Europe at a Dead End on Ukraine
Good morning! We are David Carretta, Christian Spillmann and Oliver Grimm, and we are presenting you the Morning Post Europe. Parts of it are translated with the help of AI, but always edited by one of us.
In today’s analysis, David focuses on the Ukraine reparation loan: two months after Ursula von der Leyen’s proposal, negotiations over the use of frozen Russian sovereign assets are at a standstill. Europe appears to have reached a deadlock in its support for Ukraine, hindered by political unwillingness and risk aversion.
In today’s briefs, we cover the “Sustainability Omnibus” simplification package: the EPP has decided to break the cordon sanitaire and vote on a legislative proposal together with the far right — a move that could have repercussions for the pro-European majority. At least a crisis over the 2028–34 budget has been avoided: MEPs have given in to Ursula von der Leyen’s cosmetic concessions. Governments want to delay the anti-deforestation law by one year. The Commission remains inactive on X, yet its president is under attack from Elon Musk nonetheless.
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Europe at a Dead End on Ukraine
By David Carretta
More than two months have passed since Ursula von der Leyen, in her State of the Union address, announced a €140 billion “reparation loan” for Ukraine, to be financed by frozen Russian sovereign assets. Six weeks have also passed since the informal summit in Copenhagen, where EU heads of state and government first discussed the proposal. And it has been three weeks since the European Council of 23 October, which ended without a decision because of Belgian opposition.
The Commission was asked to present “as soon as possible” an options paper with alternative proposals to secure Ukraine’s funding. So far, nothing has materialised—beyond a leak to the Financial Times. European Council President António Costa has promised “a decision” by December. The next European Council is only five weeks away. What is also missing is the political will to make financially risky but necessary choices to honour Europe’s solemn commitment to support Ukraine “for as long as it takes” and with “whatever it takes”.
A deal on the “reparation loan” is urgent. Ukraine could run out of funds to pay salaries, pensions and for weapons by the end of February. At stake is also the continuation of the financial assistance Kyiv receives from the International Monetary Fund.
Von der Leyen made a serious error when she unveiled her plan on 10 September. The Commission president acted in close coordination with Berlin. Days later, Chancellor Friedrich Merz endorsed the use of frozen Russian assets in an op-ed for the Financial Times. But von der Leyen had failed to consult Belgium—the key country, since €185 billion of Russian sovereign assets, and hence the lion’s share, are immobilised on its territory at the Brussels-based financial service provider Euroclear.
Belgium bears the international legal responsibility for that sum and could be liable for compensation if an arbitration tribunal ruled against the EU, or if sanctions were not renewed. At both the Copenhagen informal summit on 1 October and the European Council on 23 October, Belgian Prime Minister Bart De Wever refused to give his green light without guarantees of financial solidarity from other member states in case of losses. Yesterday, Moscow threatened legal action should the frozen Russian assets be used.
This morning, EU finance ministers will once again discuss the “reparation loan” ahead of the Ecofin meeting. But the debate risks being purely academic. The Commission has yet to circulate any new documents—formal or informal—on the use of Russian sovereign assets or potential alternatives. A Financial Times leak, seen by capitals as a trial balloon, revealed von der Leyen’s chosen tactic: to confront governments with the fait accompli that there are no real alternatives to using Russian sovereign assets.
The other options are far costlier for national budgets—whether a common EU loan, which would entail billions in annual interest payments, or bilateral grants from member states, which would demand tens of billions from large economies such as Germany, France and Italy. “My prediction,” a diplomat told us, “is that finance ministers will conclude that the “reparation loan” backed by frozen Russian assets is the way forward.”
“I am optimistic,” said German finance minister Lars Klingbeil yesterday. Yet optimism is neither a strategy nor a solution. Technical talks last week between the Commission and Belgium produced no breakthrough. Nor is Belgium alone in its caution. Those present at the European Council on October 23rd were struck by how many leaders voiced understanding for De Wever’s stance. Not even Chancellor Merz defended von der Leyen’s proposal anymore.
Behind Belgium’s resistance lies broader scepticism. Italy’s foreign minister, Antonio Tajani, reiterated yesterday that “any solution must respect the principles of legality, euro-area stability and overall sustainability.” Under von der Leyen’s plan, Italy could face contingent liabilities of nearly €20 billion. Russia may be advancing only slowly in the Donbas, despite heavy losses, but the EU is bogging itself down through political timidity and fear of financial exposure. Yet the overall cost for the Union would be modest. The €185 billion in Russian assets, almost a third of Belgium’s GDP, represents barely 1 per cent of the EU’s.
As time passes, legal and financial difficulties are compounded by political ones. On Saturday, Slovak Prime Minister Robert Fico declared that his country would not accept the use of frozen Russian assets to fund Ukraine’s arms purchases. “Slovakia will not take part in any legal or financial plan to seize frozen assets if those funds are to be used for military spending in Ukraine,” he said. Hungary’s position is already well known. Viktor Orbán refused to sign the European Council conclusions affirming the leaders’ intent to secure Ukraine’s financial needs for the next two years.
The stalemate over the “reparation loan” is only one example of Europe’s broader paralysis on Ukraine. In October, Ukrainian President Volodymyr Zelensky raised the idea of a “coalition of the willing” to shield his country’s skies—and infrastructure—from Russian missile and drone attacks. Promises were made. But the proposed European air-defence shield for Ukraine has made no progress.
On arms deliveries, the Kiel Institute’s mid-October report noted “a sharp decline in July and August 2025.” The Commission had pledged to mobilise SAFE, the €150 billion loan instrument for the defence industry. Yet only 13 of the 19 member states that applied for SAFE funds have said they would also use them for Ukraine. On sanctions, Donald Trump has done more to push Europeans away from Russian LNG than dozens of rounds of diplomatic meetings ever achieved.
Since Trump’s return to the White House, the EU has lacked a coherent strategy on Ukraine—content instead to move in step with Washington. When Trump announces a meeting with Vladimir Putin, Europeans summon Zelensky to Brussels (or accompany him to Washington) and convene emergency sessions of the “coalition of the willing.” When the US president loses interest in talks with Moscow, Europe falls back into torpor.
Its leaders hope that Russia’s economic troubles will eventually alter Putin’s calculus. But the Kremlin’s ruler is driven by ideology—and convinced he can endure longer, and suffer more, than the Europeans. This winter will be harsher than the previous ones for Ukrainians, as Russian strikes wreak further destruction. Corruption scandals surrounding figures close to Zelensky will sap morale and trust. Time is passing. The end of February—and potential bankruptcy—are drawing near.
By waiting passively for the war to end, Europeans may yet discover that Ukraine has lost it because of their inertia.
The Quote
“Four months after we made our proposal, we have heard your concerns”.
Ursula von der Leyen at the European Parliament on the 2028–34 EU budget.
Geopolitics
Norway will not underwrite Ukraine’s reconstruction loan alone — Will Norway come to the European Union’s rescue, using its multi-billion sovereign wealth fund to provide the guarantees Belgium demands on the €185 billion of frozen Russian sovereign assets? Not so fast—and not so much.
The idea, floated by two economists, has the backing of a majority in the Oslo parliament. But finance minister Jens Stoltenberg cooled expectations yesterday. “It would be wrong to rule anything out before seeing the proposal, but rumours that Norway would guarantee the entire amount… that is out of the question,” he said during a visit to Brussels. “We will see whether we can contribute in some way, depending on what the EU proposes,” he added.
The issue was discussed with economic-affairs commissioner Valdis Dombrovskis, who underlined the “complementarity” between the EU and Norway in supporting Ukraine financially. Among member-state diplomats, scepticism prevails. “It’s a possibility. But there’s nothing concrete on the table,” one diplomat told us. “I doubt it’s more than a curious idea promoted by a few professors.”
Corruption scandal weakens Zelensky — Timur Mindich, co-owner of Kvartal 95, the television production company founded by Volodymyr Zelensky, has been accused by Ukraine’s anti-corruption authorities of organising a $100 million bribery scheme in the energy sector.
Weakened by the scandal, Zelensky has requested the resignations of energy minister Svitlana Hrynchuk and her predecessor Herman Halushchenko, who had recently been promoted to justice minister.
Halushchenko, who served four years as energy minister, is accused of receiving “personal benefits” from Mindich in exchange for control over the sector’s financial flows. “It’s a matter of trust,” said Zelensky. “If there are allegations, there must be answers. The decision to remove them from their duties is the quickest and most effective. I have asked the prime minister to ensure their resignations.” Mindich has since left Ukraine.
Omnibus
EPP sides with the far right, breaking the pro-European majority — A vote today in the European Parliament on simplifying corporate “due-diligence” obligations for sustainability could mark the beginning of the end for Ursula von der Leyen’s governing coalition.
The groups backing the Commission president—the European People’s Party (EPP), the Socialists & Democrats, Renew Europe, and occasionally the Greens—failed to agree on the so-called Omnibus I package. The proposal, unveiled by von der Leyen in February, aims to cut red tape and liability for businesses under two directives on climate and human-rights compliance in supply chains.
In a first vote in October, Parliament failed to approve the simplification package, prompting protests from several heads of government. German chancellor Friedrich Merz urged MEPs to “correct” their vote. Blaming a handful of Socialist MEPs for breaking ranks, the EPP has now refused further talks and chosen to vote with right-wing groups—from the national-conservative ECR to Viktor Orbán’s far-right Patriots for Europe.
It would be the first time a legislative text is adopted by a right-and-far-right majority. “This is a breach of the cordon sanitaire,” said Green co-president Terry Reintke.
Trouble ahead for Ursula von der Leyen — The EPP has rejected several compromise proposals from the Socialists, Renew and the Greens—including corporate civil liability, a key element of the two directives under revision.
The manoeuvre by rapporteur Jörgen Warborn was endorsed by EPP president Manfred Weber. But the move could strain not only the pro-European coalition’s cohesion, but von der Leyen’s own position.
“This is not a basis for working together,” said Reintke. “It will weigh on any future cooperation.” She warned of “a paralysing situation that will weaken the European Parliament.”
Even EPP insiders admit there is no viable alternative majority with the far right to pass EU-friendly legislation. “It’s going to be a massive problem for Ursula von der Leyen,” said Reintke.
MFF
Parliament bows to von der Leyen on the budget — At least one crisis has been averted. Yesterday, the European Parliament’s rapporteurs on the Multiannual Financial Framework accepted von der Leyen’s reassurances on her original proposal. The changes are seen as largely “cosmetic.” None of Parliament’s key demands has been fully met.
Still, promises of more funds for rural areas and a role for regions in national partnership plans to access EU funds proved enough.
“The main questions Parliament raised have been satisfactorily answered at the start of negotiations,” said Siegfried Mureșan (EPP). “We have laid the groundwork for Parliament to be taken seriously.”
“It’s not perfect, but it’s progress,” added Socialist Carla Tavares. “What we saw over the weekend moves in Parliament’s direction.” MEPs will now begin drafting their position on the MFF and the related sectoral regulations.
Green Deal
One-year delay looms for anti-deforestation law — The Danish presidency of the Council presented a new compromise text yesterday on the deforestation regulation, proposing to postpone implementation by another year, on top of the simplification measures suggested by the Commission.
The Commission had proposed only a six-month grace period to resolve IT issues that, it claims, prevent the law from taking effect on 1 January.
Member states have so far failed to agree on the presidency’s compromise. Divisions persist over whether further simplification is needed, including a new review clause. Time is short: a deal must be reached by year-end—not only among governments but also with the European Parliament.
Digital
“X”: the letter Virkkunen won’t say aloud — The Commission yesterday unveiled its European Democracy Shield, outlining current and future tools to protect Europe’s democracies from foreign interference. Much was said about tackling platforms that poison public debate and fuel polarisation.
We asked vice-president Henna Virkkunen when the Commission would act on X, Elon Musk’s platform, under investigation for two years and already subject to preliminary findings. She delivered a long answer—without once mentioning X.
At least she gave a timeframe: “In the coming weeks and months we will send preliminary findings and take decisions.” Another journalist pressed again on X; the response was so evasive that Virkkunen drifted into a discussion of online financial fraud—one of her next priorities. But what does that have to do with democracy?
Musk attacks the unelected EU chief — “If democracy is the foundation of freedom, shouldn’t its EU leader be elected directly by the people?”.
That was Elon Musk’s reply on X to Ursula von der Leyen’s post about the new European Democracy Shield. “The EU’s leader should be elected by EU citizens, not appointed by a committee!” he added. The Commission’s inaction on X, it seems, has earned it little goodwill from the platform’s owner.
Macron rails against social-media threats to democracy — At an event in Toulouse yesterday, French president Emmanuel Macron “sounded the alarm” over the dangers social networks pose to democracy.
He outlined five actions to regulate online content: ending anonymity, eliminating fake accounts, removing false information, holding platforms legally liable for hosted content—as with traditional media—and creating a mechanism to audit algorithms.
The speech coincided with the Commission’s presentation of its European Democracy Shield.
Musical Chairs
Three new deputy director-generals at the Commission — The College of Commissioners yesterday appointed three new deputy director-generals: Sweden’s Annika Eriksgård (DG ECFIN), Spain’s Lorena Boix Alonso (DG DEFIS), and Italy’s Maria Cristina Russo (DG Research & Innovation).
Cypriot Giorgos Rossides was named senior adviser at the Internal Audit Service.
France
Marine Le Pen paves the way for Bardella at the Élysée — A French presidential race without Marine Le Pen? Three-time finalist Le Pen announced yesterday that she would back the candidacy of Jordan Bardella—her successor as head of the far-right Rassemblement National—if the Court of Appeal confirms her five-year ban from holding office for the misuse of EU funds.
“It would be very difficult, but I believe it is the right decision in the interest of the country,” she told RTL.
Her appeal will be heard from 13 January to 12 February 2026. France’s Council of State confirmed on Monday her automatic removal from the Pas-de-Calais departmental council.
Bardella currently leads first-round polls with more than 35 per cent of voting intentions.
Today’s Agenda
Ecofin
European Parliament: mini-plenary in Brussels (debate on European Council conclusions of 23 October; vote on the “Omnibus I” sustainability package)
European Commission: von der Leyen meets German finance minister Lars Klingbeil and IEA executive director Fatih Birol
Commission: commissioner Tzitzikostas meets Italian state railways CEO Stefano Donnarumma
Commission: vice-president Ribera participates in dialogue on public support for social housing
Parliament: president Metsola in Paris for the inauguration of the Bataclan victims’ memorial
Parliament: press conference by Jörgen Warborn on the “Omnibus I” simplification package
EU Court of Justice: rulings on Hungary’s export limits for construction materials; on non-alcoholic gin labelling; and an Advocate-General opinion on Spain’s Catalan amnesty law
ECB: publication of the Economic Bulletin; Banking Supervision Forum in Frankfurt
Eurostat: industrial-production data for September; regional road-accident fatalities for 2023