German Chancellor Friedrich Merz said on Monday that failure by the EU to progress on a planned €90 billion ($106 billion) loan to Ukraine backed by frozen Russian assets could “severely” damage its credibility.
The reparations loan, which has been stuck in limbo for the past several weeks as the EU struggles to reach consensus, is so-named because Ukraine would not repay it unless it received financial compensation from Russia after the war.
“If we do not succeed in this, then the European Union’s ability to act will be severely damaged for years, if not longer, and we will show the world that we are incapable of standing together and acting at such a crucial moment in our history,” Merz said, as per AFP.
The German chancellor was speaking in Berlin, where he spent the day in talks and at an economic forum with President Volodymyr Zelensky.
Zelensky also called for the EU to make progress on the loan, as the date of a decision approaches. The leaders of the EU’s 27 countries will meet in Brussels on Thursday.
“These funds must truly and fully work for the defense against Russia’s aggression. It is fair, it is reasonable, and it must be achievable.”
Also on Monday, EU foreign policy chief Kaja Kallas told the press that EU talks on the loan are “increasingly difficult.”
“But we’re doing the work and we still have some days. We will not leave the meeting before we get a result,” she added.
On Friday, the EU agreed to extend the freeze on Russia’s assets in Europe indefinitely, or until the end of Russian aggression, removing at least one hurdle to the loan being agreed.
Previously, the EU had to vote every six months to keep the assets immobilized – creating a vulnerability through which EU member Hungary, a longtime ally of Russia, could have undermined the bloc’s plan.
However, opposition from Belgium remains a serious barrier. The majority of Russia’s assets in Europe are held by Belgium’s Euroclear bank, and Brussels fears that it could
bear the brunt of the consequences should Russia be successful in challenging the move legally.
Belgian Prime Minister Bart de Wever previously said that “Moscow has informed us that if seizures happen, Belgium and I personally would ‘feel it for eternity” – demanding that the EU find a way to ensure that the Belgian taxpayer will not suffer through the loan in return for his support.
Also on Monday, Russia’s central bank filed a lawsuit in Moscow seeking $230 billion in damages from Euroclear, as per Reuters. Russia has long claimed that the freezing of its assets is illegal, and is now apparently seeking to deter Europe from moving ahead with the loan before Thursday’s summit.
At the same time, US-led talks to end Russia’s war in Ukraine are playing out in Washington, Kyiv, and several European capitals. Since US President Donald Trump’s peace plan leaked to the press several weeks ago, Europe has been fighting to assert itself as a stakeholder in how Russia’s war ends.
“Decisions concerning the EU and NATO can be made only by the members of the European Union and NATO, and nobody else,” Kallas said on Nov. 26.