Merz suggests providing Ukraine with an interest-free €140bn loan

German Chancellor Friedrich Merz supported the idea of providing Ukraine with a "reparations loan". It would amount to up to 140 billion euros, and, unlike sanctions, this mechanism cannot be blocked by one or two countries, according to Merz's article in Financial Times.

"We do this not to prolong the war, but to end it. Moscow will only come to the table to discuss a ceasefire when it realises that Ukraine has greater staying power. We have that staying power," Mertz wrote.

He believes that providing such a loan could be a lever that would destroy Vladimir Putin's stalling strategy, but for this to happen, the EU countries must show courage – not just to react to Russia's actions, but to impose their own agenda on it.

"In recent years, we have often played it by ear. Now I am advocating the mobilisation of financial resources on a scale that will secure Ukraine’s military resilience for several years," said Merz.

He emphasized that Germany does not support the confiscation of the frozen assets of the Central Bank of Russia, but considers it possible to develop a viable solution that would allow Ukraine to receive a multi-billion dollar interest-free loan without interfering with property rights.

"That loan would only be repaid once Russia has compensated Ukraine for the damage it has caused during this war. Until then, the Russian assets will remain frozen, as decided by the European Council," Merz wrote.

Such large-scale assistance will require budgetary guarantees from EU member states, but they will be replaced by funding from the next EU multi-annual budget for 2028-2034.

"I will discuss this proposal with the European heads of state and government at our meeting in Copenhagen next Wednesday. I propose that, at the European Council at the end of October, we give the mandate to prepare this instrument in a legally secure manner," Merz wrote.

"That decision should, ideally, be unanimous — failing that, it should be adopted by the large majority of member states who are firmly committed to Ukraine. We should also invite partners around the world that have frozen Russian assets to join the instrument. To this end, we will co-ordinate closely with our partners in the G7," the German Chancellor added.

• The idea of a "reparations loan" based on the cash balances of Russian assets frozen in the West after Russia's full-scale invasion of Ukraine in 2022, was put forward on September 10 by European Commission President Ursula von der Leyen.
• On September 24 it became known, that the amount of aid will be measured in tens of billions of euros.
• Back in 2022, the United Nations recognized that Russia owes Ukraine reparations. The decision refers to a number of General Assembly resolutions adopted this year condemning Russian aggression, as well as to the decision of the International Court of Justice of March 16, who ordered Russia to stop hostilities.