This is going to get very messy. This morning Fitch announced it was putting Euroclear, which holds most of Russia’s frozen money, on “ratings watch with negative outlook.” That is a polite way of saying the proverbial is about to hit the fan.

Will the vote go through? That is not certain at all. German Chancellor Friedrich Merz said he gives it a 50/50 chance. Seven member states have already said they will vote no – including Italy, which with its big population is important.

The party kicks off on Thursday at the European Council (EUCO) meeting — the EU’s highest political body composed of the heads of state or government of all EU member states. The voting procedures are defined by the Treaty on European Union and vary depending on the type of decision being made.

The vote on the Reparation Loan can be done by Qualified Majority Voting (QMV), but that is rarely used, which needs 55% of member states that represent 65% of the EU population to pass a motion.

Usually EUCO makes all its decisions by unanimous vote. Clearly, the European Commission (EC) hawks driving this scheme (VDL, Kallas) wanted to have the vote at EUCO as it is one of the few venues where a QMV can be used.

At the moment only seven countries have come out against the scheme – Belgium, Hungary, Slovakia, Italy, Bulgaria, Malta, and Czechia – but the key question is how many other countries will vote against the Reparation Loan scheme? To block the motion needs 8 countries that collectively represent more than 35% of the EU’s population to kill the bill.

The seven that have already come out against the motion only account for 23% of the EU population. Having Germany and France in the YES camp is a big boost as they are a third of the EU’s population by themselves. And if you add in all the Nordic countries then it starts to look much more likely the bill will pass.

Ukraine’s most ardent supporters are all in the top right-hand corner of Europe. The countries around the Baltic Sea – Poland, Denmark, Sweden, Finland, Netherlands and the three Baltic States -- are guaranteed to vote yes. That is a total of eight countries, so the YES camp gets a certain 10 countries that are 52.7% of the EU’s population.

What will it take to scupper the vote? You need at least 6 countries that form 35% of the EU population, or more than 156.8mn people.

To hit the population criteria, and given who is voting YES, the minimum number of countries needed who have already said NO or haven’t declared their intention yet, include: Italy, Spain, Romania, Belgium, Czechia, Slovenia, Croatia, Luxembourg.

Spain emerges as a key player. With a population of 48mn people, if it votes YES then there is still enough population share to kill the bill, but margin comes right down to only 7mn people.

To block the motion if Spain votes yes, you’d need to assemble almost every remaining country not already in the YES camp – a coalition of at least 16 other countries – and with that kind of leverage, one of the little countries is going to use that leverage to get something out of the EC big wigs and vote with the YES camp.

Macron, Merz, von der Leyen and Kallas must be working the phones furiously now trying to stitch together a coalition to get the vote through – and the phone in Madrid must be ringing off the hook.

But the White House is in this game too. Since the release of the new National Security Strategy (NSS) it is now official US policy to interfere in EU domestic politics. A big part of the Trump peace plan is to grab control of Russia’s frozen assets so the White House will be working very hard to build its own NO-coalition. Reportedly, Meloni has already caved into American pressure and that is why she joined the NO camp.

So, a lot will come down to who has more sway amongst the EU member states: the European Commission or the White House? Add to that, it’s perfectly clear a successful vote will do a lot more damage to the already reeling EU economy, which you have to assume that Prime Ministers across Europe are well aware of.

I'm not sure, but given von der Leyen and Kallas are so unpopular (VDL has already faced two votes of no confidence this year and Kallas is simply bonkers) then my money is on the White House and a NO vote.

 

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