze sovereign assets. And at the end, the losing side must give up all or part of those assets to compensate the victors,” he said, adding, it was “a fairytale, a complete illusion” to “imagine that Russia will lose this war in Ukraine”.

Moscow has, “let us know that if the assets are seized, Belgium, and me personally, will feel the effects for eternity”. The Reparation Loan is only repayable if Russia agrees to reparations and that will only happen if Russia is defeated militarily.

Permanently frozen

Despite the failure of th e Reparation Loan vote, the EU has successfully ringfenced the frozen assets that are no longer subject to the need for a semi-annual vote to renew the freeze, after it enacted Article 122 of the foundation treaty and used emergency powers to nix that provision. That move heads off a potential veto on renewing the freeze by Hungary that would have triggered a repayment of all the frozen funds.

Russia's Dmitriev said that European authorities will face "consequences for illegal actions" If it were to permanently freeze Russia's assets. "This isn't just about Russia—it's about undermining trust in the global reserve system, the rule of law, and Europe's financial solvency. Panicking EU bureaucrats will face consequences for their illegal actions," Dmitriev said in a social media post.

The cash is now frozen for the long-term allowing the EU to use the annual interest income from cash – about $4bn a year -- to service the collective borrowing loan to Ukraine, similar to the G7 €50bn loan extended to Ukraine last year.

“The proposal is that the loan would then be repaid from the frozen assets as part of a reparation deal (for damage) agreed with Moscow. The Kremlin has rejected the idea of any sort of reparation deal,” says Weafer.

Country exposure to frozen Russian assets:

Belgium      $200bn (mostly in Euroclear)

France        $70bn

Austria       $15bn

Germany    $5bn

UK     $25bn

US     $5bn

Switzerland $8bn

Japan $55bn

Source: bne IntelliNews from reports