Germany Warns EU States Blocking Russian Asset Loan for Ukraine Could Face Credit Downgrades

Germany warned that EU countries refusing to back a proposed “reparations loan” for Ukraine, financed through frozen Russian frozen assets, could face higher borrowing costs and credit downgrades, as divisions deepen ahead of a key EU summit, Euractiv reported on December 15.

Speaking in Brussels, Germany’s Europe minister Günther Krichbaum said rejecting the $246 billion scheme would likely have “negative consequences” for national credit ratings, arguing that alternative financing options would be more expensive and could push interest rates higher across the bloc. Berlin has emerged as the strongest backer of the plan, with Chancellor Friedrich Merz opposing joint EU borrowing as budgets tighten.

The European Commission has floated joint debt issuance and bilateral grants as fallback options, but German officials warn these would fuel a cycle of rising interest rates and deeper budget pressure for member states, accordiing to Euractiv.

Belgium remains the most vocal opponent. Prime Minister Bart De Wever has cautioned that using the assets, most of which are held at Brussels-based Euroclear, could be perceived by investors as de facto confiscation, increasing financial risk and destabilising EU markets. Euroclear has echoed those concerns.

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Resistance has also grown among Italy, Bulgaria, Malta, and Czechia, which are pushing the EU to focus more on alternative funding models. Polish officials, however, say support for the loan remains solid and stress the urgency of securing financing for Ukraine’s war effort for at least the next six to twelve months.

EU leaders are expected to confront the issue at a summit later this week, with the Commission and EU leadership pressing for a political decision despite the widening rift, Euractiv wrote.

Previously, the European Union has decided to indefinitely immobilize Russian assets, ensuring that up to $246 billion remains on EU soil until Russia fully pays reparations for the damage caused to Ukraine, EU High Representative for Foreign Affairs and Security Policy Kaja Kallas wrote in a post on X.

“We keep increasing the pressure on Russia until it takes negotiations seriously. Next week’s European Council will be crucial to secure Ukraine’s financial needs for the coming years,” Kallas stressed.

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