Brussels, 9 September 2022
Thank you minister, good afternoon everyone.
It is a pleasure to be back in Prague.
Thank you for hosting us in this beautiful city.
As the minister already outlined, today’s discussions in Ecofin focused on two main topics: financial support for Ukraine and our economic policy response to the war in Ukraine and its economic implications.
As regards financial support for Ukraine, it is excellent news that ministers have endorsed the next part of our exceptional macro-financial assistance programme and agreed to provide national guarantees required to make a further €5 billion available in concessional loans to Ukraine.
This is part of the overall €9 billion exceptional macro-financial assistance package for Ukraine. Its first part of €1 billion was already paid out in early August and we are now working on operationalising the remaining amount in this package.
Obviously, we need to think how we further support Ukraine because Ukraine is an economy at war.
Its economic situation has deteriorated dramatically due to Russia’s protracted war of aggression.
There are estimates that Ukraine’s GDP is set to fall by up to 15% this year. So clearly, Ukraine needs short-term financial assistance to keep the country running on a daily basis and to maintain essential services.
For this year alone, the International Monetary Fund estimates its balance of payments gap at $39 billion.
That does not include costs for the country’s longer-term reconstruction.
Since the invasion began, the EU, its Member States and financial institutions – like the EIB and EBRD – have mobilised €9.5 billion to support Ukraine. But still, more short-term financial assistance will also be needed.
And we will need to look beyond immediate needs.
The long-term costs for Ukraine’s reconstruction are likely to keep growing as long as war continues.
So today ministers also discussed options for funding the long-term reconstruction of Ukraine.
Apart from this, we discussed the policy implications of the war in Ukraine on the EU and our economy, and the necessary policy response.
Clearly, we see a marked economic slowdown in the second half of the year, and we see surging inflation.
So we need to find a delicate balance between promoting growth, controlling inflation and protecting the most vulnerable.
We also see tighter financing conditions and rising borrowing costs – which all reduces governments’ room for policy manoeuvre. And it’s also clear that fiscal support measures should not contradict the ECB’s efforts to reduce inflation.
When we discussed the support measures, these should be targeted and temporary, compatible with the green transition.
One of the major implications of the war in Ukraine is surging energy prices. Correspondingly, the issue of how to address them is very much on everyone’s minds.
This week, the European Commission came with a set of policy proposals – or options – for how we can respond to the situation in energy markets.
I will not go into detail on these measures because they were not part of today’s Ecofin agenda.
In parallel in Brussels, there was an Energy Council which was discussing exactly these energy issues. Thank you.
Source – EU Commission
EU ministers agree statement in support of additional €5bn assistance for Ukraine
Brussels, 9 September 2022
EU finance ministers and Central Bank governors met with representatives of the European Commission and the ECB at the informal Ecofin Council meeting in Prague today. The finance ministers discussed the impact of the Russian aggression in Ukraine on the European economies and supported the swift adoption of additional financial assistance to Ukraine amounting to €5 billion.
Following the agreement in July to provide €1 billion, EU finance ministers in Prague agreed to accelerate the next tranche of macro-financial assistance to Ukraine in the amount of €5 billion.
The new loan of €5 billion will be used for the day-to-day running of the state and to ensure the operation of the country’s critical infrastructure, such as offices, schools and hospitals. At the next Ecofin meetings, I will push for a swift agreement on the provision of the remaining three billion euros, for which we must also agree on the division of this amount into loans and grants.
Zbyněk Stanjura, Minister of Finance of Czechia
This financial assistance, once adopted, will complement other EU support to Ukraine in the humanitarian, development, customs and defense fields.
During the debate on economic assistance to Ukraine, the finance ministers also discussed Ukraine’s post-war reconstruction.
The EU-Ukraine Association Agreement, which entered into force on 1 September 2017, brings Ukraine and the EU closer together. In addition to promoting deeper political ties, stronger economic links and the respect for common values, the agreement has provided a framework for pursuing an ambitious reform agenda, focused on the fight against corruption, an independent judicial system, the rule of law, and a better business climate. The EU has shown continuous support for these reforms, which are crucial for attracting investments, boosting productivity and lifting the standards of living in the medium term.
Among other support instruments, between 2014 and 2022 the EU supported Ukraine through several consecutive macro-financial assistance (MFA) operations that exceeded € 7 billion of loans and grants.
Russia’s war in Ukraine is having a detrimental effect on Ukraine’s already precarious economic and financial stability. Inter alia, it has triggered a substantial outflow of capital.
- Statement of the representatives of the Member States, meeting in the margins of the informal ECOFIN Council meeting, on financial support to Ukraine
- Council adopts additional €1 billion assistance to Ukraine (press release, 12 July 2022)
- EU solidarity with Ukraine (background information)
- EU relations with Ukraine (background information)
- EU response to Russia’s invasion of Ukraine (background information)
Source – EU Council