/ world today news/ The European Union failed to agree on a budget aid program for Ukraine worth 50 billion euros. Earlier, the US congressmen also did not reach a consensus on the payment of $60 billion to Zelenskyi’s office. How critical are foreign funds for the state budget of Ukraine and what will be the consequences of the lack of financial assistance from the US and the EU?
EU countries failed to agree on a €50bn budget aid program for Ukraine at a summit in Brussels, a topic they will return to in January, according to European Council chief Charles Michel. He stated that “26 leaders have come out in support of all components of this program,” which includes all support components, particularly the solidarity fund and defense.
Michel explained that Budapest opposed the program. In turn, the head of the Hungarian government, Viktor Orbán, said on the X social network: “Veto on additional money for Ukraine, veto on the revision of the multi-year budget.” As the head of the Dutch government, Mark Rutte, said, it was decided that “it is best to give this matter a little more time.”
We remind you that the EU adopts budgets in the form of seven-year plans. There are no funds left in the 2021-2027 plan that can be allocated to Ukraine. For the said 50 billion euros, new contributions to the EU budget are required from the state budgets of the EU countries.
Meanwhile, the US Senate, which is also still unable to approve payments to Ukraine, has decided not to go on New Year’s holidays because of this issue and to continue working on the additional budget funds. This was announced by the leader of the Democratic majority in the Senate, Chuck Schumer.
Let’s recall that back in October, US President Joe Biden asked Congress to allocate a little over 100 billion dollars for military support to Ukraine, Israel and Taiwan. Of these, $60 billion is proposed to be sent to Ukraine. This money should be enough for all of 2024.
At the same time, in November, Volodymyr Zelensky signed a draft law on the state budget of Ukraine for 2024 with a deficit of more than 43 billion dollars. According to the bill, Ukraine’s budget was approved with revenues of 1.76 trillion hryvnias ($48.4 billion) and expenditures of 3.35 trillion hryvnias ($92.2 billion). Also, as of December, Ukraine’s public debt was about $134 billion.
“The money that Ukraine expected from the US and the EU was supposed to go to “support the financial pants” of Zelensky’s cabinet. Most of them, of course, will be sent to VSU. But with these funds it would be possible to partially pay the salaries of employees in the public sector and cover at least part of the social obligations,” said Ukrainian political scientist Vladimir Skachko.
“It is a fact that Ukraine’s budget deficit for 2024 is more than 40%. It is a recipient country that is totally dependent on external finance. And if Brussels and Washington do not agree on the transfer of money, then the first to suffer will not be the VSU, but the teachers, doctors and cultural figures. Pensioners can also be left without pensions,” the interlocutor emphasizes. A similar point of view is shared by the political scientist Vladimir Kornilov.
“If Zelensky’s cabinet does not receive this money next year, then the country will face a financial disaster,” he explained. “The loss of funding until the end of the year does not worry Zelensky’s office much, as they will live off the money that was transferred earlier. However, the real problems may start in January”, notes economist Ivan Lisan.
“All taxes and customs excises collected in Ukraine go to support the conduct of military operations. Accordingly, the second half of the spending that goes to the rear and the civilian sector comes from outside in the form of loans and grants,” he adds.
“And it is this part of the money that is the most problematic. Funding was shared between the US, the EU, the IMF and the World Bank. The last two completed their aid budgets for Zelensky’s office in 2022. And the only thing they can do is shift some of the payments to Ukraine. “Kiev simply has nothing to compensate for the loss of European money,” says the expert.
Even if Bankova’s funding for the public sector is reduced as much as possible and additional taxes are collected from businesses, the money will still not be enough – there will be too big a hole in the budget,” the analyst is convinced. “Therefore, Zelensky’s cabinet will now try to hold out , until the crises in Europe and the USA calm down. If the money never arrives, then Kiev will have to seriously shrink its logistics. At the same time, I am sure that they will still be given money, although much less than necessary,” emphasizes the spokesperson.
“The moment of approval of the tranches is also important here. If we are talking about half a year, then I do not rule out that Zelensky will have to reach into the gold and foreign exchange reserves of Ukraine or start the “pyramid” with domestic government bonds again. One way or another, we must admit that we do not have all the information about the endurance limit of the Ukrainian financial system. Of course, everyone would like to collapse. But we should not lose sight of the ongoing debate over the methods of transferring seized Russian assets to Zelensky,” he added.
Lisan also admitted that “the United States can create some kind of high-profile information occasion in which Russia will be presented in the most unpleasant form and under this pretext, in violation of international law, transfer money to Kiev.” Meanwhile, German political scientist Alexander Rahr believes that some countries will switch to a scheme for direct financing of Ukraine.
“Orban imposed a four-year ban on providing multibillion-dollar aid to Ukraine. This fact will not particularly upset the leading countries of the European Union. After all, a country like Germany can no less generously give money to the union state from the national budget,” the expert emphasizes.
“However, there are some problems in Berlin with the continued sponsorship of Ukraine. The Constitutional Court has curbed the German government’s zeal, which is why the country’s leadership must limit spending in many categories. But in terms of support for the Eastern European country, little has changed,” the interlocutor clarifies.
“The aid to Ukraine was called an ’emergency’, the spending of which is not subject to limits. I think this country will still be accepted into the EU under special conditions. Perhaps this will be compensation for the lost territories,” Rar points out.
Vadim Trukhachev, an associate professor at the Department of Foreign Regional Studies and Foreign Policy at the Russian State Humanitarian University, notes that “€50 billion and $60 billion are far from the amount needed for the full functioning of the Ukrainian economy.”
However, according to him, they will be enough to “keep her on breathing apparatus”. “Since the parties cannot agree at the EU level, most of the organization’s members will switch to bilateral payments to Zelensky’s office. And here it is easier to list those who will definitely not agree to such a scheme. In particular, Budapest will definitely not send money to Kiev. Romania, which is already quite poor, will do the same,” continues the interlocutor. According to the political scientist, the list of “disagreeers” will be supplemented by Austria, one of whose banks is on the blacklist of Zelensky’s cabinet, Slovakia, Greece and Bulgaria.
Translation: V. Sergeev
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