Brussels, 05/03/2014 (Agence Europe) - On Wednesday 5 March, President of the European Commission José Manuel Barroso announced aid of €11 billion in EU subsidies and loans to Ukraine for the current period up to 2020. Barroso explained that “the most immediate priority for the EU is to contribute to a peaceful solution to the current crisis (…) In parallel, the international community should mobilise to help Ukraine stabilise its economic and financial situation.” Barroso added that the package should also be accompanied by efforts by EU member states, the international financial institutions, such as the IMF and the World Bank, and all the other partners that wish to contribute.
Out of €11 billion, €3 billion will come directly from the EU budget: at least €1.4 billion in subsidies for assisting development over the next seven years, including €600 million over the next two years and €1.6 billion in macro-financial assistance loans (MFA).
The Commission is also dipping into several other development assistance programmes. Out of the €400 million previously announced for Ukraine, 60% has not yet been paid but could be very soon on the condition of reforms and carried out, explained one European source. Between €140-€200 million is provided for 2014 as part of the annual action programme, which aims to improve the government's financial capacity and support institutional transition. From 2015-2020, an envelope of €780 million is planned as part of the European Neighbourhood Instrument, which is equivalent to €130 million a year. If progress and reforms are made, an additional €40-50 million a year could be possible by way of the “more for more” framework programme (between €240 and €300 million for this period). The EU could also pay up to €35 million under the CFSP peace and stability instrument budget for supporting elections and reforming the police and security sector. €36.5 million could be used “in the very short term” for action in nuclear waste management and social projects in the Chernobyl area.
€1.6 billion is planned for macro-financial assistance. In the short term, the Commission is prepared to earmark €610 million as part of the MFA already concluded and which is still subject to the signing of an agreement between the Ukrainian government and the IMF. The Commission is ready to propose other macro-financial assistance worth up to €1 billion and which will not necessarily be linked to the IMF.
The Commission is also prepared to set up an EU Trust Fund, which will enable member states to make new and substantial financial contributions that could increase the EU's profile and help towards the “effective, swift and coordinated” release of funds.
The European Investment Bank (EIB) may also earmark up to €3 billion for the 2014-2016 period, with the European Bank for Reconstruction and Development (EBRD) providing up to €5 billion for the current period up to 2020. The EU will also leverage from between €200-250 million from the Neighbourhood Investment Facility, which could have a potential leverage effect of raising up to €3.5 billion. It will also be organising an investment task force and seeks to set up a fund donor coordination mechanism.
Barroso also announced the temporary introduction of a comprehensive and far reaching free-trade zone once the association agreement is signed. In the meantime, however, the Commission will be presenting a draft to the Council and the Parliament on “autonomous trade measures”, namely, the early application of the provisions in the agreement on imports of industrial and agricultural goods. The Commission is also committed in the short term to helping the Ukraine diversify its gas supply routes, particularly by ensuring inverse flows with the EU. It is also seeking the speeding up of the visa liberalisation action plan. (CG)