The European Union wants to move fast on a 1.6 billion-euro ($2.2 billion) aid plan for Ukraine so that money can start flowing to the government in Kiev, said EU Economic and Monetary Affairs Commissioner Olli Rehn.
The EU can start sending payments “immediately” after Ukraine reaches a deal with the International Monetary Fund on a companion package that could be about 13 billion to 14 billion euros, Rehn said in an interview in Brussels yesterday. A payment of about 100 million euros would be followed by 500 million euros “in the very short term,” he said.
“Everybody is aware that there is an emergency situation not only in the security situation but also in the economic situation, and therefore there is a need to move quickly,” Rehn said.
EU governments are struggling to find ways to support Ukraine’s new government and to punish Russia for annexing Crimea, reflecting east-west divisions within the EU and concerns that trade curbs would damage Europe’s economy. It’s unclear whether EU leaders will agree on a road map for economic sanctions at a two-day summit starting today in Brussels, six EU officials told reporters yesterday.
The EU also has been loath to provide economic assistance to Ukraine without IMF support. Loan negotiations continue this week, and IMF managing director Christine Lagarde said last week that they could wrap up by March 21.
The IMF and the EU have similar concerns about Ukraine’s economy and what steps should be required in exchange for aid, Rehn said. Ukraine needs urgent help to stabilize its situation, followed by longer-term work on more “sustainable” policies such as reforming electricity tariffs and offering aid to those most affected by the changes, he said.
If conditions continue to deteriorate, “then probably there is a need for more external funding in order to keep the Ukrainian economy afloat,” Rehn said. If tensions begin to ease, Ukraine won’t need as much money as fast, he said.
When asked whether Ukrainian authorities would be able to take the required measures, Rehn said the country’s new government is “broad-based” and heading into elections in May.
“The Ukrainian government is aware of the challenges and the emergency of these challenges,” Rehn said. “It is important that the country and its leaders will be able to take determined action in order to tackle the economic challenges the country is facing at the same time as they face significant security challenges.”