Loan to Ukraine (II): from the "accounting miracle" to explicit indebtedness

The European Union has a special talent for turning geopolitical problems into exercises in creative financial engineering. For months, the so-called "reparation loan" for Ukraine was the perfect example: a mechanism that allowed, at least in theory, to finance support for Kyiv using frozen Russian assets... without actually using them. Confiscate without confiscating, pay without paying, touch without touching. A conceptual marvel.

Today, that marvel has been discreetly abandoned.

The Council has recently approved a loan of 90 billion euros to Ukraine, financed through borrowing on the markets and backed by the Union's budgetary margin, articulated through enhanced cooperation between 24 member states. In other words: real debt, real risk, and ultimately, real taxpayers.

Europe, in an almost revolutionary turn, has decided to pay. Not because it has lost its fondness for elegant solutions, but because reality – legal, financial, and geopolitical – has shown a worrying tendency to impose itself on regulatory imagination.

From accounting magic to harsh reality

It is worth clarifying a point that has been treated with an ambiguity bordering on delicacy in public debate: this loan is not financed by Russian assets.

The capital – more than 300 billion euros from the Central Bank of Russia – remains frozen. Untouchable. The only thing being used are its extraordinary profits. And here comes the important nuance: these profits do not finance the loan, but barely cover part of its financial costs. A legally fundamental difference… and a rather disappointing budgetary one.

The initial grand idea – to use these assets as collateral for a massive loan – has been abandoned due to what we might call an excess of reality: considerable legal risks, opposition from the European Central Bank, resistance from several member states, and, in general, the uncomfortable realization that international law does not usually applaud overly creative innovations regarding sovereign property.

So Europe has opted for a more classic solution: to borrow. That said, maintaining an element of optimism worthy of mention. The loan, according to the agreement, will be repaid through Russian reparations.

The idea is impeccable. As impeccable as it is improbable. Because the repairs require either a peace agreement or an enforceable international decision, neither of which seems imminent. In practice, this amounts to financing today with European debt, hoping that, at some point in the future, someone else will pay the bill.

It is not so much a financial mechanism as a reasonably structured act of faith.

Paying at the worst possible time: economy under pressure and expanding ambitions

The turn towards debt could be considered a victory for realism… if it weren't happening at the worst possible moment.

The war in Iran -or, to maintain diplomatic terminology, "regional instability"- introduces exactly the kind of shock that the European economy needs least: more expensive energy, persistent inflation, and weakened growth. Europe is once again facing its old structural problem: high energy dependence combined with low fiscal margin.

The increase in the price of oil and gas is not just a macroeconomic data point; it is a multiplier of tensions. It affects industrial competitiveness, strains public budgets, and erodes household purchasing power. Translated into political language: less growth, more deficit, and considerably less patient citizens.

In this context, the 90 billion ceases to be an abstract figure and becomes part of a much more uncomfortable equation. Because the problem is not the loan itself. The problem is everything else.

Europe is simultaneously facing three structural imperatives: to support Ukraine in the long term, to significantly increase defense spending, and to modernize its economy so as not to fall behind the United States and China. All of this in an increasingly demanding economic environment.

The question is not whether the loan should have been granted. There was probably no alternative. The question is that, by doing so, Europe has crossed a threshold: it can no longer pretend that all its ambitions are compatible without friction.

Because in a context of low growth, expensive energy, and increasing fiscal pressure, economic policy ceases to be a list of desirable objectives and inevitably becomes a list of priorities. And, by extension, of renunciations.

If support for Ukraine and European security are real priorities -and everything indicates that they are-, other agendas will have to slow down. Not for lack of conviction, but for simple arithmetic.

Europe can be many things. But it cannot be everything at the same time and at the same political cost.

Enhanced cooperation: the effective and necessary solution that leaves its mark

The mechanism used to approve the loan -enhanced cooperation between 24 member states- is, in itself, a far-reaching political signal. It was, without a doubt, the only viable path. The alternative was deadlock. And in foreign policy, deadlock is not a neutral position: it is, simply, irrelevance with procedure.

I have always argued that enhanced cooperation is a necessary tool to advance the Union in a world that does not wait for Europe to resolve its internal debates. It allows action in a multipolar context, it is pragmatic, functional, and increasingly essential in an enlarged and heterogeneous Union. But we should not deceive ourselves: it is not neutral. It normalizes a logic in which Europe moves forward without everyone, and that, when repeated, leaves its mark.

Europe has discovered that it can function in a reduced format. It is an undeniable advance. But it also introduces a new dynamic: less homogeneous integration, more flexible... and, if not managed well, more fragmented. Variable geometry works wonderfully as an exception; when it starts to become the norm, it acquires political memory. And that memory does not always favor cohesion.

There is no contradiction here, but a structural tension. The same tool that allows action today can, accumulated over time, alter the nature of the European project tomorrow. Enhanced cooperation does not fragment Europe on its own; what fragments it is its use without clear rules, without a common narrative, and without a balanced distribution of risks. Well designed, it can be just the opposite: the way to move forward in a Union too large to move at the same pace without becoming paralyzed.

Because the alternative to a multi-speed Europe is not a perfectly united Europe. It is a stagnant Europe. And, in the current context, that is not unity: it is irrelevance.

The internal bill: between strategic necessity and political fatigue

So far, support for Ukraine has been politically sustainable largely because its cost was diffuse. That is starting to change.

The combination of joint debt, increased defense spending, and external economic pressure is progressively shifting the cost to where it really matters: national budgets and citizens' daily lives.

And there the narrative becomes more complex.

Saying that supporting Ukraine is an investment in European security is correct. Saying that this investment coincides with less fiscal margin, budgetary tensions, and possible internal adjustments is... less popular.

The risk is not an immediate reaction, but something more gradual and, therefore, more dangerous: fatigue. Economic fatigue, political fatigue, strategic fatigue.

That is the ideal environment for simple narratives that question the cost of European commitment. They don't need to be sophisticated. It is enough that they connect with a growing perception of economic pressure.

At the political level, this will translate into more visible tensions between member states - especially around common debt -, greater pressure on national governments, and an increase in internal political fragmentation.

Europe will continue to function. But with more friction, less room for error, and a growing need to explain decisions that until now were presented as technically unavoidable.

Conclusion: it had to be done, but without illusions

The 90 billion loan is not elegant. It is not innovative. It is not legally brilliant. But it is necessary and, above all, it is more honest than previous alternatives. It acknowledges a basic reality that has been tried to be avoided for too long: geopolitics costs money.

Europe has done the right thing by supporting Ukraine. What it cannot do - at least not indefinitely - is pretend that this support has no costs, that third parties will eventually bear them, or that all its ambitions can advance simultaneously without tension.

It had to be done. But it had to be done by telling the truth: that Europe will probably pay, that it will have to prioritize, and that the cost will be tangible.

Now he will have to explain and convince a tired citizenry worried about its future, sustain an effort with no set end date and, above all, pay. Because the great lesson of this entire episode is quite simple, although Brussels has taken years to accept it: geopolitics is not financed with metaphors and silences. Because the difference between creative accounting and geopolitics is simple: the former allows reality to be postponed, the latter always ends up presenting the bill with costs and sacrifices.

And those costs and sacrifices are not free or abstract: they fall on specific citizens, who will not only bear them but also have the right to know them and to accept them freely. Because, in a democracy, it is not enough to distribute the bill: you also have to show the price before charging it.