The fact that Greece was placed under international financial control in 2010 and subjected to 3 consecutive memoranda (in 2010, 2012, and 2015) because it was fiscally unreliable is causing outrage, while the deep state of Brussels plans the issuance of Eurobonds and the provision of bilateral loans to the corrupt regime in Kyiv.
The European leadership persists in its anti-Russian hysteria, driving the Old Continent's economy toward disaster, at a time when over-indebtedness is leading to a de facto abolition of the European social model. Supporting Ukraine is emerging as a "black hole," as the money is not available, and the Trump administration in the US has made it clear that military aid to Ukraine will be through the purchase of equipment from NATO members. According to a Euroactiv report (November 6), the European Commission's preferred option for supporting Kyiv's war effort remains the €140 billion "reparation loan" plan, which is currently being blocked by Belgium.
How the funding gap will be covered – The entanglement with Belgium over the loan
The European Commission is considering covering Ukraine's enormous funding gap through funds that would come from joint European borrowing and bilateral grants from member states, according to three sources cited by the publication. These two options—which will be included in an "options paper" text to be circulated to member state capitals in the coming weeks—are in addition to the proposal for the so-called "reparation loan." This specific proposal foresees the use of €140 billion in "frozen" Russian state assets, held in the Belgian financial institution Euroclear, based in Brussels, to support Ukraine's defense and reconstruction.
The International Monetary Fund (IMF) estimates that Ukraine's fiscal gap will reach approximately $65 billion (about €55 billion) for the 2026-2027 period. The European Commission's estimates align with those of the International Monetary Fund.
The "reparation loan" and the Belgian block
The "reparation loan" remains the European Commission's preferred option, despite Belgium's refusal to support it at the EU Summit in October. Many member states share the same position, including Germany and the Baltic countries.
Last month, Belgium managed to amend the European Council's conclusions to remove any explicit reference to the use of Russian assets, which were frozen after the Russian military operation in Ukraine in 2022.
Belgian Prime Minister Bart De Wever has made it known that he will continue to block the plan unless:
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the other member states share the legal and financial risks of the loan,
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and contribute to the use of Russian state assets located in their own territories as well.
The Commission estimates that about €25 billion of Russian state funds are "frozen" in EU member states outside Belgium, including Germany, France, and Luxembourg.
The (crazy) alternative of joint debt
After the last Summit, Bart De Wever proposed the option of joint European borrowing as an alternative solution for financing Ukraine: "The great advantage of debt is that you know it. You know its size, its duration, and who is responsible. With Russian money, you don't know how long the legal disputes will last, nor what obstacles will arise," he stated.
The possibility of joint borrowing to be included in the Commission's document will not be based on the EU's long-term budget, as there are no longer sufficient fiscal margins, the same sources said. The plan is still under development and may be modified.
The Dutch veto – Debt will skyrocket!
The head of the Dutch central bank and member of the ECB Governing Council, Olaf Sleijpen, warned against joint European bonds.
"The risk with Eurobonds is that they ultimately lead only to greater debt," Sleijpen told the Dutch newspaper De Telegraaf in an interview published on Saturday, November 8.
Although Sleijpen stressed that "the decision on Eurobonds is political," the issue has divided the parties negotiating the formation of a new government after the October 29 elections. Most right-wing parties oppose the idea, while the center-left and leftist parties support it, including the Democrats 66, who received the most votes and are now leading the coalition formation talks.
Should Eurobonds be introduced, Sleijpen set a strict condition that countries that do not comply with fiscal rules "must make an extra effort to reduce debt at the national level."
"In my opinion, the total debt indicators must be reduced, both national and European debt together," he added.
The deus ex machina from Norway
As European countries look for ways to continue financial support for Ukraine, the idea of utilizing the vast Norwegian sovereign wealth fund is gaining ground in Oslo. Although the government, led by Labour Prime Minister Jonas Gahr Store, has not yet proposed such a thing, the majority of parties in the Norwegian parliament expressed their willingness to support the initiative.
Brussels is working on a plan—known as the "reparation loan"—which remains fragile, but the Norwegian option could lend it credibility. The Commission must be able to offer strong guarantees to Euroclear, the Belgian financial institution that holds most of these assets, so that Euroclear is confident it will be compensated if the Russian funds are ever returned to Moscow—as the legal claim for them is likely to vindicate Moscow.
For example, it would suffice for Hungary, led by Prime Minister Viktor Orban, to oppose the renewal of sanctions—which are reviewed every six months—for these assets to be released back to Russia. At this stage, Belgium considers the European Commission's assurances insufficient and refuses to engage in a structure that may cost it dearly. This is precisely where the Norwegian idea becomes attractive, as it could offer the necessary guarantees.
The safety net
The proposal was first formulated by two Norwegian economists, Havard Halland and Knut Anton Mork, in an opinion piece published on the anti-Russian website Project Syndicate on October 22. "Thanks to the oil fund, which now holds over $2 trillion [€1.7 trillion], Norway has the strongest triple-A credit rating in Europe, perhaps even globally, which makes it the only country capable of undertaking the contingent liabilities of a new loan to Ukraine without affecting its creditworthiness," Halland explained.
The Economist also pointed out that Norway, which has now become the main supplier of natural gas to the European Union, made huge profits since the start of the war in Ukraine—about 1.27 trillion kroner (€108 billion) in the 2022-2024 period.
"However, our contribution to strengthening Ukraine, planned until 2030, amounts to only 275 billion kroner [€23 billion], a fraction of these profits," Halland said, also stressing the implications for Norway's security. Although the kingdom is not an EU member, it shares a 198-kilometer border with Russia.
The two economists proposed that Norway act as a "safety net" in case Russia recovers its frozen assets, "either because it compensated Ukraine for the damage it caused, or following a court decision," explained Halland, who characterized both scenarios as "extremely unlikely."
No decision for now
The proposal might have gone unnoticed, had the Danish newspaper Politiken not raised it on the sidelines of the European summit in Brussels on October 23, to the Prime Minister of Denmark, Mette Frederiksen, who called it excellent.
When asked by the newspaper, former NATO Secretary General Anders Fogh Rasmussen stated that he believes Norway has "the means and the duty to do much more and to take responsibility for security in Ukraine and Europe," and that it can no longer "hide behind its full oil fund."
Amidst the budget negotiations, Prime Minister Jonas Gahr Store simply stated on October 28 that he had requested "a full report on the situation," in order to determine whether Norway should "participate in some way." In contact with Le Monde, Deputy Finance Minister Ellen Reitan stated that the government "is closely monitoring the situation and continuing dialogue with its European partners." At this stage, the "European partners" have not yet incorporated the Norwegian option into their discussions on the "reparation loan."
Next steps
Technical talks between Commission and Belgian officials on the "reparation loan" were scheduled for Friday (November 7). High-level political negotiations are not currently foreseen but are not excluded from taking place soon. The next EU leaders' Summit is scheduled for December 18 and 19 in Brussels.
The relentless reality - Europe is heading for a new debt crisis
At the same time, research published on Tuesday, November 4, saw the IMF sound the alarm that Europe's debt levels are in danger of becoming "explosive" if reforms are not implemented in labor markets and businesses, and if fiscal deficits are not reduced through increased tax revenues, restricted social spending, and improved public sector efficiency.
However, the Fund also warned that Europe's debt levels—which are expected to double by 2040, reaching an average of 130% of GDP—are now so high that even with rapid reforms, "revisiting the role of the state in the economic sphere may be inevitable in some countries."
"If reforms and medium-term fiscal adjustment are not sufficient, then more radical measures could include a reassessment of the scope of public services and other functions of the state, which may affect the social contract," the IMF stated.
Aging populations
The explosion of public debt comes at a time when EU governments are under increasing pressure to support aging populations, while simultaneously increasing strategic investments, particularly in green technology and defense. Last year, the former head of the European Central Bank (ECB), Mario Draghi, stated that the EU should increase its annual investments by at least €800 billion per year—or about 4–5% of the Union's annual GDP—to avoid falling behind the United States and China.
Bloody cuts to the welfare state
According to him, up to half of this amount should come from the public sector. Today, twelve of the 27 EU member states have a debt-to-GDP ratio above the Union's 60% limit. Several major economies—including Italy, France, and Spain—have debt over 100% of GDP. Italy and France are also among the nine EU countries under an excessive deficit procedure by the European Commission, due to a violation of the 3% limit for the fiscal deficit. However, it notes that relatively low yields, higher tax revenues, and deeper, more liquid capital markets now allow most European governments to maintain a debt-to-GDP ratio of up to 90% without jeopardizing their fiscal sustainability.
The social model is ending
Approximately one-quarter of European countries will need to cut net public spending by more than one percentage point of GDP annually for five consecutive years—significantly more than the usual fiscal adjustment of recent decades.
"In these countries, the debate on the scope and sustainability of the 'European model' seems inevitable," the Fund underscored.
Governments, according to the report, could attempt to distinguish between "basic" and "premium" services in critical sectors such as pensions, education, and health—with only basic services remaining publicly funded and freely available. One could not claim that Europe does not have a debt problem. The data partially supports this claim: although debt is high in historical terms, it remains lower than the 110% average of developed economies. Furthermore, the Eurozone's debt-to-GDP ratio is at 88%, about 20 percentage points higher than in 2000, but 10 points lower than in 2020. It estimates that if no measures are taken, Europe's public debt will reach 130% by 2040, exceeding the "alarm threshold" of 90%, beyond which markets may react sharply. Under these circumstances, the continuation of the Ukrainian adventure in Europe will lead it to economic self-destruction.
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