Today, the EU and Ukraine will sign an agreement for 55 million euros, and the EU’s grant allocation for this year alone is set to amount to around 200 million euros. In addition, today Verkhovna Rada will ratify the “Memorandum of Understanding” for the third macro-financial assistance package from the European Union, amounting to 1.8 billion euros.
The European Union is supporting Ukraine’s recovery and its reform process – with unprecedented assistance, in a variety of grants and loans, and the biggest package that has ever been made available to a non-EU country in such a short period of time.
Macro-financial assistance alone amounts to 3.41 billion euros in total. To this, we add grant aid, to support the development of Ukraine and respond to urgent humanitarian needs. Altogether, the EU with the European financial institutions has now mobilized around 6 billion euros in loans and grants to Ukraine in just over a year.
We know that life is hard right now for Ukraine and its people: with a deep recession, a crisis of confidence, massive currency depreciation, rising prices, outflowing capital, and falling reserves. Despite all these challenges and conflict in the east, it is essential that Ukraine keeps up its reform momentum. This is the only way to become more resilient to outside pressures.
Ukraine has already taken significant steps in its reform process, not least in terms of improving its legislative framework. The launch of an anti-corruption package, adoption of a budget law foreseeing decentralization, the adoption of the law on the Prosecutor General’s Office – these are just some of the necessary steps that have already been taken. In other areas, however, the progress has been slower. More progress is needed in the areas of constitutional, judicial, and public administration reforms.
Today, by ratifying the “Memorandum of Understanding,” parliamentarians will endorse a list of reforms, Ukraine needs to implement over the coming months to return the country to stability – proper and transparent management of public finances, an improved business climate including determined action against corruption as well as reforms in the energy, social, and financial sectors. These reforms are long overdue in Ukraine, and we count on the Ukrainian government to carry them out. Today’s ratification will pave the way for the first payment under the program.
The conditions we attach to our assistance are only one way in which we help keep up the momentum behind reform. Today we will be announcing that in recognition of Ukraine’s reform achievements so far, we plan to add over 70 million euros to this year’s allocation.
Our assistance is designed to support not only reform, but also recovery. The financing agreement that the EU and Ukraine will sign today will support small- and medium-sized enterprises (SMEs) in the areas most affected by the conflict. Another grant allocation will be used to leverage funds through financial institutions, with the result that Ukraine can look forward to around 1 billion euros in extra help for SMEs across Ukraine’s regions to seize the opportunities of the Deep and Comprehensive Free Trade Area that will fully apply from next year onwards.
Last year, we signed the Association Agreement with Ukraine, including a Deep and Comprehensive Free Trade Area. This agreement sets the basis for political, trade, social, and cultural links as well as strengthened cooperation on security between us. It holds the ingredients for a modern and more prosperous Ukraine. The Agreement was never intended as a threat to the interests of any third party. Russia’s illegal annexation of Crimea and the destabilization in eastern Ukraine, which has already cost too many lives, are unacceptable. The EU will continue to support Ukraine’s sovereignty, independence, and territorial integrity. It is essential now that the Minsk Agreements are fully implemented.
The conflict has a huge social, financial, political cost. Public revenue that does not keep up with public spending results in a gap in the budget – a gap that needs to be urgently filled. While, under normal conditions, a country can borrow, Ukraine can currently do so largely by using foreign guarantees. Higher geopolitical risk also translates into higher costs of borrowing. EU Macro-Financial Assistance contributes to Ukraine’s recovery by offering loans that are much cheaper to repay, than the loans Ukraine would be able to secure on its own.
The situation in Ukraine is very hard. If there is one important message to the Ukrainian people, it is this: you are not alone. The European Union and your international partners will continue to stand by you to ensure your country’s return to stability and growth.
Valdis DOMBROVSKIS, Vice-President for Euro and Social Dialog; Johannes HAHN, Commissioner for European Neighborhood Policy and Enlargement Negotiations
