E.U. vs. Russia

What Ukraine Needs Now

Ukraine damage AP DISTORT_effect
Life in parts of eastern Ukraine has almost come to a halt.
  • Why it matters

    Why it matters

    Nothing less than freedom and democracy are at stake in the conflict with Russia, say the authors and call on the E.U. to find a way to deliver finanical aid to Ukraine to help the country get on its feet.

  • Facts

    Facts

    • Russia’s annexion of the Crimea region in eastern Ukraine in March 2014 triggered Western sanctions like travel bans and the asset freezes.
    • Ukraine’s economy is estimated to have shrunk up to 8 percent last year.
    • The Ukrainian currency, the hryvnia, lost half of its value against the dollar last year and plunged again on Thursday as the central bank raised interest rates.
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  • Audio

    Audio

  • Pdf

The fate of Ukraine after Russia’s military aggression will depend on the rules that Europe decides to follow in the 21st century.

Either Europe must embrace the fundamental principles of freedom, rule of law, democracy, inviolability of borders and the right to self-determination by nations large and small. Or go with the dominance of large powers, might over law, “guided” democracy, spheres of influence instead of self-determination, and violence instead of the law of nations.

Under Vladimir Putin, Russia wants to return to an order dominated by large powers and their spheres of influence, like Europe during the 18th and 19th centuries.

The European Union and a European Ukraine are a hindrance to that. Russian policy attempts to destabilize Ukraine, especially in military and financial terms. Europe must not allow it.

One great weakness of the E.U. is it doesn't have a flexible method for issuing assistance to neighboring countries.

Despite the war in the eastern part of the country, Ukraine has successfully undertaken important steps of democratization, such as the election of a new president and renewed elections for the national parliament.

Nevertheless, Ukraine has not yet achieved internal political stability. This is due to tensions within the Ukrainian government but, to a greater extent, it is due to the country’s financial situation.

The heads of governments in the United States, the most important E.U. member nations and the European Union itself are unanimous that Ukraine needs rapid and extensive financial aid in order to resist Russian aggression. These leaders are likewise united in support of necessary radical reforms in the Ukrainian economy and society.

 

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Up to now, no assistance package has been presented. This is disappointing, because the International Monetary Fund can transfer money it has already promised only when the financial stability of Ukraine is guaranteed for at least a year. The country, however, is threatened with a severe shortage of money and hence a financial crisis.

One great weakness of the European Union is that it doesn’t have a flexible method for issuing financial assistance to neighboring countries. Now would be an appropriate time to adapt to Ukraine’s needs, with a method of delivering assistance to E.U. countries outside the euro zone.

On the one hand, there is macro financial assistance, which can be used flexibly, for instance to combine credits and direct grants. On the other hand, there is balance of payments assistance, which can complement a program of the IMF for E.U. countries.

A financial crisis, on top of its military and political difficulties, would be devastating for Ukraine.

Explicitly formulated requirements can assure the money flows to where it is needed and doesn’t seep away due to corruption, which is rampant in the country.

A framework agreement among the donors should assure the financial assistance doesn’t get turned into direct payments to Russia.

It is more important to offer financial support to Ukraine than to issue new sanctions against Russia. In this way, the European Union would make clear it will not tolerate a destabilization of Ukraine, and at the same time the union would stimulate the economy of the country and region.

Russia might very well also have interest in a donors’ conference and in fresh funds from Europe for Ukraine.

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Economic sanctions, on the other hand, aggravate the crisis in Russia even while they allow Mr. Putin, who is responsible for the economy’s plight, to blame the supposedly hostile West and consolidate his position inside Russia.

All that’s lacking for transforming E.U. funds into financial assistance for Ukraine is the political will. It is of the utmost importance that the European Commission’s president, Jean-Claude Juncker, prepare an initiative that achieves this goal quickly and without bureaucratic digressions.

And even if it takes some time, starting this sort of process would be a powerful expression of the European Union’s determination to help Ukraine. It would also help to ease the country’s acute financial pain.

Europe’s leaders should use their meeting starting today at the security conference in Munich to ask Mr. Juncker to initiate this process. A financial crisis on top of its military and political difficulties would be devastating for Ukraine.

 

To contact the authors: gastautor@handelsblatt.com.

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