Europe faces backlash over failure to follow through on financial aid to Ukraine

Ukrainian authorities had been expecting billions of euros

Ukrainian police at the site of recent Russian shelling in Kramatorsk, Ukraine, November 8, 2022. AP Photo

The European Union is under fire for its failure to disburse billions of euros of promised aid this year to war-ravaged Ukraine.

Czech Finance Minister Zbynek Stanjura said that he found it “very difficult to look Ukrainians in the eye” during a visit to Kyiv last week.

“It’s difficult to explain why we’re incapable of honouring the promises made by our heads of government [to disburse] the money by the end of the year,” Mr Stanjura said in Brussels on Tuesday evening.

“They have problems with infrastructure, the social security system, the budget,” he said.

The World Bank expects the Ukrainian economy to contract by 35 per cent in 2022.

Disagreements between EU member states over whether to provide the funds as grants or loans reportedly caused the postponement of €3 billion ($3.01bn) in aid to Ukraine to early next year. The funds are the final tranche of a €9 billion package the European Commission announced in May.

The delay has caused further strain to Ukraine’s finances. Ukrainian authorities told EU officials in early September that they were counting on receiving the delayed payment this year.

The delay has also caused frustration in the US.

US Treasury Secretary Janet Yellen last month pressed senior officials from the European Commission to step up financial assistance to Ukraine, according to the Washington Post. Ms Yellen has highlighted the need for direct cash payments instead of loans.

Mr Stanjura said that if the €3bn is disbursed in January 2023, then the delay would not be excessive.

He appealed to European countries to increase their help to Ukraine.

“The Ukrainians really need this money," he said.

But EU aid will cover only a fraction of Ukraine's needs. Ukraine's President Volodymyr Zelenskyy last month asked the international community to cover an expected budget deficit of $38 billion.

Meanwhile, French legislators on Tuesday doubled to €200 million a fund dedicated to military support to Ukraine.

European Commission executive vice-president Valdis Dombrovskis said that EU leaders had asked the commission to propose a more structural solution for assisting Ukraine.

The commission will on Wednesday present a proposal to provide €18bn in financial aid next year.

The new instrument would provide highly concessional loans to cover immediate needs, rehabilitation of critical infrastructure and initial support towards postwar reconstruction, people familiar with the proposal told Bloomberg.

The commission will seek approval from the European Parliament and the European Council before the end of this year. “It needs to be decided quickly, 2023 is approaching fast and Ukraine’s financing needs are urgent,” Mr Dombrovskis said.