Ukraine: how the EU wants to finance reconstruction – Politics

The war in Ukraine is raging, but the EU is already planning to rebuild. Specifically, she discusses how reparations for war damage can be funded after a peace agreement. To this end, the European Commission wants to put in place a so-called strategic reconstruction plan called “Rebuilding Ukraine”. The eight-page draft is based on this Suddeutsche Zeitung before. The plan aims to allocate funds from member states and international partners to projects in Ukraine, the funds would be tied to strict conditions, such as the fight against corruption and the Ukrainian government’s reform efforts. Such reforms should bring the country closer to the EU – after all, Ukraine wants to become a member.

The agency estimates the reconstruction could take “more than a decade”, according to the concept paper. The “build back better” principle should apply here. This means that new infrastructure and homes, for example, must be designed to be climate-friendly. It is still unclear how much money is needed, but war damage already amounts to hundreds of billions of euros.

The European Union’s financial contribution must be channeled through a new program of the EU budget. This should be based on how the EU Corona aid pot works. Here, member states must submit reform and investment plans to the Commission. The authority reviews them and then approves grants and low-interest loans, with individual tranches tied to the achievement of certain milestones.

The reforms and investments that Kyiv has to promise against the money from the new program are aimed, among other things, at further integrating the Ukrainian economy into the EU internal market, improving the business environment or “gradually aligning” Ukrainian legislation on the EU. says the standards need to be simplified. Great importance is also attached to good governance, the rule of law, sound financial management and protection against corruption and fraud.

Can we ask Russia to pay?

The money for the reconstruction plan will also come from international partners, but it is in the “strategic interest” of the EU to lead the efforts and to assume “a large part”, explains the commission. Subsidies to Ukraine could be covered by additional payments from Member States to the EU budget or by reallocations within the budget. As for low-interest loans in Kyiv, the Commission proposes to finance them by taking on new debt yourself. The Member States are then jointly liable for these EU debts.

This suggestion is explosive: although the Commission is also indebted to the Corona aid kitty, this was intended as a one-off reaction to special circumstances. Some EU governments, including the traditional German government, are highly critical of common European debt. The Brussels authorities have also raised the possibility of using confiscated Russian assets to finance reconstruction. However, this is considered legally sensitive. In addition to these long-term considerations, the Commission announced that it would transfer another $1 billion loan to Kyiv this year for the day-to-day business of the struggling government.

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