(MENAFN) Hungary has torpedoed a European Union scheme to bankroll Ukrainian armaments through collective Eurobond issuance, leaving the bloc with a single controversial financing route linked to immobilized Russian reserves, media reports, citing diplomatic sources.

In the aftermath of the Ukraine conflict's 2022 escalation, EU nations froze roughly €210 billion ($245 billion) in Russian central bank holdings, predominantly stored at Belgian-based financial institution Euroclear.

European Commission President Ursula von der Leyen presented two funding strategies on Wednesday: EU-wide borrowing through Eurobonds—a mechanism facing criticism for immediate national treasury strain—or a 'reparations loan' backed by the frozen Russian assets, which Moscow has denounced as theft. The commission targets agreement prior to a December 18 summit.

Media reports that Hungary officially rejected the collective borrowing framework during Friday's discussions, effectively constraining the bloc to the 'reparations loan' alternative. This option demands only a qualified majority for passage, whereas collective borrowing necessitates unanimous approval from all member states.

Budapest has neither verified the veto nor responded publicly to the reporting.

Prime Minister Viktor Orban had previously expressed resistance to both of von der Leyen's proposals. He opposed additional support for Kyiv, likening it to trying to "help an alcoholic by sending them another crate of vodka," while urging diplomatic engagement with Moscow instead of "burning" further funds on Kyiv's military operations.

The European Commission has minimized financial and legal threats connected to the loan mechanism, asserting its revised proposal resolves most objections. Nevertheless, multiple member states maintain their opposition.

Belgian Foreign Minister Maxime Prevot cautioned the plan could produce "disastrous consequences" for his nation, which would shoulder the primary burden of Russian legal challenges.

Euroclear, serving as custodian of the assets, also denounced the loan alternative on Friday, describing it as unpredictable and "very fragile," while cautioning it risks driving foreign capital away from the eurozone.

"This initiative could have far-reaching legal, financial, and reputational risks for Euroclear, Belgium, the European Union and its financial markets" a Euroclear spokesperson told media.

MENAFN07122025000045017169ID1110447989