Ukraine’s Membership Would Entail ‘Financial Conundrum’ For EU, Erode Its 'Cohesion'
© AFP 2023 / KENZO TRIBOUILLARD
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Despite the socio-economic problems already plaguing the bloc, and increasingly pronounced “Ukraine fatigue,” Kiev could become a full member of the European Union by 2030, European Council President Charles Michel said in a recent interview, adding that this would be possible if "both sides do their homework."
Inclusion of Ukraine in the European Union (EU), with all of its profound political and pecuniary implications, could “raise a real financial conundrum for its institutions,” Sergio Rossi, professor of macroeconomics and monetary economics at the University of Fribourg, Switzerland, told Sputnik.
Ukraine’s accession to the EU "raises a lot of questions, which to date remain open," and need to be addressed correctly, specifically pertaining to the "origins of the money Kiev will receive" from the EU budget, the expert added. Furthermore, the entire process could trigger growing dissatisfaction and rifts between the actual member countries of the EU, Rossi stated.
“The cohesion between current EU member countries will be much harmed as a result of Ukraine’s accession to this community, particularly as a result of budget constraints heaving considerably on the macroeconomic situation across the whole EU, which can also exacerbate the emergence of nationalism and the ensuing willingness to leave this community of very heterogeneous countries on structural grounds. The larger will the EU be, the bigger are going to be the socio-economic problems it will be confronted with,” Sergio Rossi stressed.
Ukraine could become a member of the European Union by 2030, despite the ongoing armed conflict, European Council President Charles Michel said in an interview with the German publication Spiegel on October 3. “Ukraine may indeed become a member of the EU in 2030 if both sides do their homework," said Michel, adding:
“Ukraine and other candidate countries for accession to the EU must actively and steadily carry out reforms, fight corruption and comply with legal conditions.”
After a meeting of foreign ministers of EU nations in Kiev on October 2, Ukraine’s Foreign Minister Dmytro Kuleba said the officials had agreed to move his country's candidacy forward "with maximum speed." Ukraine will be joining seven other recognized EU membership hopefuls: Turkiye, Albania, North Macedonia, Montenegro, Serbia, Moldova, Georgia, and Bosnia and Herzegovina. Georgia also formally submitted application for membership in 2022 and is considered a potential candidate.
Ukraine applied for EU membership on February 28, 2022, shortly after Russia launched its special military operation. During the EU delegation's visit to Kiev on April 8, 2022, European Commission chief Ursula von der Leyen handed Ukrainian President Volodymyr Zelensky a questionnaire to begin Ukraine's accession process.
Weighing in on Charles Michel’s remarks on Ukraine’s accession to the EU, Russian Security Council Deputy Chairman Dmitry Medvedev took to Telegram to wryly point out that if politicians in the bloc were mulling admitting Ukraine to the EU by 2030, “they must still believe that the current Bandera state will last that long.”
'Financial Burden' of Ukraine's Membership
Ukraine’s accession to the EU ought to be postponed, argued Rossi, as he reiterated the financial burden for the current member states that such a move would entail. “A seminal question concerns, indeed, the origins of the money Ukraine will receive from the EU’s common budget, and the scopes for which this huge amount of funds will be used," the pundit said.
Ukraine’s accession to the EU would entitle Kiev to about 186 billion euros over a period of seven years, according to internal estimates of the bloc’s common budget, cited by the Financial Times. The outlet acknowledged that “many” existing member states would thus be transformed into “net payers for the first time.” The cited estimate added that big reforms to currently existing budget arrangements would be needed.
“All member states will have to pay more to and receive less from the EU budget; many member states who are currently net receivers will become net contributors,” a paper drafted by the Secretariat of the EU Council concluded.
Bearing in mind NATO's ongoing proxy war against Russia in Ukraine, and the destruction it has wrought in that country, the pundit pointed out that reconstruction, "as regards both individuals and the economy" will "necessitate much more than what Ukraine's accession to the EU would entitle Kiev to obtain from it."
"Further, in light of the current situation as well as the macroeconomic perspectives across the EU, it will be difficult – if not impossible – for the latter to allocate such an amount of funds to Ukraine, in a problematic period like this… All current EU member countries have been suffering from many problems on economic and financial grounds, so the EU budget cannot be enough to contribute to solving these problems any time soon," he said.
Indeed, already this summer EU officials admitted that "there are some fears of wavering support" amplified by the economic slowdown and plummeting living standards that have resulted, in part, from backfiring Western sanctions against Russia over Ukraine. Poor families have been especially affected by soaring inflation and costs. In early June, the European press admitted that the Eurozone slid into a technical recession in the first three months of 2023, citing figures from Eurostat, the EU’s statistical agency.
The EU's GDP plummeted by 0.1% in the first quarter of 2023 and the final three months of 2022, according to Eurostat. Two consecutive quarters of negative growth are commonly considered to be a "technical recession." As per European financial experts, the bloc's economic growth is expected to slow to 0.9% in 2023 before rebounding to 1.5% in 2024 and 1.6% in 2025.
26 September 2023, 11:20 GMT
Question of 'Origins of Funds'
Where the funds for Ukraine would come from is another outstanding issue, bearing in mind the woes plaguing the European economy. The “engine of Europe,” Germany, now finds itself at the bottom of the recent S&P Global PMI data ranking, confirming that the country is on the verge of deindustrialization. Many other Eurozone countries are also struggling, with the cost-of-living taking its toll on their populations.
“The origins of the funds that the EU needs to support Ukraine’s membership will have to be found in the EU budget, as well as across global financial markets. As regards the EU budget, this will imply reducing the EU contributions to other member countries as well as collecting some sort of pan-European taxes. In both cases, there will be a lot of criticism across the actual member countries of the EU, which will also much increase the people’s dissatisfaction against it, making the original project of the European Union a real utopia," Sergio Rossi said.
He added that with regard to financial markets’ contribution, this is also going to be "problematic in a period of high uncertainty and financial fragility of a number of stakeholders across the marketplace."
"There will not be enough support by financial institutions for such an idea, so the inclusion of Ukraine in the EU could raise a real financial conundrum for its institutions," he pointed out.
25 August 2023, 12:02 GMT
Before further enlarging the EU, "it would be wise to make it a real union of all those countries that are already members of it," said Sergio Rossi. "To date, a relevant number of individuals and institutions do not consider to be part of such a community, because they all behave and take their decisions in their own country’s interests only. This is even more so in the euro area, where a single currency has been introduced much too early with regard to all the structural discrepancies that exist across this area," he emphasized, adding:
"Ukraine’s accession to the EU can and, indeed, should be postponed, once a number of these structural issues will have been addressed and solved in the general interest for the common good. In the contrary case, the financial burden for the current EU member countries stemming from Ukraine’s accession to the EU will be too heavy for a majority of them, thereby aggravating their own situation, as well as their citizens’ frustration, both of which are indeed crucial for the future of the EU as a whole."
For all the previously cited EU estimates, the true financial and institutional implications of Ukraine’s accession “are huge, and cannot be fully seized today,” the expert pointed out.
“All stakeholders will be confronted with higher uncertainty as well as with worrying perspectives about economic growth and financial stability. Institutional concerns are also highly worrying and problematic, not least because it is unclear what will be the weight of Ukraine in the most important institutions of the EU, where many relevant decisions are taken for the socio-economic future of this set of countries. What is clear today, is that the accession of Ukraine will make the EU even more fragile both as regards social cohesion and political integration. These are indeed two major factors that are necessary in order to make the EU a union of people’s interests truly. Today, it remains a figment of the politicians’ imagination," Sergio Rossi concluded.
