Foto 2-20150415-1197-veldemanphoto.jpg
Philippe Veldeman

, Event: Growth stimuli for the Ukrainian economy

Following the military conflict in the east of the country, the economy of Ukraine is in a desperate situation. How can it be reformed and steered back onto its growth path? This was the central question at an event that took place in Brussels on 15 April 2015.

After the moderator Wolfgang Schüssel had welcomed some 130 participants to the event, Joachim Fritz-Vannahme, director of the Europe’s Future program, introduced the topic. He proposed that in view of the many conflicts surrounding the EU, Europe’s neighborhood policy had to be radically reformed. Country-specific approaches were necessary. Johannes Hahn, the EU commissioner responsible for the EU neighborhood policy, followed him. Hahn asserted that the EU did not want to establish exclusive economic relations with Ukraine, and supported the idea that Ukraine should also continue to deepen its trade relations with Russia. From his point of view, this did not present a contradiction. However, the EU’s deep and comprehensive free trade agreement with Ukraine should be speedily ratified. Renegotiation was out of the question.

There is nothing in our new agreement that would stop Ukraine continuing to export products to Russia.
Johannes Hahn

In favor of trilateral talks between the EU, Ukraine and Russia

Michael Landesmann of the Vienna Institute for international Economic Studies (wiiw) then introduced the findings of the study “How to stabilize and reform Ukraine's economy”, jointly published by the Bertelsmann Stiftung and the Think Tank United Europe. The study contains four central recommendations for stimulating the growth of the Ukrainian economy:

  1. Reduction of military expenditure and a focus on public investment
  2. Curbing the influence of oligarchs
  3. Strengthening of trade relations with Russia and the Eurasian Union
  4. More incentives for foreign direct Investment

Landesmann spoke in favor of trilateral talks between the EU, Ukraine and Russia considering that it would be in the best interests of Ukraine to maintain close economic relations with both partners.

Clear priorities for reforms

Two experts from Ukraine and Poland then commented on the contributions of the previous speakers. Hryhoriy Nemyria, a member of the Ukrainian parliament, pointed out that Ukraine would need considerable administrative and financial capacity in order to implement the necessary reforms. If the reforms were not successful the existence of the Ukrainian state as a whole would be endangered. Support from outside was essential and priorities had to be established. The core elements were the association agreement and the free trade agreement with the EU.

Achieving economic growth via energy efficiency

The president of the Warsaw Institute for Public Affairs, Jacek Kucharczyk, warned against shock treatment for Ukraine. Instead, the aim had to be steady economic reforms, accompanied at the same time by the protection of the social dimension. He considered the study’s recommendation to reduce military expenditure was fallacious. After all, the country was at war. For Ukraine, the increase in energy efficiency could make an important contribution to economic growth while at the same time lessening dependence on Russia.

The establishment of peace as an unconditional pre-requisite

In conclusion, Peter Havlik, Senior Economist at wiiw, and one of the authors of the study, stated that the study was based on the premise that peace in Ukraine would be restored. Without the cessation of military hostilities, economic stability in Ukraine would not be possible.

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