The proposals aim to provide flexible and effective financial support, adaptable to the evolving situation in Ukraine. The framework is built upon two primary solutions, underpinned by a set of five legal proposals.

The European Commission has detailed two potential solutions to structure the financial assistance:

• EU Borrowing: This solution would leverage the EU budget's "headroom" to secure funds.
• Reparations Loan: A novel instrument, the Reparations Loan, would empower the EU Commission to borrow against the cash balances held by EU financial institutions that originate from immobilised Russian Central Bank assets.

These proposals are structured to operate in full compliance with European and international law, while also safeguarding the integrity of the Union's financial market and the global status of the euro.

Recognising the complexities involved, the package incorporates significant safeguards which seek to protect EU member states and financial institutions from potential retaliation measures.

In particular, such safeguards include a so-called “solidarity” mechanism, which can be supported by either bilateral national guarantees or the EU budget itself, to cover any residual risk.

The proposed legislative package comprises the following key elements:

• A proposed regulation to formally establish the Reparations Loan.
• A proposal to prohibit the transfer of immobilised Russian Central Bank assets back to Russia.
• Two joint proposals to amend Council Regulation 833/2014, introducing critical safeguards with respect to Reparations Loan.
• Proposed amendment to the current multi-annual financial framework (MFF) to permit the use of the EU budget to underpin a loan to Ukraine, which could facilitate either of the two proposed solutions.

These measures are designed not only to support Ukraine's state functions and sovereignty but also to increase the cost of the ongoing conflict for Russia, thereby creating a stronger incentive for engagement in peace negotiations.

The European Council is expected to deliberate on these proposals and establish a clear path forward in its upcoming session on 18-19 December 2025. We are following these matters closely and will post a further blog in due course.

For more details, you can access the full press release here.