BRUSSELS — Ukraine’s war chest stands to get a vital cash injection after EU envoys agreed on a €90 billion loan to finance Kyiv’s defense against Russia, the Cypriot Council presidency said on Wednesday. “The new financing will help ensure the country’s fierce resilience in the face of Russian aggression,” Cypriot Finance Minister Makis Keravnos said in a statement. Without the loan Ukraine had risked running out of cash by April, which would have been catastrophic for its war effort and could have crippled its negotiating efforts during ongoing American-backed peace talks with Russia. EU lawmakers still have some hurdles to clear, such as agreeing on the conditions Ukraine must satisfy to get a payout, before Brussels can raise money on the global debt market to finance the loan — which is backed by the EU’s seven-year budget. A big point of dispute among EU countries was how Ukraine will be able to spend the money, and who will benefit. One-third of the money will go for normal budgetary needs and the rest for defense. France led efforts to get Ukraine to spend as much of that as possible with EU defense companies, mindful that the bloc’s taxpayers are footing the €3 billion annual bill to cover interest payments on the loan. However, Germany, the Netherlands and the Scandinavian nations pushed to give Ukraine as much flexibility as possible. The draft deal, seen by POLITICO, will allow Ukraine to buy key weapons from third countries — including the U.S. and the U.K. — either when no equivalent product is available in the EU or when there is an urgent need, while also strengthening the oversight of EU states over such derogations. The list of weapons Kyiv will be able to buy outside the bloc includes air and missile defense systems, fighter aircraft ammunition and deep-strike capabilities. If the U.K. or other third countries like South Korea, which have signed security deals with the EU and have helped Ukraine, want to take part in procurement deals beyond that, they will have to contribute financially to help cover interest payments on the loan. The European Parliament must now examine the changes the Council has made to the legal text. | Philipp von Ditfurth/picture alliance via Getty Images The text also mentions that the contribution of non-EU countries — to be agreed in upcoming negotiations with the European Commission — should be proportional to how much their defense firms could gain from taking part in the scheme. Canada, which already has a deal to take part in the EU’s separate €150 billion SAFE loans-for-weapons scheme, will not have to pay extra to take part in the Ukraine program, but would have detail the products that could be procured by Kyiv. NEXT STEPS Now that ambassadors have reached a deal, the European Parliament must examine the changes the Council has made to the legal text before approving the measure. If all goes well, Kyiv will get €45 billion from the EU this year in tranches. The remaining cash will arrive in 2027. Ukraine will only repay the money if Moscow ends its full-scale invasion and pays war reparations. If Russia refuses, the EU will consider raiding the Kremlin’s frozen assets lying in financial institutions across the bloc. While the loan will keep Ukrainian forces in the fight, the amount won’t cover Kyiv’s total financing needs — even with another round of loans, worth $8 billion, expected from the International Monetary Fund. By the IMF’s own estimates, Kyiv will need at least €135 billion to sustain its military and budgetary needs this year and next. Meanwhile, U.S. and EU officials are working on a plan to rebuild Ukraine that aims to attract $800 billion in public and private funds over 10 years. For that to happen, the eastern front must first fall silent — a remote likelihood at this point. Veronika Melkozerova contributed reporting from Kyiv.

BRUSSELS — The U.S. and EU are hoping to attract $800 billion of public and private funds to help rebuild Ukraine once Russia ends its full-scale invasion, according to a document obtained by POLITICO. The 18-page document outlines a 10-year plan to guarantee Ukraine’s recovery with a fast-tracked path toward EU membership. The European Commission circulated the plans with EU capitals ahead of the leaders’ summit Thursday evening where the document, dated Jan. 22, was addressed, according to three EU officials and diplomats who were granted anonymity to talk about the sensitive topic. While Brussels and Washington are lining up hundreds of billions of dollars in long-term funding and pitching Ukraine as a future EU member and investment destination, the strategy hinges on a ceasefire that remains elusive — leaving the prosperity plan vulnerable as long as the fighting continues. The funding strategy stretches until 2040 alongside an immediate 100-day operational plan to get the project off the ground. But the prosperity plan will struggle to attract outside investment if the conflict rumbles on, according to the world’s largest money manager, BlackRock, which is advising on the reconstruction plan in a pro-bono capacity. “Think about it. If you’re a pension fund, you’re fiduciary towards your clients, your pensioners. It’s nearly impossible to invest into a war zone,” BlackRock’s vice chairman, Philipp Hildebrand, said Wednesday in an interview at the World Economic Forum in Davos. “I think it has to be sequenced and that’s going to take some time.” The prosperity plan is part of a 20-point peace blueprint that the U.S. is attempting to broker between Kyiv and Moscow. It explicitly assumes that security guarantees are already in place and is not intended as a military roadmap. Instead, it focuses on how Ukraine can transition from emergency assistance to self-sustaining prosperity. A three-way meeting between Ukraine, Russia and the U.S. will take place in Abu Dhabi on Friday and Saturday, as the all-out conflict nears its fourth anniversary. The U.S. is set to play a prominent role in Ukraine’s recovery. Rather than framing Washington primarily as a donor, the document positioned the U.S. as a strategic economic partner, investor and credibility anchor for Ukraine’s recovery.  The note anticipates direct participation by U.S. companies and expertise on the ground, and highlights America’s role as a mobilizer of private capital. BlackRock’s chief executive, Larry Fink, has sat in on peace talks with Kyiv alongside U.S. President Donald Trump’s son-in-law, Jared Kushner, and his special envoy, Steve Witkoff. SHOW ME THE MONEY Over the next 10 years, the EU, the U.S. and international financial bodies, including the International Monetary Fund and the World Bank, have pledged to spend $500 billion of public and private capital, the document said. The Commission intends to spend a further €100 billion on Kyiv through budget support and investment guarantees, as part of the bloc’s next seven-year budget from 2028. This funding is expected to unlock €207 billion in investments for Ukraine. The U.S. pledged to mobilize capital through a dedicated U.S.-Ukraine Reconstruction Investment Fund, but did not attach a figure.  While Trump has slashed military and humanitarian support to Ukraine during the war, it showed willingness to invest in the country after the end of the conflict. Washington said in the document that it will invest in critical minerals, infrastructure, energy and technology projects in Ukraine.  But business is unlikely to boom before the eastern front falls silent. “It’s very hard to see that happening at scale as long as you have drones and missiles flying,” BlackRock’s Hildebrand said. Kathryn Carlson reported from Davos, Switzerland.

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  

Hungarian Prime Minister Viktor Orbán on Friday questioned who began the Russia-Ukraine war and criticized Western leaders for supporting Kyiv. Orbán said EU leaders are justifying their support by framing Ukraine as a small country that has been attacked. “Of course, it’s not that small,” Orbán said, referring to Ukraine. “And it’s not even clear who attacked whom. In any case, it is a country that has been subjected to violence.” Orbán was speaking to reporters after the European Council summit, where EU leaders agreed to jointly borrow €90 billion to send financial aid to Ukraine. Hungary, Slovakia and Czechia chose not to participate in the program to fund Kyiv, cementing their Ukraine-skeptic alliance and delivering another blow to the EU’s unity after leaders failed to reach an agreement on using more than €200 billion in frozen Russian state assets to help Ukraine. Orbán also revealed before Thursday’s EU summit that Russian President Vladimir Putin had warned the Hungarian leader that Moscow would take countermeasures if the EU tapped Russian assets to help Ukraine. According to Orbán, Putin told him there will be “a strong response using all the instruments of international law, and they will take into account the position of each individual member state of the union.” “So we Hungarians have protected ourselves,” Orbán said.

BRUSSELS — EU taxpayers will have to pay €3 billion per year in borrowing costs as part of a plan to raise common debt to finance Ukraine’s defense against Russia, according to senior European Commission officials.  The bloc’s leaders agreed in the early hours of Friday to raise €90 billion for the next two years, backed by the EU budget, to ensure Kyiv’s war chest won’t run dry in April.  The war-ravaged country faces a budget shortfall of €71.7 billion next year and is in desperate need of funds to ensure its survival after Russian President Vladimir Putin pledged to keep the conflict going on Friday.  Czechia, Hungary and Slovakia will not join the bloc’s other 24 countries in sharing the debt burden, but agreed not to obstruct Ukraine’s financing needs. As part of the carve-out deal, the Commission will propose a so-called enhanced cooperation early next week, giving the 24 countries a legal platform to raise joint debt. Many of the hallmarks of the €210 billion financing package for Ukraine will be transferred to the new plan for common debt. These include payout structures in tranches, anti-corruption safeguards, and an outline for how much money should be spent on Kyiv’s military and the country’s budgetary needs. European governments resorted to joint debt after failing to agree on a controversial plan to leverage frozen Russian assets across the bloc. The new plan would provide Ukraine with €45 billion next year, handing Kyiv a crucial lifeline as it enters its fifth year of fighting. The remaining funds would be disbursed in 2027. COST OF BORROWING The new plan won’t come cheap. The EU is expected to pay €3 billion annually in interest from 2028 through its seven-year budget, which is largely financed by EU governments, senior Commission officials told reporters on Friday. Interest payments would begin in 2027, but would cost only €1 billion that year. Ukraine will only have to repay the loan once Russia ends the war and pays war reparations. That seems unlikely, which means the EU could continuously roll over the debt or use frozen Russian assets to repay it.  That would require another political agreement among EU leaders, as Belgium is strongly opposed to using the frozen assets, most of which are held in the Brussels-based financial depository Euroclear. It was Belgium’s resistance that ultimately forced leaders to pursue common debt. Belgian Prime Minister Bart De Wever wanted unlimited financial guarantees against the Russian asset-backed loan, a demand too great for his peers. 

EU governments pursued additional privacy safeguards to ensure people’s payment habits are kept under wraps as part of a legislative framework for minting a virtual extension of euro banknotes and coins. The Council of the EU rubberstamped its negotiating position for a digital euro on Friday afternoon after clinching a deal earlier this week, as reported by POLITICO. The onus is now on members of the European Parliament to agree on a legal text so that both sides can begin legislative negotiations next year. The digital euro was the European Central Bank’s answer to Meta’s (failed) plan to launch its own virtual currency, called Diem, for its 3 billion users. Since Diem’s demise, ECB policymakers have pitched the project as a vital strategy to reduce the bloc’s reliance on U.S. credit card giants, Mastercard and Visa, for cross-border payments. EU shoppers would be able to pay with the virtual currency, backed by the central bank, across the bloc in the form of plastic or a smartphone app. The spread of Big Brother-style conspiracy theories, meanwhile, has forced policymakers to take extra precautions to reassure the public that authorities will not use the digital euro to snoop on people’s payment habits. “You cannot disregard” the concern of “many millions of citizens,” Fernando Navarrete, the center-right MEP shepherding the bill through the Parliament, told POLITICO in November. “In China, it’s explicit that they wanted to build [a digital yuan] in order to increase control over the people. I’m scared of this.” Navarrete, who hails from the European People’s Party, is highly skeptical of the initiative but is comfortable with the notion of an offline version of the digital euro that protects people’s privacy. “I’m not saying it will be used” for snooping, “but they know that the technology has potential,” he said. On the contrary, consumer groups have praised the initiative, assuming the digital euro is safe, free, and private. Banks are far less enthusiastic. Especially, as they’ll be on the hook for distributing basic digital euro services to their clients at no extra cost — a bill that could amount to over €5 billion over four years, according to ECB estimates. Bankers’ protests aside, the biggest obstacle facing the digital euro is countering conspiracy theories that the authorities will use the ECB’s project to control the populace — despite reassurances from the European Commission and the ECB. The Commission’s original proposal and the ECB’s envisioned design for the project already prevent the central bank from matching people’s digital euro accounts with citizens’ personal data. That wasn’t enough for some countries, in particular Belgium and the Netherlands, which fear the project could be politically weaponized. The final text has even strengthened privacy safeguards, making it explicit that central banks “shall not be in a position to lift these [segregation] measures during any processing of the data.” APPEASING THE BANKS Mindful of the crucial role that banks will play in getting digital euros into citizens’ virtual wallets, EU governments have tried to make the project more palatable for the industry. The key to pleasing bankers is ensuring they make money from the initiative. Once the digital euro is minted, banks can charge shopkeepers a fee for processing transactions at the cashier. These fees would be capped at the average cost of international and domestic debit cards for at least five years until the overall cost of distributing the digital euro becomes more stable. Then, new fees can be calculated. The bankers aren’t convinced, however. The Council’s bid to get banks “a ‘fair’ remuneration,” while making digital euro payments “cheaper for merchants and consumers,” is a ‘squaring the circle problem’ [that] cannot be solved,” Tobias Tenner, head of digital finance at the German banks association, said. “At least if one takes the huge necessary investments [for banks] into account.”

BRUSSELS — President Vladimir Putin slammed EU leaders for trying to leverage frozen Russian state assets to fund a €210 billion financing package for Ukraine — despite the plan ultimately falling through. Facing stiff resistance from Belgium, where most of the Russian assets reside in the financial depository Euroclear, leaders decided in the early hours of Friday to raise €90 billion in EU debt instead and lend the money to Kyiv, at zero interest, so it could keep defending itself against Russian forces. The assets, however, will remain frozen until Moscow ends the conflict and pays war reparations to Ukraine. If that doesn’t happen, the EU reserves the right to use Moscow’s assets to pay themselves back. “It’s robbery,” Putin said Friday during his annual question and answer session with journalists and the Russian public. “But why isn’t it working? Why can’t they carry out this robbery? Because the consequences could be severe for the robbers.” “No matter what they steal or how they do it, sooner or later they will have to give it back,” the Russian president added, warning that such actions undermine investors’ trust in the eurozone. “We will defend our interests, particularly in the courts.” Putin’s legal threats aside, Ukraine’s fresh cash injection in the new year means Russia will be forced into a longer war, as its economy begins to creak under the strain of international sanctions. Official estimates suggest the Russian economy will only grow 1 percent this year, with all of that and more accounted for by military spending. Residential construction — always a key concern — has also fallen around 4 percent this year. As polls have indicated, the second-most pressing issue for Russians is the economy. Putin batted away any concerns about the state of his economy during the press conference. The sharp slowdown in growth this year has been a “deliberate action” by the government and central bank to stop it from overheating, he said. Putin went on to claim that the government’s actions had helped to “balance” the budget, but noted it will be in deficit both this year and next, despite extensive tax hikes. Current projections see the deficit at 2.6 percent of GDP this year, falling to 1.6 percent next year. While that looks small in an international context, the country’s stunted capital market means that it has to pay heavily to finance it. The government currently has to pay nearly 15 percent to issue 10-year debt.

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.