A War That Must Not End, a Peace That Can No Longer Be Financially Afforded
How the EU Has Tied Its Budget, Debt Architecture, and Political Survival to the Continuation of the War in Ukraine. The EU has built the war in Ukraine into its own budget. That is why peace without Russian capitulation has become its most expensive and politically most dangerous scenario.
Viktor Orban summed up in a single sentence what has been swept under the rug in Brussels for years. After the European Union approved a new package of 90 billion euros for Kyiv, the Hungarian prime minister warned in a post on X that this is a “war loan” and that it can only be repaid if Russia is defeated—that is, if one day it pays war reparations to Ukraine. Otherwise, as he himself says, that money will be repaid by European taxpayers instead of Ukrainians—generations of children and grandchildren from the countries that agreed to this arrangement—while Budapest demonstratively opted out.
To begin with, it is important to emphasize this: the new aid scheme is not “just another package” in the series, but a turning point. The EU has decided to borrow 90 billion euros on the markets itself, creating common debt, and forward that money to Kyiv as a formal loan rather than non-repayable grants. However, the repayment mechanism is structured so that Ukraine only begins repaying if it receives reparations from Russia in some future political settlement. Thus, if that does not happen (and it won’t if Ukraine loses the war), the obligation effectively shifts to the EU itself—that is, to the national budgets of the member states participating in the arrangement. This is very openly explained in a legal analysis of the agreement itself, prepared by Italian law professor Antonino Ali, which states that in the scenario of absent reparations, “the burden will be absorbed by the EU at its own level.”
At the same time, as we know, the original plan to secure the loan through the seizure and monetization of Russian foreign exchange reserves frozen in Europe failed. After resistance from Belgium and several other members, the EU abandoned direct encroachment on Russian assets and decided simply to borrow its own money, with a political promise that Russian funds “might be used later” as a kind of backup guarantee. In doing so, the EU consciously replaced the “aggressor pays for the war” scenario with one in which, at least for many years to come, Europeans themselves will primarily finance the war.
Sources from Brussels itself admit that this compromise comes at a price. According to data reported by Politico, the interest cost alone on this war debt is estimated at around three billion euros annually in the next multiannual budget period. Since the EU has no dedicated revenue for this, these amounts will be covered from national contributions and member state budgets—that is, from citizens’ pockets—until the loan begins to be repaid or written off. In a structure where Ukraine pays nothing until Russian reparations arrive, and the probability of those reparations is (highly) questionable, it is very clear who the real debtor is in this story.
The official rhetoric of European leaders is still colored with words like “defense of Europe,” “frontline of democracy,” and “preventing the Russian threat to NATO.” At the same time, those same leaders have access to military and intelligence analyses that clearly show Russia has managed to seize about one-fifth of Ukrainian territory in nearly four years of war, and that its further advances are slow, costly, and mostly limited to a few percentage points of territory per year at enormous human cost. Russia barely manages to break through individual front lines and seize some village or industrial city, at the cost of hundreds of thousands killed and wounded, while NATO remains a militarily and economically multiple-times stronger bloc. This is simply a fact, but—(seemingly) paradoxically—Europe wants to hide it and (maximally paradoxically!) portray Russia as stronger than it really is!
In this context, the narrative of an imminent Russian army marching on Warsaw or Berlin tomorrow looks less like a rational security assessment and more like a tool for disciplining the public. When Washington publishes reports that Putin “still wants to conquer all of Ukraine and perhaps part of the former Eastern Bloc,” European politicians use those warnings to justify new aid packages, new taxes, and new military spending. But in reality, the gap between the rhetoric of the “Russian threat to NATO” and the actual capabilities of the Russian military, which has been struggling with Ukraine for years, is becoming obvious even to ordinary observers.
That is why, in this story, the security argument and the financial argument are increasingly merging into one. The new 90 billion euro loan, tied to Russian reparations that may never come, turns European leaders into stakeholders in the war’s outcome. If Ukraine wins or at least forces a settlement in which Moscow pays part of the damage, Brussels can claim that the “investment in security” made sense. If the war stops abruptly (a Moscow-Washington deal?), through compromise or a de facto Russian victory without reparations, the EU is left with a mountain of debt and a political admission of defeat. This is the moment when the war is no longer just a geopolitical conflict but, let’s call it that, a “financial bet”—and peace becomes a luxury that Europe—literally—can no longer afford!
How the EU Has Tied Its Budget to the Continuation of the War
To understand why Orban speaks of a “war loan,” one must see how the European Union has slowly but very consistently built the war in Ukraine into its own budget over three years. According to official data from the EU Council, the Union and member states have provided a total of 187.3 billion euros in aid to Ukraine and Ukrainian refugees from the start of the Russian invasion to the end of 2025, of which about 100.6 billion falls on financial, economic, and humanitarian support, 66 billion on military aid, 17 billion on costs of accommodating refugees within the EU, and 3.7 billion on revenue from frozen Russian assets. About 35 percent of that package is formally structured as “highly concessional” loans, and 65 percent as non-repayable grants, but in both cases, the key channel is the European budget—the common money filled by member state contributions.
The Council states that between 2022 and 2025, a total of 43.3 billion euros was disbursed to Ukraine through macro-financial assistance, while the Ukraine Facility envisages up to 50 billion euros in stable financing for the period 2024–2027, of which 34 billion had already been mobilized by mid-November 2025. The European Commission itself explains that through the Ukraine Facility, more than 38 billion euros in direct budget support will be delivered to Ukraine, of which up to 33 billion in the form of loans and the rest as non-repayable grants, financed by issuing EU bonds on the markets. An analysis published by PubAffairs Bruxelles recalls that as early as the beginning of 2024, about 6 billion euros was disbursed under this instrument to enable Kyiv to continue paying salaries and pensions and maintaining basic public services.
The independent portal Voxeurop, citing the European Parliamentary Research Service (EPRS), estimates that EU institutions and the 27 members mobilized about 177.5 billion euros in specific financial, humanitarian, and military aid to Kyiv by autumn 2025, not counting refugee accommodation costs. When those costs are added, the total “price of Ukraine” for the EU rises to about 330 billion euros in three and a half years—that is, 90 to 100 billion annually, roughly 0.6 to 0.7 percent of EU GDP. The same source highlights one key fact: about three-quarters of European financial aid is structured as concessional loans rather than non-repayable grants, putting the Union in the long-term position of a creditor expecting those amounts to somehow be repaid, whether from the Ukrainian budget or through Russian reparations.
About 210 billion euros of reserves from the Russian Central Bank are held frozen in Europe, and in 2024 the Council changed the rules so that revenues from those assets flow into the European budget and are used through a special mechanism to service loans granted to Ukraine by the EU and G7 partners. At the G7 level, a scheme was agreed whereby revenue from those reserves—about three billion dollars annually—is used as collateral for a 50 billion dollar loan to Ukraine, with the EU participating in its share of the arrangement. In that case too, revenue from Russian assets flows through the European budget, and the political precondition (a very important detail!) for everything is the continuation of the sanctions regime and formal non-recognition of any “peaceful solution” that would involve unfreezing the reserves and a settlement with Moscow.
This existing network of obligations was supplemented in December 2025 with the newly agreed package of 90 billion euros—the one Orban calls the “war loan.” This additional package is defined in the decision of the European Council, and media like Euronews describe it as classic issuance of common debt on the market, with the real collateral being only the future fiscal capacity of the EU. The money will be disbursed during 2026 and 2027 to cover Ukrainian budget gaps and military spending, but the borrowing is fully recorded at the Union level.
The European Commission estimates that, at current interest rate levels, the interest cost on that package will be about three billion euros annually and that from 2028 it will need to be built into the next EU multiannual budget, with a total of about 20 billion euros set aside just for servicing that debt.
In the structure of repaying the principal of 90 billion itself, there is an additional twist. Euronews explains that it is a limited-recourse arrangement toward Ukraine, in which Kyiv is obligated to repay the amount only after Russia ends the war and agrees to pay war damages, while until then the debt will be refinanced as needed so Ukraine does not have to repay anything from its own budget. The official Council text confirms that Ukraine will begin repaying the loan only when Russia compensates for war damage and that the EU “reserves the right” to use revenue from frozen Russian reserves to repay that package. Already now, analyses from EPRS and the Kiel Institute show that about 75 percent of European financial aid to Ukraine is structured as debt rather than a “gift,” making the Union the most exposed creditor whose balance sheet and budgets in the coming decades will visibly change depending on how and when the war ends.
What do all these figures and data concretely tell us? In short, the EU has not only politically but also accounting-wise built the war in Ukraine into its multiannual budget, thereby creating a strong incentive for the war to continue until the “right” kind of end arrives—one that includes Russian compensation.
What Happens to the Money If the War Ends “Too Soon”?
On paper, the new European package of 90 billion euros looks like a generous gesture of solidarity toward Ukraine. In reality, the way the structure is set up means that certain types of peace—especially those not involving Russian capitulation and formal reparations—directly turn, as we have already explained, that “loan” into Europe’s debt to itself. In other words, this is not a classic credit where the creditor expects regular payments from Kyiv, but a big bet that one day Moscow will be forced to pay.
The problem is that this bet contradicts the reality on the ground and political signals from Russia. The European Union itself acknowledges that Russian assets remain frozen until Moscow pays compensation, but sources note that European leaders privately doubt Russia will ever voluntarily agree to such a settlement and that “it does not look likely.” On the other hand, Moscow has repeatedly emphasized that seizing its reserves would be “robbery” and grounds for long-term legal and political confrontation with the EU. If the war ends tomorrow in a way the West politically calls a “bad peace”—that is, without Russian capitulation and without reparations—the entire mechanism falls back on European budgets.
In a scenario of a Russian “victorious peace” or imposed compromise where the Kremlin retains conquered territories and Kyiv signs a ceasefire without compensation—what then? Ukraine would in that case remain incapable of independent repayment, Russian money clearly would not arrive, and the Union would continue paying interest. Thus, even if the war ended tomorrow, that would not erase the already assumed obligation to pay interest; it would only remove the political justification used to explain to the public why that obligation was created in the first place.
The second scenario is a “frozen conflict,” where fighting decreases or stops, the front line stabilizes, but there is no formal peace agreement or reparations. In that case, Ukraine remains permanently dependent on European aid to maintain minimal budget and military capacity, while having no real room to allocate surplus for loan repayment. In a “frozen” scenario, the debt continues to accumulate, while implicit pressure grows to eventually acknowledge that it will be written off, since neither Ukraine nor Russia brings money into that equation.
The third scenario is a compromise peace where some form of payments are agreed, but not in the form of open war reparations. European and American ideas about “voluntary contributions” from Russia—for example, through special funds or using part of the profits from frozen assets—are for now more political wish than realistic plan. Kyiv has already estimated war damage at over 600 billion euros, and the EU that its aid packages will one day be repaid precisely from that amount. But in a compromise where Russia does not admit defeat, it is easy to imagine that any payments would be at symbolic levels, perhaps limited to a multilateral reconstruction fund, without any guarantee of covering the specific loans issued by Brussels. In that case too, the EU remains with debt on its books, and reparations become a political slogan rather than a source of money.
With the new 90 billion package, all previous instruments are also in play—from macro-financial assistance to EIB credit lines and bilateral member state loans. Those debts are formally recorded in Ukraine’s name, but their sustainability is directly tied to future growth in Ukrainian GDP, tax revenues, and exports. If the war stops at a moment when the country is territorially reduced, demographically exhausted, and industrially devastated, creditors will face the classic dilemma: either grant Ukraine deep write-offs and recognize the loss, or keep it on endless financial infusion to at least formally continue repaying old debts. In both cases, the bill goes to Brussels, Paris, Berlin, and Rome—not Moscow.
That is why, from the perspective of the financial architecture the EU has built, peace is actually the “most dangerous” scenario. A quick end to fighting without clear Russian compensation means the end of rhetoric about “defending Europe in Donbas,” but not the end of the cost. Borrowings sold to citizens as investments in security and democracy remain in the financial books, interest continues to accrue, and the only alternative is to admit it was a politically motivated bad loan that now needs to be written off at the expense of European budgets.
Why Ukraine, Even in the Best Case, Can Hardly Repay the Debts Itself
If we remove the political rhetoric and look at pure mathematics, it becomes clear why the idea that Ukraine will one day duly repay European loans seems more like fantasy than a serious projection. A European Parliament briefing recalls that Ukraine’s GDP fell by nearly 30 percent in 2022, and even with strong recovery in 2023, it was assumed it would only reach pre-war levels around 2030. Fresh World Bank data show GDP in 2024 at about 190.7 billion dollars, with 2.9 percent growth—meaning the country is moving forward, but from a very low, war-destroyed base. At the same time, the joint assessment by Ukraine, the UN, the World Bank, and the European Commission states that reconstruction and recovery will require 524 billion dollars over the next decade—that is, about 2.8 times Ukraine’s 2024 GDP. Thus, even in a scenario of quick war cessation, Ukraine enters a period where the bill for reconstruction alone—not yet for debts to the EU—would swallow practically all room for future growth.
The debt meanwhile climbs to heights that are a big problem even for peacetime economies, let alone a country at war. In the eighth review of the EFF program, the International Monetary Fund notes that Ukraine’s public debt jumped from 48.9 percent of GDP pre-war in 2021 to 77.7 percent in 2022, 81.2 percent in 2023, and nearly 90 percent in 2024, with a projection of reaching 108.6 percent of GDP in 2025. The World Bank in its October 2025 macroeconomic review confirms a similar magnitude and warns that public debt will remain above 100 percent of GDP even after 2026, even assuming gradual de-escalation of the conflict. Even official European analyses acknowledge that with continued war, Ukrainian public debt could jump toward 140 percent of GDP.
That burden does not rest on the shoulders of a “normal” state, but on a budget that is practically entirely wartime. The Kyiv-based Center for Economic Strategy openly states that since the beginning of the invasion, all domestic state budget revenues have been used for defense, with military expenditures making up roughly half of the budget, while all civilian state functions—teachers’ salaries, doctors’, civil servants’, pensions, social benefits—are financed from foreign grants and loans. According to the same source, Ukraine needs $39.3 billion in external financing just in 2025 to cover civilian expenses, and in 2026 that amount is expected to rise to $50 billion. The European Parliament warns that the cumulative external financing gap through 2027 will be at least $85 billion, noting that this amount could be even higher if the war drags on and if U.S. aid decreases further. Thus, Ukraine is not a country that “occasionally uses aid,” but a state whose civilian life is already almost entirely sustained by European and Western money.
The demographic picture further underscores how little real tax capacity remains. According to UNHCR data, as of February 2025, about 6.9 million Ukrainians were registered as refugees outside the country, and about 3.7 million were internally displaced, meaning around one-third of the pre-war population has been displaced from their homes and normal economic life. The latest joint damage assessment estimates that 13 percent of the total housing stock has been damaged or destroyed, that more than 2.5 million households have been directly affected, and that the number of people with disabilities has increased by over 300,000 since the start of the invasion.
The World Bank, in its baseline scenario for the period through 2027, sees growth of 2 percent annually in 2025 and 2026, with a possible jump to 5 percent only if the conflict calms down and serious reconstruction begins. But the same document warns that those years will still be marked by double-digit fiscal deficits when excluding grants, high inflation, and persistent trade deficits, as imports of energy, weapons, and construction materials remain high. In short, even in the “optimistic” scenario, everything the country earns and any additional taxes it collects will be needed for bare survival, reconstruction, and minimal state functioning. There is simply no room for seriously servicing hundreds of billions of euros in debts to the West, unless endless restructuring and deferral of obligations continue.
So what does the story of a Ukrainian “victory” that enables repayment of European loans look like? Even if the war ends with an agreement in which Ukraine retains approximately its current territory and gradually enters the EU, the country will face a reconstruction bill that multiple times exceeds its GDP, with public debt above 100 percent of GDP, and a society in which one-third of the population lives in exile or temporary solutions. In such an arrangement, the only realistic way for EU debts to be “repaid” is for someone else to actually pay them—either Russia through reparations, which is currently a political fiction, or Europeans themselves through converting loans into grants and their gradual write-off.
Ultimately, the economic structure of today’s Ukraine more closely resembles a protectorate than a classic debtor state. All civilian functions are financed from abroad, domestic revenues go exclusively to the war, reconstruction will consume more than two and a half annual GDPs, and public debt is already breaking through levels that even peacetime countries can barely tolerate. In such conditions, the idea that Ukraine will one day repay the EU tens or hundreds of billions of euros from its own exports and taxes alone seems like wishful thinking. This also means that those in Brussels today constructing new “Ukrainian loans” know very well that Kyiv won’t repay them, but rather the very European taxpayers who are simultaneously being told that it’s all an “investment in security” and “defense of Europe”!
How Much Europe Is Risking and Why the Continent Can No Longer “Afford” Peace
The European Commission itself admits that the war in Ukraine serves as a pretext for a historic increase in defense spending and the launch of new loans for the military industry. In the new framework for “European defense,” the Commission describes a plan to increase military budgets that would open up to €650 billion in fiscal space for defense over four years for member states, plus the launch of a special SAFE instrument, through which up to €150 billion in common debt will be raised for defense loans to member states. In a separate memorandum, the European Commission further explains that under SAFE, the EU itself will issue up to €150 billion in bonds and then place that money with member states as long-term, low-interest loans for purchasing weapons and equipment.
The British Guardian reports estimates from European officials that the combination of SAFE loans and fiscal loosening could open space for a new €800 billion in defense spending in the coming years, of which €150 billion through common loans and the rest through “flexibility” in national deficits. An academic analysis published in the Yearbook of European Law notes that member states between 2021 and 2024 already increased defense spending by 30 percent, to a record €326 billion, with investments in equipment nearly doubling. In other words, the war in Ukraine has become a trigger for a new generation of public borrowing and military programs within the EU itself.
At the same time, the consequences of the energy shock and the war are already deeply etched into Europeans’ living standards. The International Monetary Fund estimates that high energy prices have raised the cost of living for the average European household by about 7 percent compared to pre-invasion levels, with the impact being regressive and hitting poorer layers harder. Germany, the EU’s industrial engine, today has among the highest household electricity prices in Europe, and the International Energy Agency warns that high prices continue to pressure both households and industry. Bloomberg recently reminded that even after gas prices fell, Germany’s chemical industry in 2025 is operating at only about 70 percent capacity—the lowest in twenty years—a symptom of broader European deindustrialization.
All this means that war costs are piling onto an already existing crisis in living standards. While the ECB and the Commission talk about “successfully overcoming the energy crisis,” analyses from the IMF itself warn that it is a permanent loss of national income for European energy importers and that prices will remain above pre-war levels even after the peak. European governments responded with massive subsidy packages, energy tax cuts, and various “shields,” which further increased public debt. Now, onto that same fiscal body, Ukrainian war loans and SAFE credits for the military industry are being added. In practice, this means less room for housing construction, public health, education, and social policy, and more room for weapons and debt servicing.
When the possibility of the war ending abruptly and “wrongly” is factored into such a context, it becomes clear why European elites instinctively choose war continuation. If, for example, an American “quick peace” scenario were realized—in which Trump’s representatives want Ukraine to agree to a ceasefire and territorial concessions in a few weeks—for Brussels, that would mean something other than “peace.” It would mean the war ended without Russian capitulation, without reparations, and without a political narrative of victory to justify the hundreds of billions of euros already spent. Reuters reports that European officials already privately admit they do not believe Russia will ever agree to compensation.
This fits with the loud political statements coming from Paris, London, or Berlin. Emmanuel Macron already in March 2024 warned that Europe “must not be cowardly” in aiding Ukraine and that no option should be ruled out, including sending Western troops, emphasizing that “war has returned to our continent.” Keir Starmer repeats the mantra that any peace without “strong security guarantees” for Ukraine would fail and open Putin’s path to “new aggression,” and that the West is obliged to offer security guarantees—practically a version of Article 5 outside NATO.
Behind it lies a simple logic. For European elites, a bad peace means the price of war immediately becomes visible. Debts cannot be hidden behind hope for “future Russian reparations,” the war industry loses its main justification for an explosion of orders, and voters ask uncomfortable questions about why they accepted a drop in living standards, energy price hikes, and social cuts for a conflict that ultimately ended with Ukraine’s division. Continuing the war, with the narrative of a “Russian threat to NATO” marching tomorrow on Vilnius, Warsaw, or even Berlin, allows postponing that bill.
At the same time, the war is proving an opportunity for part of European capital. The new €150 billion SAFE fund is actually a program of subsidized loans for the domestic military industry—from French and German artillery and armored vehicle manufacturers to Eastern European ammunition plants. Reuters reports that Poland alone took €43.7 billion of those loans, Romania €16.7 billion, while France and Hungary applied for €16.2 billion each, and Italy nearly €15 billion. These loans have long grace periods and low interest rates. More importantly, a political framework opens where any criticism of war spending is branded “irresponsible” or “pro-Russian,” further making war and war preparation an attractive business for those at the top of the chain.
When all this is combined, we get a picture of a continent that truly can no longer “afford peace”—at least not the wrong kind. In three years, the EU has deeply embedded Ukraine into its own budget, while launching massive new military programs and borrowing, at a time when citizens’ living standards are already hit by the energy crisis and inflation. A peace that stops the war but leaves Russia in conquered positions without compensation would open the question of who will pay for the hundreds of billions of euros already spent and what justifies the new generation of debts. That is precisely why the rhetoric of the “Russian threat” and “defending Europe in Donbas” is so stubbornly maintained.
In that sense, Ukrainian “victory” is not just a moral or geopolitical goal. It has become a financial condition for the survival of the current European course. If the war ends differently, the EU will have to face its own debts, bloated military-industrial complexes, and voters already paying for more expensive energy, housing, and food. That is why the continent has found itself in a paradox: the closer peace gets, the greater the panic in political and financial circles. Europe long ago crossed the point where war is just a foreign policy problem. Today, it is a key budget item and the reason why peace is not only political but also a fiscal risk. A grim, but real state of the continent we live in.
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