BRUSSELS, May 11 — A top European official has backed a multi-trillion-euro ‘Marshall’-style plan to rebuild Ukraine, pledging the firepower of the EU’s lending arm for what he said must be a global rescue effort.
Werner Hoyer, president of the European Investment Bank, said Europe must not be left alone to foot the vast bill that he predicted could run into the trillions.
Under the post-World War Two US scheme known as the Marshall Plan, the United States granted Europe the present-day equivalent of some US$200 billion (RM875 billion) over four years in economic and technical assistance.
Addressing the need for a similar programme for Ukraine, Hoyer told Reuters that the cost of rebuilding the country had been discussed at recent meetings at United Nations, the International Monetary Fund and World Bank in Washington.
“What will it cost to rebuild, reconstruct Ukraine? Figures were flying around the room … but one thing is quite clear to me: We are not talking about millions but trillions” said Hoyer, a former German foreign office minister under Chancellor Helmut Kohl following the fall of the Berlin Wall.
Hoyer’s remarks underscore how the European Union is preparing to tackle the ever-growing economic impact of the war, using the clout of the pan-national European Investment Bank, which typically funds infrastructure, such as roads and bridges.
“It’s a challenge for the entire free world to make sure that this (support) will be provided,” said Hoyer, one of the highest-ranking officials from Germany in the European Union.
“The political leaders must make up their mind as soon as possible,” Hoyer said. “But I think we need a structure that is really targeting a global audience and not just the taxpayers in the European Union.”
The debate is unfolding against the backdrop of war in Ukraine and an increasingly tense stand-off between Moscow and Brussels, which has backed tough sanctions to isolate Russia.
Russian President Vladimir Putin told his armed forces at a parade this week they were fighting for their country but offered no clues as to how long their assault on Ukraine, which the Kremlin calls a “special military operation”, would last.
Earlier in the day, Ukraine’s Finance Minister Serhiy Marchenko said the country’s economy is expected to shrink by almost half this year. Read full story
Its central bank estimates a third of Ukrainian firms have stopped producing entirely for the time being, while the United Nations estimates that nearly 6 million people — around 13 per cent of the population — have already fled.
Researchers from Economic Policy Research, a network of economists, estimate that the cost of rehabilitating Ukraine is already €500 billion-€600 billion (RM2.3 trillion-RM2.7 trillion) — more than three times its annual economic output before the war.
Hoyer’s forecast suggests this could yet rise sharply.
Hoyer said that a critical part of the plan will be for the West’s large state-sponsored banks to provide “guarantees” that would underwrite Ukraine’s government once the war ends.
Doing that should help Kyiv regain access to global borrowing markets, much as Iraq did after the second Gulf War that overthrew Saddam Hussein, and speed up its reconstruction.
“If we want to entice the investor community to give us their money … then we need to give them reassurances,” Hoyer said, referring to guarantees against heavy losses for investors.
“I’m convinced that the capital markets will be open to this.”
Many of the privately run global investment funds that have lent to Ukraine’s government and firms since its post-Crimea debt writedown in 2015 say they understand that another one will now inevitably be needed.
Kyiv has an almost US$1 billion bond payment due in September although it has repeatedly said it still intends to meet it.
“I get a feeling that there will have to be a discussion with the Ukrainians about where the money coming from the West is best spent” said AXA Investment Managers’ Sailesh Lad.
“Nobody will want to say, ‘I am going to be a holdout,” added Ray Jian at Europe’s biggest fund manager Amundi, referring to how bondholders were likely to agree to debt relief as they fully understood that Ukraine wouldn’t have been in such difficulties without the invasion.
Having already made some finance available to Ukraine, Hoyer said the EIB had a further 1.5 billion euros of immediate support available if the European Commission agrees to its use.
He acknowledged that the “big uncertainty” for both Ukraine and investors was whether Russia would be decisively repelled or whether it would remain locked in a series of frozen conflicts like in Crimea since 2014.
“I understand the political leaders that they will not be ready to grant Vladimir Vladimirovich partial success,” Hoyer said referring to Putin’s name and patronymic.
Hoyer said international aid could be used to fund rail infrastructure to transport Ukraine’s wheat harvest from last year, an estimated 8 billion euros was still stranded in the country.
“Part of this scandal is that Ukraine is sitting on a huge amount of wealth which it cannot monetize. This must be addressed.”
He said some financial assistance could be sent even before the conflict was over, to, for instance, repair bridges in safe parts of the country. — Reuters