European Commission President Ursula von der Leyen on Wednesday (4 May) made a pitch for a post-war recovery package for Ukraine to help it rebuild after the war Russia is waging on its neighbour ends.
“This package should bring massive investment to meet the needs and the necessary reforms,” the EU’s chief executive told the European Parliament after proposing the sixth package of sanctions against Moscow, including an oil embargo.
“We want Ukraine to win this war. But we also want to set the conditions for Ukraine’s success in the aftermath of the war,” von der Leyen added.
However, she did not offer details on what such a package could entail. What is clear is that the EU and other Western countries will likely have to chip in.
‘Huge investements’ needed
European Investment Bank (EIB) President Werner Hoyer warned in April the country’s reconstruction would 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.
A recent study by the Centre for Economic Policy Research (CEPR) estimates the cost of the war between €200 billion and €500 billion. The physical damage to infrastructure alone was deemed to amount to €60 billion by the World Bank in April, while other estimates go even higher.
“It could set a system of milestones and targets to make sure that the European money truly delivers for the people of Ukraine and is spent in accordance with EU rules,” von der Leyen said, referring to the proposed post-war recovery package.
“It could help fight corruption. We have to do that. It could align the legal environment with European standards and radically upgrade Ukraine’s productive capacity,” she added.
“Eventually, it will pave the way for Ukraine’s future inside the EU,” Von der Leyen told the European Parliament.
The European Commission is expected to issue an opinion on Ukraine’s membership request ahead of an EU summit in June.
Aspirants wanting to join the EU typically face a long and complex process that often requires major reforms to reach the bloc’s standards on political and economic convergence.
Ukraine said it would finalise the second part of a questionnaire on the ability of Ukraine to assume the obligations of membership by the end of this week and expects a positive answer in the summer.
Meanwhile, European cities and towns are moving to support Ukrainian local and regional authorities through peer to peer schemes as sub-national leaders look to rebuild the war-torn country.
Creating long-term partnerships has also been floated at the national level, with Ukraine’s President Volodymyr Zelenskyy calling for twinning EU cities and regions with counterparts in his country in need of reconstruction.
Nevertheless, the main question for any such plan remains where the money for its execution would come from, as a European executive has warned that there is little room to manoeuvre within the bloc’s budget.
“You all deal with budgets in your own towns and regions, and you know how it is: budgets are fixed, and there is little flexibility usually, and it is the same with the European Union budget,” European Commissioner for Interinstitutional Relations and Foresight Maroš Šefčovič told local European leaders last week.
Pointing out the current seven-year EU budget was agreed upon before the pandemic and the Russian aggression, he said: “it is quite tight, I have to admit, with little flexibilities.”
While there is not much room within the current EU budget, a much more abundant source of funds might be accessible, namely the assets seized by EU member states and the US in line with the sanctions against Russia.
Especially the Russian central bank’s frozen foreign exchange reserves could provide an important part of the needed funds if the EU and the US are willing to use them to this end. Around €300 billion in Russian reserves are currently frozen in the US and EU.
[Edited by Alice Taylor]