The controversial plan by Brussels to use frozen Russian sovereign assets to secure a reparations loan to Ukraine of up to €210 billion could have serious consequences for the euro as a reserve currency. This opinion was expressed by experts and market participants surveyed by the Financial Times (FT), reports DW.
“There is a risk (from such a step - ed.) to the status of the euro as a safe currency,” said Kenneth Rogoff, a professor at Harvard University and former chief economist of the International Monetary Fund.
At the same time, he noted that the threat to the European currency already existed earlier due to the possibility of future encroachments by Russia on the borders of Europe. The European Commission's proposal is a reasonable way to provide financing to Ukraine, the expert added, noting that Russia could still agree to pay reparations to Kyiv as part of a peace settlement.
“Seizing Russian assets is an extremely delicate issue,” noted Christian Kopf, head of fixed income and currency operations at the German asset management company Union Investment.
Investors Will Demand a “Geopolitical Premium”
If Europe wants to enjoy the status of a safe haven - like Switzerland - it should not interfere with property rights, Kopf emphasized, adding that the rule of law has historically been one of Europe's great comparative advantages.
Kevin Tozet, a member of the investment committee at Carmignac, clarified that the single currency could suffer as investors will demand a “geopolitical premium” for holding assets in euros.
Carsten Junius, chief economist at the Swiss private bank J Safra Sarasin, warned that if the perception of Europe as a financial community with a strong commitment to the rule of law is undermined, investors from Asia and the Gulf countries may turn their attention to other regions, which could lead to a weakening of the euro in the medium and long term.
ECB Will Not Play the Role of Lender of Last Resort for Euroclear
Meanwhile, Robert Dishner, a senior manager at Neuberger Berman, suggested that Russia is a special case, and the market has been aware of the risk of confiscation since the freezing of assets three years ago. “This has been in preparation for a long time,” he noted, speaking about the loan to Kyiv.
Mahmood Pradhan, head of macroeconomics at Amundi Investment Institute, praised the clear distinction between the monetary policy of the European Central Bank (ECB) and Brussels' support for Ukraine.
Earlier, the ECB emphasized that it would not play the role of lender of last resort for Euroclear. The Belgian company holds most of the frozen Russian assets and may be required to compensate Russia for losses if Moscow successfully contests the confiscation of assets in court.
Merz Visits Belgium on Urgent Mission to Discuss Russian Assets Earlier, on December 4, it became known that German Chancellor Friedrich Merz postponed a planned trip to Norway on December 5 to meet with Belgian Prime Minister Bart De Wever on that day. The meeting was scheduled as a private dinner, which was also to be attended by European Commission President Ursula von der Leyen.
As reported by AFP, citing sources in the German government, the topic of discussion during Merz's urgent trip was to be the possible use of frozen Russian assets for a reparations loan to Ukraine, proposed by the European Commission.
Belgium, where most of the blocked Russian funds (about €189 billion) are held, rejected the European Commission's plan. At the same time, Germany and most EU countries approved the idea. EU authorities hope that agreements on a reparations loan for Ukraine can be reached by the end of the year.
The euro still maintains its status as the second most used reserve currency in the world.
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