European Commission unveils two options to meet Ukraine’s budget needs

The European Commission has introduced two fresh financing options aimed at meeting Ukraine’s budget needs for 2026 and 2027. Central to the proposal are long-term European Union borrowing and a ‘compensation credit’ funded by revenues from frozen Russian state assets held within the EU. The proposals, shaped by five draft legal texts, come after months of pressure from EU leaders to establish a sustainable long-term support structure for Ukraine as Russia’s military actions continue to widen the country’s budget deficit.

The package was announced in response to mounting calls, including last October from the European Council, for a permanent financial framework to support Ukraine. European Commission President Ursula von der Leyen said the initiative is designed to help Ukraine both defend itself and negotiate for peace from a strong position. The plan aims not only to close Ukraine’s looming budget gap but also to strengthen its defense industry and foster deeper integration with Europe’s own defense sector.

Despite strong backing from Germany, the plan faces resistance in Belgium, where most of the roughly 185 billion euros in frozen Russian assets are held. Belgian officials have warned that using proceeds from these assets could expose the country to significant legal and financial risks, with Foreign Minister Maxime Prévot cautioning that Belgium could be forced to pay major compensations if Russia pursues court challenges. Nevertheless, the Commission has resolved to move forward with the plan, even as Russian officials threaten prolonged legal battles should the EU proceed.