The EU has to either go all-in or call a halt to what they are currently doing.
This halfway stuff does not work for anyone but the arms merchants and is just plain evil in terms of lives lost and livelihoods ruined. As the BSD's used to say: "Go big or go home."
From EurActiv, July 29:
As the war in Ukraine drags on and the country’s economic outlook worsens, the state’s financial needs become more acute. Meanwhile, the EU dithers on delivering more macro-financial assistance and organising funding for reconstruction.
Wars are costly. The Ukrainian state is currently financing its defence against military aggression while tax income plummets due to the collapse of the economy.
Estimates from earlier this year predicted that the Ukrainian economy might contract by anything between 35% and 50% this year, with the IMF projecting that the Ukrainian government will need around $5 billion per month to keep going.
Consumers and businesses become more cautiousAnd this number is growing as the war continues.
“It is my impression that the needs will increase,” adviser to President Zelenskyy’s office and former economy minister Tymofiy Mylovanov told EURACTIV.
According to him, people and businesses have started to realise that the war might drag on for many more months. “Everybody becomes much more careful about their funds, people are spending less, firms are cutting more jobs, and savings are starting to run out,” he said.
Just this week, the Ukrainian state energy company Naftogaz became the first Ukrainian state entity to default on bond payments since the start of the invasion.
In May, the EU Commission proposed macro-financial aid for Ukraine to the tune of €9 billion and set up a platform for the reconstruction of the country.
However, by the end of July, EU member states could only agree on €1 billion in assistance: a sum that covers the Ukrainian needs for about a week.
The first billion can be paid out because 70% of the subsidised loans for Ukraine are backed by the EU budget. However, the EU budget is now at its limits and cannot be used to also back the other €8 billion.
“The exceptional feature of this macro-financial assistance stems from the specific war circumstances in Ukraine, which call for a provisioning rate under the Union budget of 70%, as opposed to a traditional rate of 9%,” a Commission spokesperson told EURACTIV earlier this month.
Thus, member states will have to chip in with substantial guarantees for the rest of the money. According to the EU Commission, it is working to find a solution to fund the rest of the originally proposed €9 billion “as soon as possible”.
EURACTIV understands that there is disunity among member states about whether this money should be paid out in loans or grants. While most EU member states want to provide the rest of the money in loans, the German government would prefer the assistance to come in form of grants because it fears that the German constitutional court might rule against providing the macro-financial assistance in loans.
Will Ukraine have to monetise the deficit?For Ukraine, meanwhile, the lack of funding is becoming an issue. At the top of the priority list for spending is the military, alongside shelters for displaced people to be safe and warm during the winter....
