BRUSSELS — European governments failed to reach a deal on sending Russian frozen state assets to Ukraine after a 16-hour summit in Brussels, in a major setback for German Chancellor Friedrich Merz and European Commission President Ursula von der Leyen.

Countries were forced instead to agree on an emergency backup plan based on EU joint debt that was pushed for weeks by Belgian Prime Minister Bart De Wever and was deemed a long shot until hours before the deal was done. In a further blow to EU unity, three countries ― Hungary, Slovakia and the Czech Republic ― won’t take part.

“The bottom line, after today, is that our support for Ukraine is guaranteed,” Danish Prime Minister Mette Frederiksen said as the summit wrapped up at 3 a.m.

The agreement provides a crucial lifeline to Ukraine’s war-battered economy as it grapples with the risk of a looming cash crunch as early as next spring with its conflict with Russia grinding on into a fourth year.

Though the accord allows everyone to claim victory, this wasn’t the solution that Germany and the Commission had been pushing for in the lead-up to this summit.

“Of course some people did not like it … they want to punish [Russian President Vladimir] Putin by taking his money,” De Wever said, referring to the original plan to use Russia’s assets. But “politics is not an emotional job,” and “rationality has prevailed.”

For weeks, the EU executive and Berlin have been pressuring member countries to finalize a controversial plan to use up to €210 billion Russian frozen state assets to finance Ukraine. De Wever ensured once again that didn’t happen after already derailing the Russian assets scheme during a previous summit in October.  

Instead, leaders agreed to jointly borrow €90 billion to fund a loan to Ukraine over two years. This will be guaranteed by the common EU budget.

While this option appealed to southern countries, it was not favored by Germany and its northern European allies, who have traditionally opposed underwriting bonds for their highly indebted peers.

But in the end, the urgency of Ukraine’s financing needs and the desperation of EU leaders to show their support as Donald Trump wavers and Putin talks up victory, won the day.

In a concession to Germany, leaders opened the door to using the frozen Russian assets to repay the loan to Ukraine. But this is something to be worked out in the future.

De Wever’s tactics

With Belgium railing against the plan to use Russian assets to fund the loan since it was first presented, EU diplomats and financial experts spent many sleepless nights in the run-up to the summit finessing legal language and offering extra financial buffers to reassure De Wever.

The stakes were as high as they get for the Belgian prime minister given that the bulk of Russia’s immobilized assets in Europe are held by the financial firm Euroclear, which happens to be registered in Belgium.

De Wever repeatedly asked that in return for backing this plan, EU countries needed to stump up unlimited amounts of cash to protect Belgium in the unlikely event that the Kremlin clawed back the money.

However, that was too big an ask even for the most ardent supporters of the Russian assets idea, who dismissed the Belgian offer as nothing short of a “blank check.”

While De Wever’s derailing tactics were popular at home, they made him a pariah in the European Council where fellow leaders toyed with the extreme idea of outvoting Belgium as a last resort to get a deal over the line. But none of that turned out to be necessary.

As the Commission was desperately trying to salvage the Russian assets plan, a separate group of countries led by Belgium and Italy was secretly plotting to bring back to life their preferred Plan B: EU joint debt.

“It emerged as the most realistic and the most practical solution,” French President Emmanuel Macron told reporters.

Mercosur and the EU budget

A full day of diplomatic frenzy started with EU leaders pushing the thorny issue of Ukraine financing down the agenda ― only for them to return later in the evening after their aides pre-cooked an agreement behind closed doors.

“There is an overlap between the three topics of the summit: Mercosur, Russian assets and the EU’s next budget,” said an EU diplomat.

It was evident from the start that Merz — who is being seriously challenged at home by the far-right Alternative for Germany — could not afford to return to Berlin empty-handed.

Besides his backing for the Russian assets scheme, the German is supporter of the Mercosur trade deal with South America that has been hanging by a thread for decades and was supposed to be signed this week.    

But it soon became clear that Italian Prime Minister Giorgia Meloni — who has made a name for herself in Brussels as a pragmatist — would try to torpedo both Merz’s pet projects.

She secured a postponement of the Mercosur deal until January and worked in cahoots with De Wever to dismantle the Russian assets plan bit by bit.

“Common sense has prevailed,” Meloni said.