BRUSSELS — Hungary has officially dismissed the idea of issuing eurobonds aimed at bolstering Ukraine’s economy, complicating the European Union’s strategy to finance a €165 billion loan to Kyiv using frozen Russian state assets. This decision may hinder the EU’s contingency plans if efforts to unlock Russian central bank reserves falter.
The European Commission is urging the 27 EU member states to reach a consensus at an upcoming summit to support Ukraine’s struggling economy. However, Belgium, which holds a significant portion of the frozen Russian funds, is voicing strong reservations, fearing potential legal repercussions from the Kremlin if these assets are targeted.
Budapest’s stance on eurobonds
While eurobonds could have offered an alternative funding route for Ukraine, Hungary’s leadership has rejected the proposal for issuing joint debt that would be backed by the EU’s long-term budget, according to insights from two diplomats present at a recent ambassadors’ meeting.
This rejection occurred just prior to a dinner in Brussels attended by German Chancellor Friedrich Merz and Belgian Prime Minister Bart De Wever, where discussions surrounding the loan were on the agenda. Merz expressed his intention to address De Wever’s concerns, stating,
“I take the concerns and objections of the Belgian prime minister very seriously. I don’t want to persuade him, I want to convince him that the path we are proposing here is the right one.”
Negotiations ahead of the EU summit
Germany has proposed to provide a backstop covering 25 percent of the loan to alleviate Belgium’s concerns, yet De Wever is seeking a more comprehensive guarantee from the entire EU to ensure full protection for the funds in question.
The European Commission had introduced eurobonds as a potential solution alongside the Russian asset-backed loan to secure essential funds for Ukraine, which faces the risk of depleting its resources by next April. Achieving consensus on raising debt through the EU budget to support Ukraine necessitates unanimous approval, and Hungary’s rejection significantly heightens the stakes for ongoing negotiations ahead of the EU leaders’ meeting scheduled for December 18.
Given De Wever’s strong opposition, officials do not anticipate immediate progress in negotiations. The Commission has consistently downplayed the financial and legal uncertainties tied to the proposed reparations loan, asserting that it addresses many of Belgium’s concerns.
The reparations loan is projected to allocate €115 billion towards enhancing Ukraine’s defense sector over the next five years, with an additional €50 billion designated for covering the country’s budgetary requirements.
James Angelos contributed reporting from Berlin.