Ukraine’s reconstruction will require sums ‘beyond imagination’, says EIB head

Ukraine's reconstruction will require huge investments, according to Werner Hoyer, president of the European Investment Bank (EIB). [EPA-EFE/STEPHANIE LECOCQ]

With the EU’s plan for Ukraine’s recovery in the making, the president of the European Investment Bank (EIB) Werner Hoyer warned that the country’s reconstruction will require huge investments from both public budgets and private capital.

“If we will finally get the chance to rebuild Ukraine, then we are talking about sums which are beyond imagination for the time being,” Hoyer said during an event organised by the Atlantic Council on Thursday (21 April).

The EIB president said while Western governments have been “generous” in their provision of direct budget support to Ukraine since Russia’s invasion in February, in the long term, reconstruction will require huge investments.

A recent study by the Centre for Economic Policy Research (CEPR) estimates the cost of the war between €200 and €500 billion.

On Monday Ukraine’s infrastructure minister Oleksandr Kubrakov said the Russian invasion has caused an estimated $100 billion worth of infrastructure damages alone.

Since the invasion, more than 300 bridges on national roads have been destroyed or damaged and dozens of railway bridges have been blown up, the minister said, calling for more international financial support to rebuild the country’s infrastructure.

In March, the EIB approved a €668 million financial package to help Ukraine and the neighbouring countries cope with war-related damages.

However, Hoyer said “much more will have to be done” going forward.

In his view, private capital will also be critical when support for Ukraine moves from direct funds to project financing, similarly to what happens with climate goals.

“This is where an institution like ours comes in, or other multilateral development banks, who can go to the capital markets and mobilise private capital, convince people in the markets, and investors that they’re doing something serious and good.”

EU support for Ukraine

While the priority remains immediate support to address the humanitarian crisis and stop the aggression, the EU has already started working on a post-war reconstruction plan.

“The EU is committed to providing strong support for a democratic Ukraine once the invasion has stopped,” a Commission spokesperson told EURACTIV.

The EU executive is currently setting up a Ukraine Solidarity Trust Fund for the reconstruction of Ukraine, which was agreed by member states at the 24-25 March EU Council.

While discussions on the fund are ongoing, it is still “premature” to establish the funding needs for the country, the spokesperson said.

Meanwhile, the EU’s Economic and Investment plan for the Eastern Partners should also mobilise investments of up to €6.5 billion to support the country’s recovery.

According to Hoyer, Ukrainians will use the funds not only to restore what has been destroyed by the war, but to “build a strong economy.”

“When they rebuild, they will make true what some people only have in the headlines ‘rebuild better’,” he said.

“Overdue changes”

The ongoing crisis can also be a lever for “overdue changes” in the rest of Europe, added Hoyer, who sees the war as an opportunity for the continent to push forward the transition towards sustainability and energy independence.

“We have been blind not to see this energy dependency of most of the European nations from Russia and other suppliers.”

As part of the sanction regime against Putin’s country, the Commission plans to drastically reduce dependency on Russian fossil fuels in the coming months.

As a first step, on Thursday the EU executive and the International Energy Agency presented a 9-step plan to guide citizens to decrease energy consumption.

However, cutting reliance on Russian energy will also require structural changes, including new technologies.

Hoyer said the EIB and other multilateral development banks can play a crucial role in providing the necessary investment to introduce new energy sources in the short term, urging “not to waste the next six, eight months” before starting the transition.

[Edited by Nathalie Weatherald]

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