The EU is too financially weak to help rebuild Ukraine

Before the EU committed head over heels to support Ukraine in fighting a needless war on vague principles of protecting the international world order, Brussels should have thought about the war’s aftermath. Can the EU really afford an eventual reconstruction bill?

As EU leaders converge in London at a conference to grapple with how to help, the war grinds on with no end in sight. The famed Ukrainian counter-offensive, about which much has been written in Western media, is progressing slowly. “Some people believe this is a Hollywood movie and expect results now. It’s not,” President Zelenskyy told the BBC this week.

Even if the war were to end today, the reconstruction costs would be enormous. The World Bank estimates this to be $411 billion (in October 2022, a similar estimate was $350 billion – so, the reconstruction costs are climbing at about $8 billion a month). From where will the EU fund the effort?

Politico Europe reported that on the eve of the London summit, the European Commission unveiled the “Ukraine Facility” to provide up to $55 billion in financial support for Ukraine from 2024 to 2027, with two-thirds coming from loans and a third in grants. If you are confused that the numbers don’t add up – how can an $18 billion subsidy for what is dubbed a Marshall Plan even hope to close in on a reconstruction tab of $411 billion and rising – you are not alone. No one knows how to deal with this gorilla.

The truth is that the EU, including the UK, is in one of the worst financial straits since World War II. Germany, Europe’s wealthiest economy, is already in a recession. Spain and Italy are posting anemic GDP growth rates of 0.5%. The Bank of England announced interest rates to rise to 5% in the 13th straight increase, cautioning that more hikes may occur.

The UK, even before Brexit, is a country more comfortable with pomp and pageantry aligned with its colonial past than being an economic powerhouse. We noted two months ago that of the top ten global software companies that produce tools for individuals and businesses, not one is British. In the engineering and technology world, the UK is a waning power.

The EU is a textbook example of what happens when bureaucracy rules over the fundamental tenets of a liberal democracy rooted in capitalism. Even today, each EU member nation has its own form of government, lower and upper houses of parliament, chief executive, capital, flag, language, and fiscal tax and expenditure policy.

But all EU nations have a single common currency, the Euro, backed by a single central bank. A common monetary policy means that interest rates for all member nations would be decided in Brussels, as would be other central bank responsibilities such as the money supply.

The EU has a complex system of rules that have lifted barriers to trade among member states – the retirement of customs duties, excise, and other taxes, for example – resulting in the complete elimination of borders. Each EU country enjoys instantaneous access to markets, capital, and labor across 27 other nations.

But what holds the fragile union together is a set of unbending rules in Brussels developed over six decades and perfected into an art form by millions of bureaucrats. These officials are faceless and not elected by the people of the member states. But they have enormous powers to make sovereign member nations comply through communiques and diktats, even more power than the chief executives of those states.

Liberals who salivate over a deep regulatory state made extraordinary predictions about how the EU experiment would succeed. Anu Bradford, a Columbia law school professor, said in 2012 that the EU is an influential superpower that shapes the world in its image by promulgating regulations that shape the international business environment and elevating standards worldwide.

Bradford’s romantic view of the EU has not aged well. Jeremy Shapiro and Jana Puglierin of the European Council on Foreign Relations said in a policy paper in April: “In 2008 the EU’s economy was somewhat larger than America’s: $16.2tn versus $14.7tn. By 2022, the US economy had grown to $25tn, whereas the EU and the UK together had only reached $19.8tn. America’s economy is now nearly one-third bigger. It is more than 50 percent larger than the EU without the UK.” Conclusion: The EU has been an economically failing group of nation-states for nearly 15 years now.

The EU is too rules-driven and has too many domestic problems of its own (labor strife, pension reform, immigration, lack of capital markets, lack of innovative products) for it to power Ukraine’s reconstruction. Rather than mindlessly embracing President Biden by dutifully following his lead in the Ukraine-Russia war, committing weapons, moral support, and breaking energy ties with Russia, Brussels should have listened to Hungarian leader Victor Orban, who has consistently maintained that the EU cannot afford not just this war but all wars.

As EU leaders in London strain to put on a unified public face to show they stand with Ukraine, they must be privately conceding that they probably went too far in attempting to punish Russia, and the war has hurt the EU more than it has the aggressor. The conflict has impoverished the EU so much that it has to rely on the United States to help meet conference objectives. Again.

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Ukraine said it had downed an entire barrage of 13 cruise missiles fired by Russian forces overnight targeting an airfield in the country’s west.

Russia launched waves of aerial attacks with cruise missiles and attack drones over the winter, prompting Kyiv to appeal to its Western allies to bolster its air defense systems.

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The United Nations has placed Russia’s military and allied armed groups on its “list of shame” over the killing and maiming hundreds of children in its war against Ukraine.

Human Rights Watch welcomed the UN’s decision to name Russian forces but criticized the UN chief Antonio Guterres’s decision to leave Israel off the shame list, saying that he “had failed Palestinian children again.”

3. Wagner Chief: Russians Misled In Ukraine Offensive – AFP

Wagner chief, whose forces had for months led an assault for towns and cities in eastern Ukraine, accused the Russian Defense Ministry of not telling the truth and losing territory to Ukrainian troops.

“They are misleading the Russian people,” he said in an audio message released by his spokesmen. Russian President Vladimir Putin has repeatedly said Ukraine’s offensive is failing.

4. Russian Diplomat Reportedly Refusing To Leave Axed Embassy Site in Australia – Bloomberg

Russia and Australia’s dispute over the site of Moscow’s proposed embassy in Canberra escalated. Local media reported that a Russian diplomat has been living on the land previously held by Moscow.

It reported the man couldn’t be evicted as he holds diplomatic immunity.

Prime Minister Anthony Albanese announced last week that he was canceling Russia’s lease because of security risks arising from the site’s proximity to parliament.

5. Biden Defends Calling China’s Xi A ‘Dictator’ During Fundraiser – Al Jazeera

During a joint press conference with Indian Prime Minister Narendra Modi, Biden said his blunt statements about China are “just not something I’m going to change very much.”

“I expect to be meeting with President Xi sometime in the future, near-term. And I don’t think it’s had any real consequence,” he said.

China’s embassy in Washington said it had issued a formal protest against Biden’s comments.

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President Joe Biden and Indian PM Narendra Modi agreed on a long list of strategies to expand defense and technology cooperation as their countries grapple with China’s economic and military strength.

One of the noteworthy deals made will allow General Electric Co. to co-produce fighter jet engines in India, with Modi characterizing it as a “landmark” achievement that will give their defense cooperation “a new character in the times to come.”

7. Geopolitical Winds Raise Israel’s Threat Perception Of Iran But Major Strike Unlikely – Al Arabiya

Ahead of a military drill simulating war with Iran, Israel’s PM Benjamin Netanyahu said: “I have a sharp, clear message for Iran and the international community: Israel will do what it must to prevent Iran from getting a nuclear bomb.”

Israel’s unease is intensified by Tehran’s latest flurry of diplomatic activity, especially in light of the China-brokered normalization agreement with Saudi Arabia and the military alliance with Russia.

8. Paris Climate Summit Seeks To Provoke ‘Public Financial Shock’ – RFI

The Summit for a New Global Financial Pact aims to find financial solutions to the interlinked global goals of tackling poverty, curbing planet-heating emissions, and protecting nature.

In his opening remarks, French President Emmanuel Macron told delegates that the world needs a “public finance shock,” a global push of innovation and financing –to fight these challenges, adding the current system was not well suited to address the world’s challenges.

9. Borrell Says Agreement Reached On Need To Hold Fresh Elections In Northern Kosovo – RFE/RL

EU foreign policy chief Josep Borrell says an agreement has been reached on the need to hold fresh elections in ethnic Serb-majority northern Kosovo to defuse tensions between Pristina and Belgrade.

10. Japan Denies Biden Claim He Influenced Its Defense Budget Increase – Kyodo News

The denial came after Biden said Japan had increased its defense expenditures “exponentially” due to his persuasion of PM Fumio Kishida during their past three talks.

Chief Cabinet Secretary Hirokazu Matsuno said Tokyo has told Washington that Biden’s remarks were “misleading” as Japan decided to expand the defense budget on its own, adding the president’s intention was “unclear.”

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The office of the Director of National Intelligence (DNI) noted that Pyongyang might also employ non-nuclear, non-lethal attacks to advance its goals in the future, believing that its nuclear weapons will deter counter-offensives.

North Korea has launched nearly 100 ballistic missiles since the start of last year, firing an unprecedented 69 ballistic missiles in 2022 that, marked the new annual record of ballistic missiles fired.

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After Ottawa passed a bill requiring digital giants to pay for such content, Facebook and Instagram users in Canada will be blocked from viewing Canadian news, parent-company Meta said.

Google, another critic of the Online News Act, has previously said it is considering a similar move.

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Some 529 million people were estimated to already live with diabetes, one of the top 10 causes of death and disability.

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Republished with permission from TIPP Insights