BRUSSELS — The European Commission on Wednesday unveiled a €90 billion loan to Ukraine aimed at saving it from financial collapse as it continues to battle Russia while aid from the U.S. dries up. About one-third of the cash will be used for normal budget expenditures and the rest will go to defense — although countries still need to formally agree to what extent Ukraine can use the money to buy weapons from outside the EU. A Commission proposal gives EU defense firms preferential treatment but allows Ukraine to buy foreign weapons if they aren’t immediately available in Europe. While the loan is interest-free for Ukraine, it is forecast to cost EU taxpayers between €3 billion and €4 billion a year in borrowing costs from 2028. The EU had to resort to the loan after an earlier effort to use sanctioned Russian frozen assets ran into opposition from Belgium. The race is now on for EU lawmakers to agree on a final legal text that’ll pave the way for disbursements in April, when Ukraine’s war chest runs out. Meetings between EU treasury and defense officials are already planned for Friday. The European Parliament could fast-track the loan as early as next week. The financing package is also crucial for unlocking additional loans to Ukraine from the International Monetary Fund. The Washington-based Fund wants to ensure Kyiv’s finances aren’t overstretched, as the war enters its fifth year next month. The €90 billion will be paid out over the next two years, as Moscow shows no sign of slowing down its offensive on Ukraine despite U.S.-led efforts to agree on a ceasefire. “Russia shows no sign of abating, no sign of remorse, no sign of seeking peace,” Commission President Ursula von der Leyen told reporters after presenting the proposal. “We all want peace for Ukraine, and for that, Ukraine must be in a position of strength.” When EU leaders agreed on the loan, Ukrainian President Volodymyr Zelenskyy called the deal an “unprecedented decision, and it will also have an impact on the peace negotiations.” Adding to the pressure on the EU, the U.S. under President Donald Trump has halted new military and financial aid to Ukraine, leaving it up to Europe to ensure Kyiv can continue fighting. Once the legal text is agreed, the EU will raise joint debt to finance the initiative, although the governments in the Czech Republic, Hungary and Slovakia said they will not participate in the funding drive.  The conditions on military spending are splitting EU countries. Paris is demanding strict rules to prevent money from flowing to U.S. weapons manufacturers, while Germany and other Northern European countries want to give Ukraine greater flexibility on how to spend the cash, pointing out that some key systems needed by Ukraine aren’t manufactured in Europe. MEETING HALFWAY The Commission has put forward a compromise proposal — seen by POLITICO. It gives preferential treatment to defense companies based in the EU, Ukraine and neighboring countries, including Norway, Iceland and Liechtenstein, but doesn’t rule out purchases from abroad. To keep the Northern European capitals happy, the Commission’s proposal allows Ukraine to buy specialized weapons produced outside the EU if they are vital for Kyiv’s defense against Russian forces. These include the U.S. Patriot long-range missile and air defense systems. The rules could be bent further in cases “where there is an urgent need for a given defense product” that can’t be delivered quickly from within Europe. Weapons aren’t considered European if more than 35 percent of their parts come from outside the continent, according to the draft. That’s in line with previous EU defense-financing initiatives, such as the €150 billion SAFE loans-for-weapons program. Two other legal texts are included in the legislative package. One proposes using the upper borrowing limit in the current budget to guarantee the loan. The other is designed to tweak the Ukraine Facility, a 2023 initiative that governs the bloc’s long-term financial support to Kyiv. The Commission will also create a new money pot to cover the borrowing costs before the new EU budget enters into force in 2028. RUSSIAN COLLATERAL Ukraine only has to repay the €90 billion loan if it receives post-war reparations from Russia — an unlikely scenario. If this doesn’t happen, the EU has left the door open to tapping frozen Russian state assets across the bloc to pay itself back. Belgium’s steadfast opposition to leveraging the frozen assets, most of which are based in the Brussels-based financial depository Euroclear, promises to make that negotiation difficult. However, the Commission can indefinitely roll over its debt by issuing eurobonds until it finds the necessary means to pay off the loan. The goal is to ensure Ukraine isn’t left holding the bill. “The Union reserves its right to use the cash balances from immobilized Russian assets held in the EU to repay the Ukraine Support Loan,” Economy Commissioner Valdis Dombrovskis said alongside von der Leyen. “Supporting Ukraine is a litmus test for Europe. The outcome of Russia’s brutal war of aggression against Ukraine will determine Europe’s future.” Jacopo Barigazzi contributed to this report from Brussels.

WHAT ARE THE ODDS? ANALYZING SIX GLOBAL SCENARIOS FOR 2026.  A series of inflection points await the world. Here’s our view of what might happen next year. By JAMIE DETTMER Illustration by Michael Waraksa for POLITICO Last year, POLITICO chose to be boosterish about the future as it outlined some not entirely tongue-in-cheek reasons for optimism about 2025. Some predictions were spot-on, though others less so: Donald Trump did manage to end (maybe) the war in Gaza, but peace in Ukraine is proving more elusive.   This P28 we’re taking a different tack by offering odds on some 2026 scenarios — from the political survival of both Hungary’s Viktor Orbán and Israel’s Benjamin Netanyahu to the chances of a financial crash and the likely winners of the mid-term elections in the United States.   Is the author prepared to bet his own salary on any of the episodes sketched below? Hell no! The most common mistake when it comes to gambling is to start in the first place. Just ask Harry Kakavas, one of Australia’s smartest real-estate salesmen, who made a fortune selling property on the Gold Coast only to lose tens of millions of dollars at the Baccarat tables.  But if you want to place some wagers, be my guest. There are plenty of online gambling sites that’ll be happy to take your money.   Here’s a caution though. Politics in this topsy-turvy era is even less predictable than sports. And even more so with the ever-unpredictable Donald Trump in the White House. After a whirlwind year at the start of his second term, here’s how we see things unfolding across the globe in 2026.   TRUMP PULLS OFF AN END TO THE WAR IN UKRAINE For all the talk of Western sanctions crashing the Russian economy and bringing the Kremlin to heel, Vladimir Putin seems unperturbed. Regardless of the carnage on the frontlines or Russians queueing for gas because of Ukrainian drone strikes on oil refineries, he has remained fixed on pressing his maximalist demands.   Meanwhile, there are domestic political limits on what Ukraine’s Volodymyr Zelenskyy can agree to without triggering a public backlash.   Nonetheless, Trump often seems more inclined than not to think a deal might be possible. After his Alaska summit with Putin, Trump was heard on a hot mic explaining to France’s Emmanuel Macron that he thinks Putin really wants to “make a deal for me.” “I think he wants to make a deal with me. Do you understand that? As crazy as it sounds,” Trump added.   Of course, the stubbornness of the Russian leader has left Trump frustrated and occasionally musing about whether he’s being played — which is what Melania Trump reportedly thinks Putin is doing.  The Russian leader is adept at stringing Trump along — and his timing is impeccable when reaching out to his US counterpart. Take his two-hour-log phone call last month dangling the prospects of a summit just as Trump hinted he might give Ukraine Tomahawk Cruise missiles.   Arguably, prolonging the war is useful for Putin. It has the benefit of further straining cash-strapped European nations (see below), and risks fracturing the transatlantic alliance. A distracted West also helps Putin’s ally Xi Jinping as he calculates whether, or when, to make a move on Taiwan.  Arguably, prolonging the war is useful for Putin. | Sputnik And Putin’s regime could be imperiled if he ends the conflict abruptly. A rapid shift out of a war economy would likely trigger some dangerous sociopolitical infighting, according to Ella Paneyakh, a sociologist at the New Eurasian Strategies Centre think tank. She says it would spark “cruel and vicious competition for diminishing resources.”  With Ukraine’s severe manpower shortage — Ukrainian units are able to deploy just a dozen troops per kilometer of front — there’s always the chance of a frontline breakthrough. In short, Putin may well calculate he can get more by persisting: more land, Western security guarantees so watered down they’re worthless and a cap on the size of a postwar Ukrainian army. That would handily set the stage for a later resumption of Russian revanchist hostilities.   The counter-argument? The Russian economy is struggling with high interest rates, labour shortages and soaring government borrowing costs. There’s alarm about the bad debt Russian banks are shouldering. The status quo may not be able to last forever. Likewise, though, Ukraine could be on the ropes this winter with Russia’s relentless targeting of the country’s energy infrastructure and the Europeans unable to bankroll Kyiv sufficiently.   Odds: 4/1 2026 IS THE YEAR THE BOND MARKET SAYS ENOUGH IS ENOUGH  Bill Clinton’s campaign guru James Carville once suggested it would be fun to be reincarnated as the bond market. “You can intimidate everybody,” he said.   Even Trump appears to appreciate he’s outranked by the real masters of the universe — the bond vigilantes, hedge and pension fund bosses and high financiers. In the spring he had to pause his signature policy of “reciprocal tariffs” when the bond market frowned.   The awesome collective power of the global investment giants and traders was demonstrated three years ago when they reacted adversely to the poorly sequenced tax-cutting mini-budget of Britain’s Liz Truss. Her premiership was the shortest-lived in British history; Truss’s brief 49 days in office broke the previous record of George Canning, who served for 119 days in 1827 — but he had the excuse of dying on the job.   How many other Western heads of governments might be ushered to the door next year by the bond market as they fail to reduce rising budget deficits?   How many other Western heads of governments might be ushered to the door next year by the bond market as they fail to reduce rising budget deficits? | Timothy A. Clary/AFP via Getty Images The parlous state of public finances — from Japan to Britain and the United States — has kept long-dated borrowing costs at near multi-year peaks this year. The fiscal challenges of high levels of government borrowing, slow growth and sluggish productivity are only mounting. And it is going to be an uphill battle to keep the bond markets reassured.   Demand for government bonds worldwide has cooled with institutional investors put off by the outlook for some major governments being able to maintain their finances, including the United States. “The economic reforms needed to really cover increasing debt are lacking, and the capital market sees that,” Deutsche Bank CEO Christian Sewing said in September.   With its exploding public debt, France has been the canary in the mine with a succession of Emmanuel Macron-appointed prime ministers unable to muster parliamentary — or public — support for serious debt-reduction. Britain is closely following. Financial crisis and political crisis go hand-in-hand, reinforcing and fueling each other. For electoral reasons, governments are equally loath to hike taxes or cut spending, but something has got to give.   Odds: 5/1 NETANYAHU SURVIVES AGAIN They call him “the Magician” for a reason. When all has seemed lost in Benjamin Netanyahu’s long political career, he has implausibly bounced back. “An obsessive, relentless fighter, failure is not a legitimate option for him,” noted one of his biographers, Ben Caspit.   The Israeli leader was first nicknamed “Bibi the Magician” in the 1990s, after beating Shimon Peres in elections held months after the assassination of then-Prime Minister Yitzhak Rabin. Later, few believed he could pull off a win in 2015 given talk of criminal investigations and allegations of breach of trust and bribes. Still, Bibi pulled another rabbit out of his hat and secured reelection by courting the Israeli far right and religious nationalists — a tactic he repeated in 2019 to claw his way back.   The political obituarists were quick to declare him finished two years ago after Hamas rampaged through the kibbutzim of southern Israel. His government was widely blamed for a catastrophic failure to prevent the Oct. 7 attack, seen as the worst security lapse since the 1973 Yom Kippur war that ended the legendary Golda Meir’s career.  They call him “the Magician” for a reason. When all has seemed lost in Benjamin Netanyahu’s long political career, he has implausibly bounced back. | Joe Raedle/Getty Images Parliamentary elections have to be held by October next year. The smart money is on a vote being held sooner, likely Netanyahu’s preferred option. And despite Oct 7 and Netanyahu’s legal travails, he has slowly improved his political position. The rock-bottom poll ratings of his ruling Likud party started to lift after the military campaign against Hezbollah in Lebanon and they continued to rise with the humbling of Iran.   And Trump may have done Bibi a big favor by pushing him into accepting the Gaza peace plan and agreeing to a ceasefire. Netanyahu was able to use Trump as the excuse for halting the military campaign in Gaza, allowing him to overrule the religious nationalists and far-right partners in his rambunctious coalition who wanted the war to continue.  Netanyahu’s political opponents are drawing comfort from the fact that Likud appears to be running short of the 35 seats it secured in the last election. Opinion polls are showing his right-wing coalition would struggle to secure 61 seats in the 120-seat Knesset. But so too would the opposition bloc. And a poll last month for Zman Yisrael, a Hebrew-language media site, suggested Bibi was enjoying increased support in the wake of the ceasefire and hostage release deal. Likud appears on course to once again emerge as the largest party in the Knesset.  The best hope for Netanyahu’s opponents is to unite and offer Israelis a simple choice. That’s the strategy former Prime Minister Naftali Bennett is pursing; he’s wooing Gadi Eisenkot, a former chief of the Israeli Defense Forces, in a bid to shape the election as a head-to-head fight between himself and Bibi. Does Netanyahu have another card up his sleeve?  Odds 3/1 HUNGARY’S VIKTATOR WINS REELECTION Who would bet against Viktor Orbán leading his national conservative party, Fidesz, to another parliamentary victory?  The Viktator — a pun combining his first name and the Hungarian word for dictator — has been victorious in the past last three elections. The bête noire of Europe’s centrists and leftists, they will be determined to see him tripped up this time when Hungarians go to the polls in April, eager to be free of his EU obstructionism.   Who would bet against Viktor Orbán leading his national conservative party, Fidesz, to another parliamentary victory?  | Pierre Crom/Getty Images “The election isn’t going to be hermetically sealed off from the rest of Europe,” chuckles Frank Furedi, who heads the Brussels branch of the Hungarian government-backed college Mathias Corvinus Collegium. Furedi predicts Hungary will be the venue for a massive ideological brawl, further polarizing an already highly divided country.   Trump, MAGA influencers and Orbán’s allies in the Patriots for Europe group will be equally determined to see him remain as prime minister. They’re already drawing comfort, says Furedi, from the result in October of the Czech Republic’s parliamentary election, which saw right-wing populist Andrej Babiš’s ANO party secure a big win. The presidential election victory by a national conservative in Poland this year is also a source of confidence. But even Orbán loyalists don’t doubt this is going to be the toughest election he has faced in the past 15 years with incumbency proving a disadvantage.  And election campaigning is already underway. Péter Magyar, an MEP and former Fidesz insider, is Orbán’s main rival and hopes to capitalize on widespread public dissatisfaction with record inflation, economic woes and a series of political scandals. He’ll hope Orbán fatigue will kick in. His pro-Western and center-right party, Tisza, is running neck-and-neck with Fidesz in many polls, although some independent pollsters reckon Magyar is ahead.   But one in four Hungarians remain undecided. “A bit of trickery and a lot of campaigning” could shift the polls, according to political analyst Péter Krekó of the Budapest-based think tank Political Capital. “Tisza’s lead is not unchangeable.” Orbán is casting Magyar as a puppet of the EU and even a Ukrainian agent of influence who wants to push Hungary into war. He will hope his populist EU-baiting narratives, helped by a media controlled by his friends, shift the focus of the election toward the culture wars. It just may work, again.  Odds: 2/1 A SHADOW BANKING CRISIS ERUPTS And spare a worrying thought for the unregulated private credit market and the so-called shadow banks. The usually staid Governor of the Bank of England, Andrew Bailey, has already tolled the alarm bell.  In October, he warned of parallels with the 2008 financial crash, which was sparked by an American housing bubble fueled by easy credit and the issuance of risky subprime mortgages, with their subsequent bundling into opaque financial products that spread risk throughout the global financial system. Risk turned to contagion.  Governor of the Bank of England, Andrew Bailey, warned of parallels with the 2008 financial crash. | Oli Scarff/Getty Images Will the global financial system once again be brought to its knees? The private credit markets have become a major source of funding for businesses. That’s partly because traditional banks never regained their appetite for riskier lending after the 2008 crisis, and they have also been restrained because of greater regulatory scrutiny.   The hedge funds and private equity firms comprising the shadow banking sector now account for just under half of the world’s financial assets, worth around $250 trillion, according to the US Financial Stability Board.   The good news is that unlike traditional and investment banks they’re not using consumer cash deposits to invest in long-term, illiquid assets; they raise and borrow funds from investors, who in large part agree for their investment to be locked up for long periods. That reduces the short-term risks for the shadow banks — so in theory there shouldn’t be massive runs on them, like, say, what happened to Lehman Brothers in 2008.   But that’s in theory. If the private credit market is roiled, there’s bound to be an impact on other parts of the global financial system. And cash-strapped governments will be in no position to organize a bailout like in 2008, particularly at a time of even greater populist revolt. Furthermore, shadow banks have bet heavily on AI — and the AI boom might be a bubble ready to pop. It might soon be time to take cover.  Odds 3/1 DEMOCRATS VS. REPUBLICANS It will be a tall order for the Republicans to retain control of the House of Representatives.   The incumbent president’s party invariably loses control of the House in the midterms — only twice since 1938 has that not been the case. “Both exceptions reflected unusual circumstances,” according to William A. Galston of the Brookings Institution, a centrist think tank.   It will be a tall order for the Republicans to retain control of the House of Representatives.  | Visions of America/Universal Images Group via Getty Images In 2002, President George W. Bush’s Republicans surfed a rally-round-the-flag wave following the 9/11 attacks; and in 1998, Bill Clinton’s Democrats benefited from the unpopular effort by Republicans to impeach him.  Complicating the task for Democrats next year is a controversial redistricting scheme pushed by Trump in Texas and other states that should net Republicans additional seats, though some of that will be offset by Democrats redistricting in California. Nonetheless, with Republicans only enjoying a slim majority in the House, Democrats have to be odds-on favorites to win back control, especially if Trump’s net approval rating remains negative. In a reassuring sign for the party, Democrats scored big wins in gubernatorial races in New Jersey and Virginia in November.  The Senate is another matter. The GOP has a six-seat majority currently, and they’re playing on much safer turf. Although they will be defending 22 seats next year compared to the Democrats’ 13, most of their incumbents are considered secure. Only one Republican senator is running in a state that voted for Kamala Harris in last year’s presidential election. Two Democratic incumbents will be running in states that Trump won last year.   All in all, Republicans in the Senate look to be in a much stronger position than their counterparts in the House. For Democrats to win the Senate would require a giant wave of anti-Trump fervor sweeping into even some of the most conservative states in the country. It’s unlikely, but stranger things have happened.  Democrats seize the House: 2/1 odds; Republicans keep the Senate: 2/1 odds  

BRUSSELS — Diplomats are working on a long-shot 11th-hour compromise to salvage a deal on sending vital financial aid to Ukraine at Thursday’s high-stakes EU leaders’ summit. On Wednesday evening Europe’s leaders were split into irreconcilable camps, at least publicly, and seemed unlikely to agree on how to fund Kyiv, thanks partly to the reemergence of the same bitter north-south divisions over joint debt that torpedoed EU unity during the eurozone crisis. Only a few hours before the 27 leaders gather in Brussels, two opposing groups are crossing swords over whether to issue a loan to Ukraine based on frozen Russian central bank reserves, largely held by the Euroclear bank in Belgium. Germany along with Nordic and Eastern European countries say there is no alternative to that scheme. But they are running into hardening resistance from Belgium and Italy, which are gunning for Plan B: Support for Kyiv based on EU debt guaranteed by the bloc’s common budget. Bulgaria, Malta, Hungary and Slovakia are also against the use of the assets. In a stark illustration of the schism, Italian Prime Minister Giorgia Meloni said on Wednesday she would use the Council meeting to demand answers on the “possible risks” of leveraging the assets, while German Chancellor Friedrich Merz doubled down on the assets plan “to help end this war as quickly as possible.” ESCAPE PLAN The first contours of a potential route out of the impasse — one that would have to be hashed out during hours of negotiations — are beginning to take shape. European Commission President Ursula von der Leyen cautiously opened the door to joint debt on Wednesday morning during a speech at the European Parliament in Strasbourg. “I proposed two different options for this upcoming European Council, one based on assets and one based on EU borrowing. And we will have to decide which way we want to take,” she said. The key to such a plan would be carving Hungary and Slovakia — which both oppose giving further aid to Ukraine — out of the joint debt scheme, four EU diplomats told POLITICO. A deal could still be agreed at the Council among the 27 EU countries, but the ultimate arrangement would stipulate that only 25 would be involved in the funding. Agreeing such a scheme would give a crucial lifeline to Ukraine’s shattered public finances as its coffers risk running dry as early as next April. Hungary’s Viktor Orbán is already predicting the assets will not be discussed in Brussels, and that negotiations have shifted to joint loans. Multiple diplomats, however, retorted that Orbán was wrong and that the Russian assets were still “the only game in town.” CRUNCH TIME Despite growing political pressure on the EU to prove it can rise to meet the existential challenges facing Ukraine, diplomats from the rival camps were often skeptical on Wednesday that a compromise could be found. The idea of EU joint debt has for years been anathema to the northern member countries, who have been unwilling to underwrite bonds for highly indebted southern countries. “The closest [situations] to what’s happening now with frozen assets are the 2012-2013 financial crisis and Greece’s bailout in 2015,” said a senior EU diplomat who, like others quoted in this story, was granted anonymity to speak freely. With respect to the Ukraine war, the northerners deny they oppose the use of eurobonds over concerns about the solvency of other EU countries, but argue they prefer the assets because they would provide a greater long-term cash infusion to Ukraine. “This is not about frugals versus spenders. It’s about being pro-Ukraine or not,” said a second EU diplomat, adding that northern and eastern European countries have taken the lead in bankrolling Ukraine’s war needs over the past four years. BACKING THE BELGIANS Despite weeks of painstaking negotiations over the assets, efforts to bring Belgium around are backfiring. The country adamantly opposes using the Russian money held by Euroclear in Brussels, and has now attracted allies. “[The Commission] created a monster, and they’ve been eaten by it,” said a third EU diplomat, referring to the assets plan. Germany and its allies, however, warn there is still no alternative to targeting the Euroclear money. “If you want to do something together as Europeans, the reparations loan is the only way,” a fourth EU diplomat said. The idea behind the assets-based loan is that Kyiv would not have to repay it unless Moscow coughs up the billions-worth of reparations needed to rebuild Ukraine’s pulverized cities — an unlikely scenario. Belgian Prime Minister Bart De Wever is expected to push the Commission to explore joint debt during Thursday’s summit of EU leaders — in the hope that others around the table will echo his demands. His supporters claim the model “is cheaper and offers more clarity,” said a fifth EU diplomat. But critics point out it will also require the political blessing of Hungary’s pro-Russia Prime Minister Orbán — who has repeatedly threatened to torpedo further financial aid to Kyiv. The impasse would require the Commission to concoct a workaround to keep Ukraine afloat while allowing Orbán to save face, according to the four EU diplomats. In exchange for his support the Commission could spare Hungarian and Slovak taxpayers from having to pay for Ukraine’s defense.   “The Commission now pushes joint loans, but we will not let our families foot the bill for Ukraine’s war,” Orbán wrote on X on Wednesday afternoon. He added that “Russian assets will not be on the table at tomorrow’s EUCO [European Council].” However, a senior EU official was quick to reject the Hungarian leader’s claim that the Russian reserves were no longer in play. “The reparations loan is still very much on the table,” they said. Bjarke Smith-Meyer, Gabriel Gavin and Gerardo Fortuna contributed to this report

Less than 24 hours before EU leaders descend on Brussels for vital talks on financing Ukraine’s war effort, Belgium believes negotiations are going in reverse. “We are going backward,” Belgium’s EU ambassador, Peter Moors, told his peers on Wednesday during closed-door talks, according to two diplomats present at the meeting. The European Commission and EU officials are in a race against time to appease Belgian concerns over a €210 billion financing package for Ukraine that leverages frozen Russian state assets across the bloc. Belgium’s support is crucial, as the lion’s share of frozen assets lies in the Brussels-based financial depository Euroclear. Bart De Wever, the country’s prime minister, refuses to get on board until the other EU governments provide substantial financial and legal safeguards that protect Euroclear and his government from Russian retaliation — at home and abroad. One of the most sensitive issues for Belgium is placing a lid on the financial guarantees that currently stand at €210 billion. Belgium believes that the guarantees provided by other EU countries should have no limits in order to protect them under any scenario. Talks looked to be going in the right direction. The Belgians backed a Commission pitch for EU capitals to cough up as much as possible in financial guarantees against the Ukrainian package — only for Belgium’s ambassador to drop a bombshell at the end of the meeting. “I just don’t know anymore,” one diplomat said, on condition of anonymity in order to speak freely. A spokesperson for the Belgian permanent representation declined to comment. Another key demand from Belgium is that all EU countries end their bilateral investment treaties with Russia to ensure Belgium isn’t left alone to deal with retaliation from Moscow. But to Belgium’s annoyance, several countries are reluctant to do so over fears of retribution from the Kremlin. Moors said during the meeting that any decision on the use of the assets will have to be taken by De Wever, according to an EU diplomat. Belgium is pushing the Commission to explore alternative options to finance Ukraine, such as issuing joint debt — a position that’s gained traction with Bulgaria, Italy, and Malta. European Commission President Ursula von der Leyen cautiously opened the door to joint debt during a speech at the European Parliament in Strasbourg on Wednesday morning. “I proposed two different options for this upcoming European Council, one based on assets and one based on EU borrowing. And we will have to decide which way we want to take,” she said. But joint debt requires unanimous support, unlikely given Hungarian Prime Minister Viktor Orbán’s threats to veto further EU aid to Kyiv.  Moors proposed a possible workaround on Tuesday by suggesting triggering an emergency clause — known as Article 122 — that would nullify the veto threat. The Commission and Council’s lawyers rebuffed the Belgian pitch at the same meeting, saying it was not legally viable. The idea was first proposed by the president of the European Central Bank, Christine Lagarde, during a dinner of finance ministers last week, but has been challenged by Northern European countries. De Wever is expected to suggest this option during the meeting of EU leaders on Thursday.

Czech President Petr Pavel on Monday officially swore in the country’s new right-wing coalition government led by populist billionaire Andrej Babiš, which could join ranks with Hungary and Slovakia in opposing aid to Ukraine. The appointment ends weeks of uncertainty over whether the president would approve Babiš as Czechia’s new leader. Pavel said last week he would name Babiš prime minister after the tycoon pledged to divest his ownership of Agrofert, an agricultural conglomerate and a major recipient of EU subsidies. Babiš’ comeback (he previously served as PM from 2017 to 2021) poses a fresh headache for Europe as it struggles to finance aid to war-ravaged Ukraine. Over the weekend Babiš came out against a proposal to finance Kyiv via a loan based on Russia’s frozen assets, joining the growing list of countries that have rejected the instrument. “The European Commission must find other ways to finance Ukraine,” Babiš announced Saturday on Facebook. “Our coffers are empty, and we need every crown [unit of Czech currency] we have for our citizens.” The billionaire’s previous term in power was marked by clashes with Brussels over his conflict of interest related to Agrofert. Since then Babiš has steered his ANO party firmly to the right, joined the far-right European Parliament grouping Patriots for Europe, and threatened to cancel a Prague-led ammunition initiative that has delivered over 1 million rounds to Kyiv. Babiš won a parliamentary election in October and proceeded to clinch a coalition deal with the far-right Freedom and Direct Democracy (SPD) and right-wing Motorists. All three parties share a commitment to rolling back support for climate measures such as the ETS2 emissions trading system, and to opposing Brussels’ plans to ban combustion engines. ANO will hold nine ministerial posts in the new Cabinet, including the premiership, with the Motorists taking four and the SPD three. Speaking at the inauguration ceremony Pavel promised to closely monitor how the incoming government safeguards democratic institutions, including the media, the judiciary and the country’s security forces. Babiš earlier raised concerns about media freedom with his plan to reform public broadcasting by abolishing license fees and funding it through the state budget. The president also noted that Czechia’s key safety and economic guarantees stem from its EU and NATO membership. “That is why we should approach membership in these institutions with the utmost responsibility and be responsible, constructive members rather than rejecters,” Pavel said.

Top EU diplomat Kaja Kallas said Monday that financing Ukraine via a loan based on Russia’s frozen assets was now looking “increasingly difficult” ahead of a crunch European Council summit on Thursday. Kallas’ warning on the narrowing path to securing a deal on Russia’s immobilized billions came as European leaders gather in Berlin to try to influence the shape of a potential peace deal in discussions with Ukrainian President Volodymyr Zelenskyy and envoys from U.S. President Donald Trump. EU leaders including German Chancellor Friedrich Merz insist that using Russia’s frozen assets is the only credible method for Europe to keep Ukraine financially afloat from next year. But in the run-up to the summit in Brussels, fears are growing that the push could be derailed by opposition from EU states, who are under pressure from both Russia and the United States. While Belgian Prime Minister Bart De Wever has mentioned threats from Russia if Brussels seizes the assets — and Moscow has already taken steps to sue the Belgian bank where most of the cash is held — two senior European officials involved with the loan effort said the U.S. was also pressuring EU states to go against the scheme. “The Americans are not only demanding that Ukraine cede territories Russia did not manage to take, but are also pushing several European countries not to give Ukraine a €210 billion reparations loan,” said one of the senior European officials. According to a leaked U.S.-Russia draft peace plan, Washington intends to direct part of the assets toward U.S.-led reconstruction efforts, and the same European officials said the U.S. had not dropped its basic opposition to Europe using the assets to help Ukraine. Germany’s Merz has already insisted that the Russian assets should not be transferred to America’s economic advantage. Speaking on her way into a gathering of foreign ministers in Brussels, Kallas noted “significant pressure from all sides” over the reparations loan, which she called the “most credible option” to keep Kyiv financially afloat from next year. “This [reparations loan] is what we’re working on. We are not there yet and it is increasingly difficult, but we’re doing the work and we still have some days,” she said. Belgium has long been opposed to using Russia’s frozen assets to help Ukraine, arguing that this would imperil the peace process and expose Brussels to legal retaliation from Russia. In recent days, Italy, Bulgaria and Malta came out against the scheme, while Hungary and Slovakia have previously voiced opposition. Over the weekend, Czechia’s newly-installed prime minister, Andrej Babiš, came out against the loan, saying Prague would not provide any financial guarantees to back up Belgium. The EU doesn’t need unanimous backing to tap the assets following a decision last week to use emergency powers to immobilize the assets indefinitely. A vote by qualified majority could still pass even if all seven countries cited above oppose it, given that a blocking minority requires 35 percent of the EU’s population.  But Kallas said that it would “not be easy” to override Belgium, given that the bulk of the assets are in the country. “I think it’s important that they are on board with whatever we do.” The threats against Belgium appear to be ramping up. A joint investigation by EU Observer, Humo, De Morgen and Dossier Center stated that the chief executive of Euroclear, Valérie Urbain, has been the subject of threats and intimidation from a Russia-sympathizing French banker linked to Euroclear, requiring her to contract private security. In response, former Estonian Prime Minister Kallas said “some countries are more used to the threats presented by Russia than others — but I want to tell you these are only threats. If we keep united, we are much stronger.”

ATHENS — The country that almost got kicked out of the eurozone is now running the powerful EU body that rescued it from bankruptcy. Greece’s finance minister, Kyriakos Pierrakakis, on Thursday beat Belgian Deputy Prime Minister Vincent Van Peteghem in a two-horse race for the Eurogroup presidency. Although an informal forum for eurozone finance ministers, the post has proved pivotal in overcoming crises — notably the sovereign debt crisis, which resulted in three bailouts of the Greek government. That was 10 years ago, when Pierrakakis’ predecessor described the Eurogroup as a place fit only for psychopaths. Today, Athens presents itself as a poster child of fiscal prudence after dramatically reducing its debt pile to around 147 percent of its economic output — albeit still the highest tally in the eurozone. “My generation was shaped by an existential crisis that revealed the power of resilience, the cost of complacency, the necessity of reform, and the strategic importance of European solidarity,” Pierrakakis wrote in his motivational letter for the job. “Our story is not only national; it is deeply European.” Few diplomats initially expected the 42-year-old computer scientist and political economist to win the race to lead the Eurogroup after incumbent Paschal Donohoe’s shock resignation last month. Belgium’s Van Peteghem could boast more experience and held a great deal of respect within the eurozone, setting him up as the early favorite to win. But Belgium’s continued reluctance to back the European Commission’s bid to use the cash value of frozen Russian assets to finance a €165 billion reparations loan to Ukraine ultimately contributed to Van Peteghem’s defeat. NOT TYPICAL Pierrakakis isn’t a typical member of the center-right ruling New Democracy party, which belongs to the European People’s Party. His political background is a socialist one, having served as an advisor to the centre-left PASOK party from 2009, when Greece plunged into financial crisis. He was even one of the Greek technocrats negotiating with the country’s creditors. The Harvard and MIT graduate joined New Democracy to support Prime Minister Kyriakos Mitsotakis’ bid for the party leadership in 2015, because he felt that they shared a political vision. Pierrakakis got his big political break when New Democracy won the national election in 2019, after four years of serving as a director of the research and policy institute diaNEOsis. He was named minister of digital governance, overseeing Greece’s efforts to modernize the country’s creaking bureaucracy, adopting digital solutions for everything from Cabinet meetings to medical prescriptions. Those efforts made him one of the most popular ministers in the Greek cabinet — so much so that Pierrakakis is often touted as Mitsotakis’ likely successor for the party leadership in the Greek press. Few diplomats initially expected the 42-year-old computer scientist and political economist to win the race to lead the Eurogroup after incumbent Paschal Donohoe’s shock resignation last month. | Nicolas Economou/Getty Images After the re-election of New Democracy in 2023, Pierrakakis took over the Education Ministry, where he backed controversial legislation that paved the way for the establishment of private universities in Greece. A Cabinet reshuffle in March placed him within the finance ministry, where he has sped up plans to pay down Greece’s debt to creditors and pledged to bring the country’s debt below 120 percent of GDP before 2030.

BRUSSELS — Belgium is demanding that the EU provide an extra cash buffer to ensure against Kremlin threats over a €210 billion loan to Ukraine using Russian assets, according to documents obtained by POLITICO. The cash buffer is part of a series of changes that the Belgian government wants to make to the European Commission’s proposal, which would be financed by leveraging €185 billion of frozen Russian state assets held by the Brussels-based financial depository Euroclear. The remaining €25 billion would come from other frozen Russian assets, lying in private bank accounts across the bloc — predominantly in France. Belgium’s fresh demand is designed to give Euroclear more financial firepower to withstand Russian retaliation. This cash buffer would come on top of financial guarantees that EU countries would provide against the €210 billion loan to protect Belgium from paying back the full amount if the Kremlin claws back the money. In its list of amendments to the Commission, Belgium even suggested increasing the guarantees to cover potential legal disputes and settlements — an idea that is opposed by many governments. Belgium’s demands come as EU leaders prepare to descend on Brussels on Dec. 18 to try and secure Ukraine’s ability to finance its defences against Russia. As things stand, Kyiv’s war chest will run bare in April. Failure to use the Russian assets to finance the loan would force EU capitals to reach into their own pockets to keep Ukraine afloat. But frugal countries are politically opposed to shifting the burden to EU taxpayers. Belgium is the main holdout over financing Ukraine using the Russian assets, amid fears that it will be on the hook to repay the full amount if Moscow manages to claw its money back. The bulk of this revenue is currently being funneled to Ukraine to pay down a €45 billion loan from G7 countries, with Euroclear retaining a 10 percent buffer to cover legal risks. | Artur Widak/Getty Images In its list of suggested changes, Belgium asked the EU to set aside an unspecified amount of money to protect Euroclear from the risk of Russian retaliation. It said that the safety net will account for “increased costs which Euroclear might suffer (e.g. legal costs to defend against retaliation)” and compensate for lost revenue. According to the document, the extra cash buffer should be financed by the windfall profits that Euroclear collects in interest from a deposit account at the European Central Bank, where the Kremlin-sanctioned money is currently sitting. The proceeds amounted to €4 billion last year. The bulk of this revenue is currently being funneled to Ukraine to pay down a €45 billion loan from G7 countries, with Euroclear retaining a 10 percent buffer to cover legal risks. In order to better protect Euroclear, Belgium wants to raise this threshold over the coming years.

BRUSSELS — France and Italy can breathe a sigh of relief after the EU’s statistics office signaled that the financial guarantees needed to back a €210 billion financing package to Ukraine won’t increase their heavy debt burdens. Eurostat on Tuesday evening sent a letter, obtained by POLITICO, informing the bloc’s treasuries that the financial guarantees underpinning the loan, backed by frozen Russian state assets on Belgian soil, would be considered “contingent liabilities.” In other words, the guarantees would only impact countries’ debt piles if triggered. Paris and Rome wanted Eurostat to clarify how the guarantees would be treated under EU rules for public spending, as both countries carry a debt burden above 100 percent of their respective economic output. Eurostat’s letter is expected to allay fears that signing up to the loan would undermine investor confidence in highly indebted countries and potentially raise their borrowing costs. That’s key for the Italians and French, as EU leaders prepare to discuss the initiative at a summit next week. Failure to secure a deal could leave Ukraine without enough funds to keep Russian forces at bay next year. The Commission has suggested all EU countries share the risk by providing financial guarantees against the loan in case the Kremlin manages to claw back its sanctioned cash, which is held in the Brussels-based financial depository Euroclear. “None of the conditions” that would lead to EU liability being transferred to member states “would be met,” Eurostat wrote in a letter, adding that the chances of EU countries ever paying those guarantees are weak. The Commission instead will be held liable for those guarantees, the agency added. Germany is set to bear the brunt of the loan, guaranteeing some €52 billion under the Commission’s draft rules. This figure will likely rise as Hungary has already refused to take part in the funding drive for Ukraine. The letter is unlikely to change Belgium’s stance, as it wants much higher guarantees and greater legal safeguards against Russian retaliation at home and abroad. The biggest risk facing the Commission’s proposal is the prospect of the assets being unfrozen if pro-Russia countries refuse to keep existing sanctions in place. Under current rules, the EU must unanimously reauthorize the sanctions every six months. That means Kremlin-friendly countries, such as Hungary and Slovakia, can force the EU to release the sanctioned money with a simple no vote. To make this scenario more unlikely, the Commission suggested a controversial legal fix that will be discussed today by EU ambassadors. Eurostat described the possibility of EU countries paying out for the loan as “a complex event with no obvious probability assessment at the time of inception.”

The European Parliament could have an early say in the race for the European Central Bank vice presidency, a win for lawmakers after years of pushing for more influence over the EU’s top appointments. Eurozone finance ministers will begin the process of selecting a successor to Luis de Guindos on Thursday, according to a draft timeline seen by POLITICO and an EU diplomat who separately confirmed the document’s content. The deadline for submitting candidates will be in early January, although an exact date is still to be agreed.  According to the document, members of the Economic and Monetary Affairs Committee will have the right to hold in-camera hearings with all the candidates in January before the Eurogroup formally proposes a name to the European Council for appointment. This would mark a break with the past, when MEPs only got involved in the process after ministers had already had their say. Involving the Parliament at an earlier stage could influence the selection process, for example by giving it the chance to press for adequate gender balance in the list of candidates. This had been one of the Parliament’s demands in its latest annual report on the ECB’s activities. “The Parliament will play a stronger role this time,” the diplomat told POLITICO. So far, only Greece is considering proposing a woman for the vice president slot: Christina Papaconstantinou, who is currently deputy governor at the C. Finland, Latvia, Croatia and Portugal are all set to propose male candidates. The candidate picked by ministers will return to lawmakers for an official hearing, which should take place between March and April, according to the document. MEPs have limited power over the final appointment, but they will issue a nonbinding opinion, which is then adopted through a plenary vote. The new vice president will be formally appointed by the European Council in May, before taking office on June 1. So far, only Greece is considering proposing a woman for the vice president slot. | Aris Messinis/Getty Images The vice president’s position is the first of four to come up for rotation at the ECB’s Executive Board over the next two years. It wasn’t immediately clear if the other three appointments — including the one for a new president — will give the lawmakers the same degree of influence. CORRECTION: This article was updated on Dec. 9 to correct the spelling of the surname of the deputy governor of the Bank of Greece.