The European Commission proposed on Wednesday 18 May to provide Ukraine with additional macro-financial assistance in 2022 in the form of loans of up to €9 billion to support the government.
“This sum would be paid in tranches with long maturities and concessional interest rates thanks to the guarantee from the Union’s budget”, the European Commission’s communication states. However, for this to be possible, Member States will have to agree to make guarantees available, which will be combined with grant aid from the EU budget to subsidise the corresponding interest payments.
Speaking to the media, Executive Vice-President Valdis Dombrovskis also announced that the European Commission would disburse the second tranche of €600 million in emergency macro-financial assistance within the week.
The International Monetary Fund has estimated Ukraine’s balance of payments deficit up to June at around €14.3 billion. Since the beginning of the war, not counting the European Peace Facility, the EU has already mobilised over €4 billion to support Ukraine’s overall economic, social and financial resilience.
Reconstruction Plan and Facility
Beyond this immediate assistance, the European Commission has been working on the reconstruction of Ukraine. “The EU has a responsibility and a strategic interest in leading this reconstruction effort”, said European Commission President Ursula von der Leyen, which will also mean taking a significant share of the international financial effort.
The European Commission proposes the creation of an international platform for reconstruction, which would aim to agree on the direction to be taken and ensure maximum synergy of efforts towards reconstruction.
It would be jointly led by Ukraine and the European Commission and would bring together EU Member States, other bilateral or international donors, international financial institutions and other like-minded partners. This platform could be responsible for approving a reconstruction plan developed and implemented by Ukraine, with the support of EU administrative capacity and technical assistance. This plan would serve as a basis for determining priority areas for funding and for specific projects.
The platform would coordinate the sources of funding and their destination in order to optimise their use and would monitor progress in the implementation of the plan.
The European Commission’s Communication highlights four main pillars for reconstruction: rebuilding the country and digital and energy resilience, further modernising the State and its institutions, implementing a structural and regulatory agenda with the aim of deepening the economic and societal integration of Ukraine and its people with the EU, and finally, supporting the recovery of the Ukrainian economy and society by promoting sustainable and inclusive economic competitiveness, sustainable trade, and private sector development, while contributing to the country’s green and digital transition.
To support this plan, the European Commission proposes to create a facility called ‘RebuildUkraine’, which would be integrated into the EU budget. “This new instrument would be dedicated to financing the reconstruction effort and aligning the Ukrainian economy with the EU. It would offer a mix of grants and loans, with a close link to the reform programme”, Mr Dombrovskis said. The focus would be on Rule of law reforms, the fight against corruption, administrative capacity and judicial independence.
No financial indication
While the Communication states that “given the extent of the damage caused by the war so far, the financial needs for reconstruction are expected to be considerable and the reconstruction effort could take more than a decade”, no figures are given.
However, it is clear that the unforeseen needs created by the war far exceed the means available in the current Multiannual Financial Framework. “Therefore, new sources of funding will have to be identified”, the document adds.
Thus, the additional grants to be made available to Ukraine could be financed either by additional contributions from Member States - and third countries if they so wish - to the Facility and to existing EU programmes, or by a targeted revision of the Multiannual Financial Framework. These sources could also finance loans to Ukraine under the Facility. “However, given the scale of the loans that are likely to be needed, it is possible to mobilise the funds for the loans on behalf of the EU or with national guarantees from the Member States”, the document adds.
“We must make Russia pay for its military aggression against Ukraine and its people and for the damage it has caused”, Mr Dombrovskis warned, saying this was a principle of international law. The Communication therefore explains that the possibility of using frozen Russian assets as a source of funding could be explored, in accordance with national and European rules. Mr Dombrovskis said that the European Commission is studying the legal possibilities regarding private assets and the assets of the Russian Central Bank.
See the Communication: https://aeur.eu/f/1p9
EUAM returns to Kyiv
In addition, the EU Advisory Mission to Ukraine (EUAM) returned to Kyiv on Wednesday 18 May after being forced to evacuate the city on 24 February.
A 15-member core team is being redeployed to continue contacts with the Ukrainian authorities in a more direct manner and to support them in particular in the investigation and prosecution of war crimes and crimes against humanity, the European External Action Service said in its statement. The mission plans to gradually increase its international presence in Ukraine throughout the summer, depending on the security situation. Currently, the temporary seat of the Mission is located in Rzeszów, in southern Poland. (Original version in French by Camille-Cerise Gessant)