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.”

EU countries will need to individually commit billions of euros to guarantee as much as €210 billion in urgently needed loans to Ukraine, with Germany set to backstop up to €52 billion, according to documents obtained by POLITICO. The European Commission presented the eye-watering totals to diplomats last week after unveiling a €165 billion reparations loan to Ukraine using the cash value of frozen Russian assets. The backstops, which would be divided up proportionally among countries across the bloc, are needed to secure a go-ahead on the loan from Prime Minister Bart De Wever. The Belgian leader has opposed the use of sovereign Russian assets over concerns that his country alone may eventually be required to pay the money back to Moscow. Some €185 billion in frozen Russian assets are under the stewardship of the Brussels-based financial depository, Euroclear, while another €25 billion is scattered across the bloc in private bank accounts. The per-country totals may go up, however, if Kremlin-friendly countries such as Hungary refuse to join the initiative — though non-EU countries may help, if they choose, by covering some of the overall guarantee. Norway had been mooted as a possible candidate until its finance minister, Jens Stoltenberg, distanced Oslo from the idea. Ukraine faces a budget shortfall of €71.7 billion next year and will have to start cutting public spending from April unless fresh money arrives. Hungary on Friday vetoed issuing new EU debt to plug Kyiv’s budget gap, putting the onus on leaders to convince De Wever to support using Russian assets when EU leaders meet on Dec. 18, rather than dipping into their own national coffers. German Chancellor Friedrich Merz was in Brussels on Friday evening to reassure De Wever that Germany would provide 25 percent of the backstop, the largest share of any country. “We had a very constructive exchange on this issue,” Merz said after dining with the Belgian leader. “Belgium’s particular concern about the question of how to make use of frozen Russian assets is undeniable and must be addressed in any conceivable solution in such a way that all European states bear the same risk.” CHECKS AND BALANCES The proposed reparations loan earmarks €115 billion to finance Ukraine’s defense industry over five years, while €50 billion would cover Kyiv’s budgetary needs. The remaining €45 billion from the overall package would repay a G7 loan to Ukraine, issued last year. The funds would be disbursed in six payments over the year, according to the Commission’s slideshows. Certain checks and balances would be in place to prevent crooks from pocketing the money. In terms of defense spending, for example, this would include ensuring that the contracts and the spending plans are acceptable to the Commission. The Commission would also detail Ukraine’s financing needs and outline where the government receives military and financial aid, allowing EU capitals to track the money streaming to Kyiv.

BRUSSELS — Hungary formally ruled out issuing eurobonds to support Ukraine on Friday, a move that robs the EU of a potential Plan B should it fail to find a way to use frozen Russian state assets to finance a €165 billion loan to Kyiv. The European Commission wants the 27 EU member countries to agree at a summit later this month to support Kyiv’s faltering economy with a loan based on immobilized Russian central bank reserves. Belgium is pushing back hard as it holds the lion’s share of that frozen cash and fears it would be on the hook if the Kremlin sues. Eurobonds would have provided an alternative funding stream to Ukraine, but Budapest rejected the idea of issuing joint debt backed by the EU’s seven-year budget, two diplomats at a meeting of ambassadors told POLITICO. Hungary’s rejection came hours before a dinner between German Chancellor Friedrich Merz and Belgian Prime Minister Bart De Wever in Brussels to discuss the loan. Merz said he was planning to use the event to bring De Wever on board. “I take the concerns and objections of the Belgian prime minister very seriously,” Merz told reporters on Thursday night. “I don’t want to persuade him, I want to convince him that the path we  are proposing here is the right one.” Germany is offering a backstop on 25 percent of the funds to convince Belgium to send the frozen billions to Ukraine, but De Wever wants a broader guarantee from the whole EU that Belgium will be insured for the full amount, or more. The Commission proposed eurobonds on Wednesday as one of two options, along with the Russian asset-backed loan, to ensure that Ukraine’s war chest doesn’t run bare as soon as next April. Raising debt through the EU budget to prop up Ukraine requires a unanimous vote, however. Hungary’s rejection now raises the stakes for what are expected to be intense negotiations on the loan before EU leaders gather in Brussels on Dec. 18. Officials did not expect an immediate breakthrough given De Wever’s strong opposition. The Commission has repeatedly downplayed the financial and legal risks associated with the reparation loan and insists its proposal addresses most of Belgium’s concerns. The proposed reparations loan earmarks €115 billion to finance Ukraine’s defense industry over five years, while €50 billion would go to cover Kyiv’s budgetary needs. James Angelos contributed reporting from Berlin.

Giorgia Meloni’s Brothers of Italy party is picking a fight with the country’s influential central bank over gold reserves, stepping up a conflict between the government and the country’s technocratic elite. Last month, Lucio Malan, who is chief whip for the Brothers of Italy in the Senate and a close ally of Meloni, introduced an amendment to the 2026 budget that would assert the Italian state’s ownership of close to €290 billion worth of gold reserves held by the Bank of Italy.  At first glance, it seems clear enough why this amendment came into being. Italy has a staggering amount of debt on its books, around 140 percent of the national gross domestic product, and is under strict EU orders to rein in its deficit, resulting in a perennial budget squeeze.  So it might seem logical to raid the world’s third-largest reserve of gold to pay down Europe’s second-largest debt pile. The temptation to do so has been getting stronger by the day: The value of the Bank’s hoard has risen 60 percent over the past year, thanks to a global rally driven largely by other central banks’ buying. But as usual in Italy, it’s not so simple. For one, the amendment doesn’t imply putting the gold to any specific use, but merely claims that the gold is property of the Italian people. “Nothing is going to be transferred,” Malan himself told POLITICO over the weekend. “That gold has always belonged to the Italian people, and that’s going to stay the same.” He pushed back at “even the most distant hypothesis that even the smallest part of the gold reserves are going to be sold off.”  Just as well. Three previous prime ministers — Romano Prodi, Silvio Berlusconi and Giuseppe Conte — have all had a sniff at similar schemes to bring the gold under more direct government control. But those schemes — the last of which was only six years ago — all foundered on the objections of the European Central Bank. The ECB published a withering opinion on the legality of the proposal on Wednesday, bluntly reminding Rome that the EU Treaty gives the Eurosystem exclusive rights over holding and managing the foreign reserves of those countries that use the euro (and pointing out that it said exactly the same thing six years ago). “This proposal has no chance of materializing,” said Lucio Pench, a professor specializing in economic governance and a fellow at the think tank Bruegel, pointing to the “clear conflict” with the EU treaty. But if the amendment is essentially just gesture politics, the question arises — what exactly is its purpose? A SHOT ACROSS THE BOW Some see in it a warning shot at the Bank of Italy, arguing that Malan, as Meloni’s chief Senate whip, is unlikely to have acted without the premier’s consent (Malan himself didn’t comment on whether Meloni approved the amendment). In the corridors of the Bank itself, behind its neoclassical facade on Via Nazionale in the heart of Rome, the move prompted consternation at the highest levels.  “I can tell you that people at the bank are furious,” fumed one official, adding that the proposal is illegal under EU law. “Our government — even if made up of thieves — cannot steal from the central bank, even if it writes it into a law.” Lucio Malan, a close ally of Meloni, introduced an amendment to the 2026 budget that would assert the Italian state’s ownership of close to €290 billion worth of gold reserves held by the Bank of Italy. | Simona Granati/Getty Images The Bank of Italy declined to comment on that point, but several Bank officials admitted privately that the move is consistent with a growing sense of antagonism from Meloni’s government. The Bank has always drawn the ire of the populist right, which blames it variously for the erosion of real wages over three decades and for the fall of the late Silvio Berlusconi.  But such antagonism is also consistent with a broader trend across the Western world, where deeply indebted governments are leaning on their central banks, as fiscal needs become more pressing and as dissatisfaction with the technocratic management of the economy grows. U.S. President Donald Trump’s attacks on the Federal Reserve this year have been the clearest example of that but, as one ECB official told POLITICO, the “independence of central banks is not only the problem of the U.S. — there is some encroachment globally happening.” There have been signs that the once close relations between Meloni the Bank’s governor Fabio Panetta — whom she brought home expressly from ECB headquarters in Frankfurt — have cooled. Indeed, Panetta was initially derided by some within the Bank for his apparent deference to the premier. However, some officials believe that relationship was strained when the Bank’s head of research, Fabrizio Balassone, criticized a government budget draft last month, suggesting that tax cuts aimed at the middle classes were more beneficial to wealthy Italians than poor ones. Bank officials maintained the analysis was purely technical and apolitical — “It was, like, two plus two,” one said in defense of Balassone — but it caused a storm in the right-wing, Meloni-supporting press.  The Bank’s leadership worried that the government was not respecting the 132 year-old institution’s “traditions of independence,” said another. Others see the amendment as being of a piece with a broader struggle against Italian officialdom: Francesco Galietti, a former Treasury official and the founder of political risk consultancy Policy Sonar, noted that in recent months, Meloni has pushed through a bill to rein in what she sees as a politicized judiciary, and also clashed with the head of state, President Sergio Mattarella, over an article that suggested he was plotting to prevent her from being reelected. Malan himself insisted that the gold initiative was not directed “against anybody at all.” He nevertheless described the move as emblematic of the Brothers of Italy’s “battle” — without elaborating. BROADER PLAY  Toothless though the bill is now, it still represents an interesting test case for how robustly the EU is willing to defend its laws against national governments who, across the continent, are becoming more and more erratic as they struggle with the constraints of economic stagnation and demographic decline. Earlier this year, the European Commission stood by while Meloni’s government strong-armed UniCredit, one of Italy’s largest banks, into abandoning a takeover that didn’t suit it. EU antitrust authorities only launched an infringement procedure after UniCredit dropped its bid in frustration. Reports also suggest that pressure from Rome is set to scupper a planned merger between the asset management arm of Generali, Italy’s largest insurer, with a French rival, out of fear that the new company would be a less reliable buyer of Italian government debt. If unchallenged, the latest initiative could soon become an existential challenge for the Bank of Italy, said a former official who maintains close connections to Bank leadership. “If you take the gold from the Bank of Italy, it no longer has any reason to exist,”he said. And while Governor Panetta collaborated happily with Meloni at first, “there’s always a limit,” the official said. “When it comes to independence, that’s where it ends — this is only the beginning of a war.” This article has been updated to include the ECB’s legal opinion.

German Chancellor Friedrich Merz will arrive Friday in Brussels in a bid to convince Belgium’s leadership to back a €165 billion reparations loan to Ukraine using the cash value of frozen Russian state assets held on Belgian soil. “Chancellor Friedrich Merz will travel to Belgium tomorrow evening for a dinner meeting to speak privately with Belgian Prime Minister Bart De Wever and European Commission President Ursula von der Leyen,” a German government spokesperson told POLITICO. Merz scrapped his travel plans to Oslo to make the trip to the EU capital after the Commission proposed a financial package to fund Ukraine’s defense against Russian forces. Time is of the essence, as Kyiv’s war chest is expected to run bare in April. De Wever continues to oppose the initiative, as the lion’s share of the assets is under the stewardship of Brussels-based financial depository, Euroclear. He fears that Russia will retaliate against Belgium at home and abroad, and is demanding ironclad financial guarantees from EU capitals before he even considers backing the Commission’s proposal. EU leaders are scheduled to discuss the initiative in Brussels on Dec. 18. Failure to reach a deal could force EU governments to use taxpayers’ money to ensure Ukraine’s survival.

BRUSSELS — The European Commission is adamant it has done what’s needed to address Belgium’s concerns about a financial package worth up to €210 billion to fund Ukraine’s defense against Moscow. The EU executive unveiled the package on Wednesday, first reported by POLITICO, which leverages the cash value of frozen Russian state assets across the bloc — with the lion’s share sitting in Belgium. The Belgian government fears the move would provoke Russian retaliation but, without support, Ukraine’s war chest is expected to run bare in April. Diplomats are now in a race against time to scrutinize the proposal before EU leaders gather in Brussels on Dec. 18 to decide on whether to proceed with the initiative or meet Ukraine’s financing needs with their own taxpayers’ money. The main stumbling block remains the Belgian government’s opposition to the loan. “I’m not impressed yet, let me put it that way,” Belgian Prime Minister Bart De Wever said in televised remarks before the proposal was unveiled on Wednesday afternoon. “We are not going to put risks involving hundreds of billions … on Belgian shoulders. Not today, not tomorrow, never.” Belgium fears Russian retaliation against the state and the financial depository holding the frozen assets, Euroclear. The government is demanding that other EU capitals pay up the full amount if Moscow successfully recovers the money. Responding to De Wever’s concerns, Commission President Ursula von der Leyen told reporters that “we have put in place mechanisms that protect all our member states and this, of course, includes specifically also Belgium.” She added that the legal proposal addresses Belgium’s main conditions for supporting the loan, which include more risk-sharing and tapping into assets held by other EU countries beyond Belgium. Here are the five top questions that De Wever will ask to determine whether the proposal stays within his red lines. WHAT DOES THE LOAN TO UKRAINE LOOK LIKE? Under the proposal, the EU will lend €165 billion to Ukraine, which it will only have to repay once Russia ends the war and pays reparations. The loan includes €25 billion of immobilized Russian state assets held in private bank accounts in France, Germany, Belgium, Sweden, and Cyprus, in addition to €140 billion held in the Brussels-based Euroclear bank. As part of the financial package, the Commission will set aside €45 billion to repay a G7 loan to Ukraine, which was agreed in 2024. This brings the total value of the package to €210 billion. If all else fails, the EU executive said that it can issue joint debt to Ukraine through its multi-year budget. The main drawback is that pursuing this option requires unanimity, an unlikely scenario given Hungary’s repeated threats to block further financing to Kyiv.  Within the reparations loan, €115 billion has been earmarked to finance Ukraine’s defense industry, while €50 billion will cover Kyiv’s budgetary needs. | Roman Pilipey/Getty Images HOW WILL THE MONEY BE SPENT? Within the reparations loan, €115 billion has been earmarked to finance Ukraine’s defense industry, while €50 billion will cover Kyiv’s budgetary needs. The loan reserved for military spending will be disbursed over five years in cash envelopes, known as tranches, under certain conditions to avoid corruption. The bulk of the money, €90 billion, would be available over the next two years. Money reserved for the country’s budgetary needs could last until the end of 2055. The proposal gives preference to military gear made in Europe or Ukraine, but also allows for buying equipment from foreign allies, such as the U.S., under certain conditions. WHAT SAFEGUARDS DOES BELGIUM HAVE? EU governments will provide bilateral financial guarantees of up to €105 billion until 2028 to ensure that Belgium is not alone in handling the risks associated with the initiative. The underlying principle is that EU capitals collectively stump up the full amount of the loan should the Kremlin successfully claw its money back, which the Commission sees as unlikely. Belgium is demanding that the guarantees exceed the total value of the EU loan and extend beyond the expiry of the Russian sanctions package — and will continue to push for this during the technical negotiations in Council. In further reassurance to Belgium, the Commission will set up a “liquidity mechanism” that can lend money to governments to ensure that the guarantees can be paid out at a moment’s notice. The EU’s next seven-year budget will take over from national guarantees from 2028, and shoulder the burden through its “headroom,” a financial cushion that ensures Brussels can meet its obligations. HOW WILL THE EU KEEP THE RUSSIAN ASSETS FROZEN? The biggest legal hurdle facing the 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. The Commission suggested a legal fix that would make this scenario less likely. It aims to trigger a clause in Article 122 of the EU treaty that could make it illegal to return the assets to the Kremlin. The clause is legally uncertain and hinges on the argument that reversing the sanctions would wreak havoc on Europe’s economy. The Commission is confident that it can trigger this legal clause by a qualified majority. The Belgian government fears the move would provoke Russian retaliation but, without support, Ukraine’s war chest is expected to run bare in April. | Nicolas Tucat/Getty Images DOES THIS AFFECT THE PEACE DEAL WITH RUSSIA? De Wever claimed last week that the Commission’s proposal would derail a peace deal in Ukraine by removing leverage that might encourage Russian President Vladimir Putin to the negotiating table. But von der Leyen played down the argument, saying that the reparations loan will instead ramp up the pressure on Russia. “It is a very clear message … to Russia that the prolongation of the war on their side comes with a high cost for them,” she said, adding that the proposal “will contribute positively to the peace negotiations.” For Ukraine, meanwhile, the scheme would strengthen its negotiating position, ensuring it was not entering peace talks while facing a cash crunch. “It is a leverage that makes it very clear that we are in for the long haul with Ukraine,” she said. Hanne Cokelaere contributed reporting from Brussels.

BRUSSELS — The European Commission is proposing a reparations loan of €165 billion for Ukraine using the cash value of frozen Russian state assets held in Belgium, according to documents obtained by POLITICO. The reparations loan is part of a wider financial package, worth up to €210 billion, to keep Kyiv’s finances afloat for the coming years. The €165 billion reparations loan includes €25 billion of immobilized Russian state assets held in private bank accounts across the bloc, in addition to €140 billion held in the Euroclear bank in Belgium. Ukraine’s war chest is set to run bare in April. The legal proposal will serve as a basis for immediate technical negotiations before EU leaders meet in mid-December to decide on the most sensitive parts of the initiative. Ukraine would only have to repay the loan if Russia ends the conflict and pays war reparations, which is seen as an unlikely scenario.  Within the reparations loan, €115 billion has been earmarked to finance Ukraine’s defense industry, while €50 billion will cover Kyiv’s budgetary needs. The remaining €45 billion of the package will be used to repay a G7 loan to Ukraine from 2024. The main stumbling block remains the Belgian government’s opposition to the loan. “The text the Commission will table today does not address our concerns in a satisfactory manner,”  Belgian Foreign Minister Maxime Prévot told reporters on Wednesday morning on the margins of a NATO meeting.”We have the frustrating feeling of not having been heard.” Belgium fears Russian retaliation against the state and the financial depository holding the frozen assets, Euroclear. The government is demanding financial guarantees from EU capitals if Moscow successfully recovers the money.   The Commission has signaled its readiness to provide emergency bridge financing to Ukraine to cover its needs for the first months of the year, likely through EU debt.

BRUSSELS — The European Commission on Tuesday slapped a red flag on Finland for spending too much and warned others to tighten their belts to avoid getting the same treatment.  The EU executive unveiled the full list of countries that are overspending, as part of the Commission’s biannual “European Semester” that checks whether governments are within the EU’s rules for public spending.  Red flags, known as excessive deficit procedures (EDPs), signal concerns about countries’ financial health to investors. Brussels can impose a fine if governments refuse to adopt measures to bring their finances back in line. Brussels reintroduced the EU’s rules for public spending last year after the Commission gave capitals free license during the pandemic, which plunged the EU’s economy into the worst recession since the Second World War. While the bloc’s economy has picked up this year, many governments are struggling to comply with the EU’s rules amid trade tensions with the U.S. and mounting defense budgets to deter Russian aggression. One of the countries on Russia’s doorstep, Finland, was reprimanded for exceeding the EU’s cap on budget deficits, which limits how much a country can spend beyond what it collects in taxes.  Economy Commissioner Valdis Dombrovskis. | Thierry Monasse/Getty Images The rules limit the deficit to 3 percent of a country’s economic output. Recent tweaks to the rules allow governments to spend an additional 1.5 percent of GDP on defense. But the numbers still don’t add up for Helsinki. “The deficit in excess of 3 percent of GDP is not fully explained by the increase in defense spending alone,” Economy Commissioner Valdis Dombrovskis told reporters in Strasbourg. Germany narrowly avoided the same punishment. Separately, the Commission checked whether governments’ expected spending in 2026 complies with their five or seven-year plans that were approved by Brussels. So far, Croatia, Lithuania, Slovenia, Spain, Bulgaria, Hungary, the Netherlands, and Malta aren’t doing enough. Failure to act could see Brussels reprimand the eight countries at the next European Semester in June.  POLITICO took a deeper look at some of the key countries and graded their current performances. FINLAND: E The Nordic state got a slap on the wrist from Brussels as its deficit is set to exceed the EU’s limit for the next two years. Once a paragon of fiscal stability, Finland is now in the same EDP basket as the indebted nations of France, Italy, and Belgium. As a result, Helsinki will have to reduce the deficit. That’s a tall order for a country facing overstretched social and health budgets, as well as a ballooning defense bill. ROMANIA: D+ Romania can breathe a sigh of relief after today’s announcement. Dombrovskis praised the country’s recent economic reforms and ruled out triggering the nuclear option — a suspension of the country’s payouts from the EU budget, which are worth billions.  But the country is not out of the woods. At 8.4 percent of GDP, its 2025 deficit remains by far the highest in the EU, and painful domestic reforms will be required to reduce it significantly in the years to come. GERMANY: C The country’s budget deficit is expected to reach 3.1 percent of GDP this year. That’s technically a breach of the rules. But Brussels refrained from punishing the bloc’s economic powerhouse, because the breach is “fully explained by the increase in defense spending,” the Commission said in a statement. But there is trouble ahead. Germany plans to continue its spending spree next year to juice growth, only curbing expenditure later. That won’t be easy, as China threatens the country’s export-driven economy and Chancellor Friedrich Merz’s grand coalition needs to deliver reforms to revive growth. Berlin is taking a huge gamble. Brussels too. FRANCE: C- France is in the middle of a budget crisis and is not even sure that it will manage to adopt the 2026 budget by the end of this year. That doesn’t seem to worry Brussels too much for the time being, especially considering that France received its EDP red flag in 2023. The Commission found that the French budget plans for next year are compliant with its recommendations and encouraged Paris to continue on this path.  But not even France’s prime minister knows what his budget for next year will look like. Sébastien Lecornu has pledged to bring the deficit down to 5 percent of GDP. But that goal is at risk, as contradictory amendments to the draft budget in parliament undermine the chances of a deal before Christmas. HUNGARY: F  Hungary is facing a worrying situation because it’s not making the necessary cuts in 2026 to exit the EDP. For now, the Commission has merely warned Hungary to cut spending in 2026. But if Budapest ignores such calls, Brussels might threaten to issue fines during its next budget review in Spring. Hungarian Prime Minister Viktor Orbán is unlikely to heed Brussels’ calls as the country is heading to the polls next spring and he faces the risk of losing power after almost a decade.  ITALY: B- Has Europe’s perennial fiscal bad boy turned good? That’s what it looks like, with Italy’s deficit set to fall to 2.6 percent of GDP next year, while government spending is forecast to stay below the limits imposed by the EU’s fiscal rules. That puts it on track to exit its EDP, if it can prove that debt is set to trend lower in the long term. Other good news: Rome’s tax take is trending above economic growth, helping to fill its coffers and pay down debt.  It’s not all good news. Italy remains the second-most indebted country in the EU. That isn’t changing next year, with government debt expected to increase to 137.9 percent of GDP. But any positive change is welcome, especially when it’s the class clown who is finally hitting the books.