EU: €1.4 billion to aid Ukraine's reconstruction
The Ukraine Recovery Conference saw the EU take a major step in its commitment to support Ukraine's rebuilding efforts with new guarantee and grant deals worth €1.4 billion. Taking place on 11 June 2024 in Berlin, the agreements highlight the bloc's continued and unwavering support for Ukraine.
European Commission President Ursula von der Leyen announced the signing of the agreements to aid Ukraine's recovery and reconstruction efforts. These agreements mark the first under the EU's Ukraine Investment Framework – the investment arm of the €50 billion Ukraine Facility.
‘The European Union is rallying financial firepower to help Ukraine resist and recover,’ von der Leyen stated. ‘From the proceeds of immobilised Russian assets to our €50 billion Ukraine Facility, we will make sure Ukraine has all the support it needs.’
Boosting private investments in key sectors
The agreements comprise €1 billion in loan guarantees and €400 million in blended finance grants, aimed at benefiting private companies, municipalities, and Ukrainian state-owned enterprises. A key focus will be the repair, rehabilitation, and development of energy infrastructure, which has been heavily targeted by Russia.
Other programmes will target the transport and municipal sectors, as well as improving access to finance for small and medium-sized enterprises (SMEs), particularly those affected by the war in de-occupied and front-line regions. In total, these initiatives aim to unlock €6 billion in investments.
Some key programmes include:
- Initiatives to enhance access to finance for SMEs, including war-affected companies, via the European Investment Bank (EIB) Group.
- The Better Futures Programme to accelerate investments in renewable energy, transport, digital, and industrial sectors via the International Finance Corporation (IFC).
- The Financial Inclusion Recovery Programme and Hi-Bar Programme via the European Bank for Reconstruction and Development (EBRD) to support SMEs, green lending, and the net-zero transition in the energy sector.
- The Municipal, Infrastructure and Industrial Resilience Programme focused on emergency support and future reconstruction efforts across sectors like energy and municipal infrastructure, also via the EBRD.
- Initiatives via Germany's KfW bank and the EFSE Fund to enhance access to financing for mid-caps, SMEs, green businesses, and micro-enterprises, including in de-occupied/front-line regions.
The bigger picture
Since Russia's invasion on 24th February 2022, the EU has rallied behind Ukraine, providing extensive economic, humanitarian, military, and financial aid worth over €88 billion. This includes support for EU member states hosting around 4 million Ukrainian refugees.
In December 2023, EU leaders decided to start accession talks with Ukraine, recognising the country's commitment to democratic reforms even amid the ongoing war. To support Ukraine's recovery, the EU established the Ukraine Facility – a dedicated instrument providing up to €50 billion in stable financial support from 2024 to 2027.
The Facility has three pillars:
- Direct support to the State budget: This will provide financial assistance based on a plan developed by Ukraine for its recovery, reconstruction, and modernization, including key reforms and investments.
- An investment framework: This will attract public and private investments for Ukraine's recovery and reconstruction through guarantees and blended finance.
- Technical assistance and other support measures: This will provide support for reforms and grants covering the borrowing costs of loans to the Ukrainian government.
It is financed through EU bond issuances (€33 billion) and the annual EU budget's Ukraine Reserve (€17 billion in grants).
The larger plan for Ukraine
In April 2024, the EU endorsed the Ukraine Plan – Ukraine's comprehensive reform and investment strategy for the next four years. The Plan outlines structural reforms and investments in sectors with high growth potential, addressing public administration, good governance, the rule of law, and anti-corruption efforts.
The plan focuses on several key areas:
- Structural reforms: This includes improving public administration, strengthening the rule of law, fighting corruption, and promoting good governance.
- Investments in key sectors: This includes infrastructure development, energy efficiency, digitalization, and human capital development.
- EU accession alignment: This includes aligning Ukrainian legislation and institutions with EU standards.
The Ukraine Plan serves as a roadmap for Ukraine's recovery and modernization, providing a clear vision for the country's future. It also demonstrates Ukraine's commitment to implementing reforms and meeting the criteria for EU membership. The successful implementation of the Ukraine Plan will be crucial for attracting investments, fostering economic growth, and ensuring a stable and prosperous future for Ukraine.
Next steps
With the political agreement on the Ukraine Facility reached in February 2024, the EU aims to make the first regular payment under the Plan in the coming months, following the recent disbursement of €6 billion in bridge financing.
The Commission will continue working closely with Ukrainian authorities to define, prioritise, and sequence strategic needs within the recovery process, coordinating economic assistance in line with Ukraine's reform ambitions and European path.
Steadfast commitment to Ukraine's future
As President von der Leyen affirmed, ‘Europe will be at Ukraine's side for every single day of the war, and for every single day thereafter.’ These new agreements underscore the EU's dedication to supporting Ukraine's resistance, recovery, and reconstruction – a commitment that will endure for as long as it takes.
With robust financial firepower, strategic reforms, and a coordinated international effort, the EU is paving the way for a sustainable, resilient, and modernised Ukraine, upholding democratic values and strengthening its path towards EU membership.