By agreeing to provide a loan of €90 billion for the years 2026-2027 “based on EU borrowing on the capital markets backed by the EU budget headroom”, EU leaders have set the direction for the future of support for Ukraine. At stake at yesterday’s meeting of the European Council was Kyiv’s ability to continue to defend itself against Russia’s ongoing aggression — as well as the credibility of the EU as a player in the future of European security.
The key decision for the EU’s leaders was whether, and how, they would continue to support Ukraine financially over the next two years. Europeans have provided a vital drip-feed of ongoing financial assistance to Kyiv throughout almost four years of war. But they have also struggled to fill, in its entirety, the hole created by the withdrawal of US support since the return of Donald Trump to the White House in January 2025.
The estimated €136 billion budget support needed by Ukraine in 2026 and 2027 is a relatively fixed figure regardless of whether any peace initiative comes to fruition. A large part of it — €52 billion in 2026 and €33 billion in 2027 — is for military support. The EU-agreed loan of €90 billion thus covers at least the essential military needs of Ukraine. It will either contribute to the ongoing war effort or help create a sufficiently large and credible defence force to deter any future aggression by Russia. Brussels is now the most important financial partner for Ukraine by any measure.
To fund support for Ukraine in the future, the commission developed two proposals. The most widely supported — but ultimately rejected — proposal was to use the frozen Russian assets held by the Belgium-based Euroclear exchange as collateral for a loan to Ukraine.
In view of Belgian opposition — because of insufficient protections against likely Russian retaliation — the European Commission had also proposed joint EU borrowing to fund support for Kyiv. Despite resistance from a group of EU member states, this was the only agreeable solution at the end.
The agreement on a loan to Ukraine funded from EU borrowing achieves the primary goal of securing at least a modicum of budgetary stability for Kyiv. But it came at the price of EU unity. An “opt-out clause” had to be provided for Hungary, Slovakia and Czechia. All three countries are governed by deeply Euro-sceptical and Russia-leaning parties. The deep irony is that by opposing EU support for Ukraine, they expose Ukrainians to a fate similar to that they suffered when the Soviet Union suppressed pro-democracy uprisings in Hungary in 1956 and then Czechoslovakia in 1968.
The EU until now managed to maintain a relatively united front on sanctions against Russia, on political, economic and military support for Ukraine, and on strengthening its own defence posture and defence-industrial base.
Over the past year, these efforts have accelerated in response to Trump’s return to the White House. Since then, Trump has shifted the US position to one which is in equal measure more America-first and more pro-Russia than under any previous US administration. And the pressure on Kyiv and Brussels has increased significantly over the past few weeks. First there was the 28-point peace plan, which may have been a US-led proposal, but read as if it was Kremlin-approved. Then the new US national security strategy, which gave significantly more space to criticisms of Europe than to condemnation of Russia for the war in Ukraine. And in an interview with Politico, Trump called European leaders weak and alleged that “they don’t know what to do.”
No longer casting Russia as a threat to international security and considering Europe’s liberalism as dangerous and contrary to American interests shows how detached the US has become from reality and the transatlantic alliance.
At the same time, Russia’s president, Vladimir Putin, keeps insisting that he will achieve his war aims of fully annexing another four Ukrainian regions — in addition to Crimea — by force or diplomacy. Giving his usually optimistic outlook on Russia’s military and economic strength, Putin reiterated these points at his annual press conference on December 19.
In light of how squeezed Brussels and Kyiv thus now are between Washington and Moscow, the agreement on EU financing for Ukraine, despite its flaws and the acrimony it has caused within the EU, is a significant milestone in terms of the EU gaining more control over its future security. But it is not a magic wand resolving Europe’s broader problems of finding its place and defining its role in a new international order.
Neither is EU dithering on other issues. The agreement reached at the summit between the EU’s leaders on how to financially support Ukraine was overshadowed by their failure to overcome disagreement on signing a trade agreement with the South American trade group, Mercosur. A decision on this trade deal with Argentina, Bolivia, Brazil, Paraguay, Uruguay and (currently suspended) Venezuela had been 25 years in the making. The deal was due to be signed on December 20, but this has now been postponed until January.
This delay is meant to provide time for additional negotiations to assuage opponents of the deal in its current form, especially France, Italy and Poland, who fear that cheaper imports from Mercosur countries will hurt European farmers. Those farmers staged a fiery protest at the European parliament ahead of the European Council meeting.
The delay does not derail the trade deal, which aims to create one of the world’s largest free trade areas. But it severely dents the EU’s claim to leadership of an international multilateral trading system based on rules that prioritise mutual benefit as an alternative to the Trump administration’s unpredictable and punitive America-first trade practices.
Both internal disagreements — on financing Ukraine and on the Mercosur trade deal — continue to hamper the EU’s capacity for a decisive international role more generally. Where Trump’s US offers unpredictability, Brussels for now only offers extended procrastination on key decisions. This places limits on the confidence that the EU’s would-be partners in a new international order can have in its ability to lead the shrinking number of liberal democracies. Without skilled and determined leadership, they will struggle to survive — let alone thrive — in a world carved up by and between Washington, Moscow and Beijing.
An earlier version of this analysis was published by The Conversation on December 19, 2025.
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