Brussels – Nearly a month after the dramatic deal struck at the European Council – in which the option of using immobilised Russian Central Bank assets was abandoned in favour of common borrowing backed by the EU budget – the final proposal to cover Ukraine’s financing needs for 2026-2027 is now on the table of the EU institutions.
“We all want peace for Ukraine. And for that Ukraine must be in a position of strength on the battlefield and at the negotiating table,” European Commission President Ursula von der Leyen said on 14 January, while presenting the new €90 billion Ukraine Support Loan, which would cover two thirds of the EU candidate country’s overall funding gap over the next two years.
The investment is “conditional on reforms,” von der Leyen added, stressing that it will bring Kyiv “closer to EU membership.” As with other EU financial support mechanisms, the new package – which requires approval by the EU co-legislators – is underpinned by robust conditionality, including measures to strengthen the rule of law and fight corruption set out in the Ukraine Plan. These are the same conditions that link the disbursement of funds under the Ukraine Facility to a broader reform agenda.
It is no coincidence that, as agreed during an informal meeting hosted in Lviv on 11 December, Kyiv must work on delivering a ten-point reform plan, with the implementation of the most relevant and effective measures – including anti-corruption and rule-of-law policies in line with the requirements of the EU accession process – by the end of 2026.
How the EU’s Ukraine Support Loan works
The EU’s €90 billion Ukraine Support Loan is designed to meet Ukraine’s financial needs in 2026 and 2027. The loan is divided into two parts: €30 billion for the State budget and €60 billion tom acquire military equipment and weapons with “European preference” – meaning produced in Ukraine, the EU, or EEA-EFTA countries (Iceland, Liechtenstein, and Norway).
The loan will be financed through common EU borrowing on the capital markets and guaranteed by the ‘headroom’ of the EU’s Multiannual Financial Framework (MFF) – the financial buffer between the maximum contributions that can be collected from member states and the planned annual budget spending.
Ukraine will not be required to repay the loan until reparations are paid by Russia once the war comes to an end. If this does not occur, the EU reserves the right to use Russian assets immobilised within Member States or to rely on the ‘headroom’ of the EU’s budget.
As decided at the European Council in December 2025 to unlock the agreement on Ukraine’s support for 2026-2027, any mobilisation of EU budget resources as a guarantee for this loan will not affect the financial obligations of the Czech Republic, Hungary, and Slovakia. Their share – representing 3.6% of the EU’s total Gross National Income – will be redistributed among the other 24 member states based on national GNI.
Senior officials estimate that interest on the common EU borrowing will cost around €3-4 billion per year, to be paid entirely by EU contributors (excluding Hungary, Slovakia, and the Czech Republic) under the current MFF via a special instrument, and most likely within the framework of the EU’s 2028-2034 MFF.
The legislative proposal has been now submitted to the European Parliament and the Council, aiming for the approval process. As Commissioner for Economy Valdis Dombrovskis stated, the process is “hopefully to be concluded by early March,” which would allow for disbursement “in April,” in line with the European Council’s agreement to provide financial support to Ukraine starting from the second quarter of 2026.
Risks and opportunities for the EU budget
“Agreeing on this loan was a success,” says Fabian Zuleeg, Chief Executive and Chief Economist at the European Policy Centre (EPC), speaking to The New Union Post. However, several factors cast a shadow over the solution found: not all member states were kept on board, Russia was not held to account through the use of frozen assets, and most of all there is “a real risk” that common borrowing will be interpreted by some capitals “as a final and temporary concession rather than the start of a process whereby common borrowing becomes normalised,” Zuleeg warns.
On the approach chosen – common EU borrowing on the capital markets, using the ‘headroom’ of the EU budget as a guarantee – Jacob Funk Kirkegaard, a Senior Fellow at Bruegel, does not see “any financial risks.” He describes this as “a robust and well-known procedure that has no implications for the Eurobonds issued,” especially considering that the three opt-out countries are small.
The real challenge will come in the next MFF negotiations. The so-called ‘frugal’ countries – which were denied access to frozen assets – will “surely” demand that they be utilised in some form in the future. Otherwise, they are “unlikely to agree” to even the smallest increase in the overall MFF or “rolling over rather than repaying” the existing Next Generation EU debt. Meanwhile, the decision to issue €90 billion in new Eurobonds “makes it politically less urgent” to restart the repayment of NGEU in 2028, as originally agreed.
Eurobonds for Ukraine “politically demonstrate that the EU is now a debt-issuing entity.” As Kirkegaard notes, “It makes financial sense” to keep the amount of outstanding Eurobonds as high as possible “to maximise investor interest and get the lowest interest costs.”
