Marshall`s postwar logic holds true in Ukraine today
USA Ukraine Russia
ft.com bssb.be 03.11.2014
Ukraine is ravaged by war, aggravating its economic and financial crisis. It needs major reforms but also substantial international assistance, not only credits but also ample grants. Its emergency calls for a Marshall Plan.
The National Bank of Ukraine forecasts that the country’s economic output will plummet by 10 per cent this year. Then the budget deficit will surge to 15 per cent of gross domestic product, and the public debt to more than 100 per cent of GDP next year. A classical devaluation-inflation cycle is near and can lead to a financial meltdown.
The need for a Marshall Plan was raised after the collapse of the Soviet Union, but then there was no war destruction, no military threat and no particular need for a new western alliance. Today all these needs are present, presenting five good reasons for a Marshall Plan for Ukraine.
First of all, the cause of the economic disaster is the war the Kremlin launched against Ukraine on February 27, when the current government was appointed. Russian arms have blown up the power stations in Donbas, stopping the pumps in the coal mines, which have been flooded. On September 13 Arseniy Yatseniuk, the prime minister, assessed the war damage to physical infrastructure at $9bn, and they have risen substantially. Donbas’ humanitarian crisis calls for western humanitarian aid.
Second, like Europe after the Second World War, Ukraine needs to rebuild its state and economy. After its democratic breakthrough in February, the election of President Petro Poroshenko on May 25 and parliamentary elections this Sunday, Ukraine will be ready for this gigantic task. If the EU is serious with its recently ratified association agreement with Ukraine, it needs to show it now.
Third, if the needed capital is provided as credits, Ukraine will not be financially sustainable.
Fourth, the original Marshall Plan aimed at shielding the free world from the military and diversionary threats of the Soviet Union. Today once again Europe is facing such a serious security threat, now from Russia. Europe needs to stand up to this threat.
Ukraine needs all the foreign aid it can get, but it should be co-ordinated. Therefore, the Kiev government has formed a working group on a Marshall Plan for Ukraine, chaired by Volodymyr Groysman, the deputy prime minister.
The main difference from 1948 is that the EU should take the lead. It has the necessary means. Andrius Kubilius, the former prime minister of Lithuania, has proposed that the EU commits 3 per cent of its €1tn budget for 2014-20 – that is, €30bn – in grants to Ukraine.
The time to launch a Marshall Plan for Ukraine should be at a planned donor conference in December after the new Ukrainian parliament has opened and a new government formed.