Diplomats in the EU are working on an unlikely last-minute compromise to save a deal to provide vital financial assistance to Ukraine at the bloc's leaders' summit on Thursday, UNN reports with reference to Politico.
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On Wednesday evening, European leaders were divided into irreconcilable camps, at least publicly, and seemed unlikely to agree on how to finance Ukraine, partly due to the re-emergence of the same fierce north-south divisions over common debt that torpedoed EU unity during the eurozone crisis, the publication writes.
Just hours before the 27 leaders gathered in Brussels, two opposing groups crossed swords over whether to provide Ukraine with a loan based on frozen Russian central bank reserves, most of which are held in the Euroclear bank in Belgium.
Germany, along with the countries of Northern and Eastern Europe, says there is no alternative to this scheme.
But they face increasing resistance from Belgium and Italy, who are pushing for a "plan B": support for Kyiv based on EU debt guaranteed by the bloc's common budget. Bulgaria, Malta, Hungary, and Slovakia also oppose the use of these assets.
A clear example of the split is Italian Prime Minister Giorgia Meloni's statement on Wednesday that she would use the EU Council meeting to demand answers regarding the "possible risks" of using these assets, while German Chancellor Friedrich Merz doubled down on the plan for the assets "to help end this war as quickly as possible," the publication notes.
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"The first outlines of a potential way out of the deadlock, which will have to be considered during hours of negotiations, are beginning to take shape," the publication said late on Wednesday.
European Commission President Ursula von der Leyen cautiously opened the door to common debt on Wednesday morning during a speech to the European Parliament in Strasbourg.
"I have proposed two different options for this upcoming European Council, one based on assets and the other on EU borrowing. And we will have to decide which path we want to take," she said.
Key to such a plan would be the exclusion of Hungary and Slovakia, both of which oppose further aid to Ukraine, from the common debt scheme
A deal can still be agreed in the EU Council between the 27 countries of the bloc, but the final agreement would mean that only 25 countries would participate in the financing, the publication indicates.
Agreeing on such a scheme would be a lifeline for "Ukraine's broken public finances, as its treasury risks running out as early as next April," the publication writes.
Hungarian Prime Minister Viktor Orbán has already predicted that the assets will not be discussed in Brussels, and that negotiations have shifted to common loans. However, several diplomats denied that Orbán was wrong and that Russian assets are still "the only option."
"Despite growing political pressure on the EU to prove it can rise to overcome the existential challenges facing Ukraine, diplomats from warring camps on Wednesday were often skeptical about the possibility of finding a compromise," the publication writes.
The idea of common EU debt has been anathema for years to northern member states, which were unwilling to guarantee bonds for highly indebted southern countries.
"The closest [situations] to what is happening now with frozen assets are the financial crisis of 2012-2013 and financial assistance to Greece in 2015," said a senior EU diplomat.
Regarding the war in Ukraine, the northerners deny that they oppose the use of Eurobonds due to fears about the solvency of other EU countries, but argue that they prefer these assets because they will provide a larger long-term inflow of funds to Ukraine.
"It's not about the thrifty versus the spendthrifts. It's about being pro-Ukrainian or not," said a second EU diplomat, adding that Northern and Eastern European countries have taken the lead in financing Ukraine's war needs over the past four years.
Despite weeks of painstaking negotiations on assets, efforts to persuade Belgium are having the opposite effect. The country is categorically against the use of Russian money held by Euroclear in Brussels, and has now enlisted allies.
"[The European Commission] created a monster, and it ate them," said a third EU diplomat, referring to the asset plan.
However, Germany and its allies warn that there is still no alternative to using Euroclear funds.
"If you want to do something together as Europeans, a reparations loan is the only way," said a fourth EU diplomat.
Belgian Prime Minister Bart De Wever is expected to insist that the European Commission explore the issue of common debt during the EU leaders' summit on Thursday - in the hope that others at the negotiating table will echo his demands.
His supporters argue that the model is "cheaper and offers more clarity," said a fifth EU diplomat.
But critics note that this would also require the political blessing of pro-Russian Hungarian Prime Minister Orbán, who has repeatedly threatened to derail further financial aid to Ukraine.
According to four EU diplomats, this deadlock will require the European Commission to develop a workaround to keep Ukraine afloat while allowing Orbán to save face. In exchange for his support, the European Commission could exempt Hungarian and Slovak taxpayers from having to pay for Ukraine's defense, the publication writes.
"The European Commission is now pushing for common loans, but we will not allow our families to pay the bills for Ukraine's war," Orbán wrote on X on Wednesday afternoon. He added that "Russian assets will not be on the table for discussion at tomorrow's EUCO European Council meeting."
However, a senior EU official quickly refuted the Hungarian leader's claim that Russian reserves are no longer in play. "A reparations loan is still very much on the table," they said.