German chancellor calls for €140 billion loan to Ukraine backed by frozen Russian assets

German Chancellor Friedrich Merz has proposed using frozen Russian assets to provide an interest-free loan of nearly €140 billion to finance Ukraine’s military equipment. The loan, he said, “would only be repaid once Russia has compensated Ukraine for the damage it has caused during this war.”

Merz’s call marks a shift from Berlin’s earlier reluctance to tap seized Russian funds and aims to demonstrate the EU’s “staying power” against Russian aggression. He emphasised the need to “systematically and massively raise the costs of Russia’s aggression” and said the funds should be dedicated solely to military procurement, not Ukraine’s general budget, Caliber.Az reports per FT.

“Such a comprehensive programme must also help to strengthen and expand the European defence industry,” Merz added. “That would serve both our collective security and European sovereignty.”

Under his proposal, the loan would be guaranteed by EU member states and collateralised with funds from the EU’s next long-term budget in 2028. Merz suggested the mechanism should be approved by a “large majority” to avoid vetoes from opposing countries.

“Now is the moment to apply an effective lever that will disrupt the Russian president’s cynical game of buying time and bring him to the negotiating table,” he said.

The European Commission is currently exploring ways to utilize the estimated €194 billion of Russian assets frozen within the EU.

By Sabina Mammadli