Do you want to give even if you don't have money in your pocket? The huge expenditure on aid to Ukraine may add insult to injury to the EU economy. EU | Ukraine | Economy
On July 14th local time, a meeting of EU finance ministers was held in Brussels. While focusing on discussing how to provide financial support to Ukraine, participants also acknowledged that the EU economy has not yet emerged from its difficulties.
Screenshot of Reuters report
At a press conference held after the meeting, the Executive Vice President of the European Commission, Dong Brovskis, said that the meeting discussed the proposal of the European Commission to establish a "Ukraine Fund", reaffirming its goal of providing stable and predictable support for Ukraine's macroeconomic stability, long-term reconstruction, and the reforms needed to join the EU by 2027.
Participants also urged Spain to make rapid and substantial progress in multilateral financing reviews during its presidency of the European Union, stating that this is crucial for alleviating current budget pressures and ensuring sustained financial support for Ukraine from January 2024 onwards.
According to "European News Network", Spain, the rotating presidency of the European Union, has proposed a new approach to EU fiscal reform and hopes to reach an agreement in the autumn. The picture shows Executive Vice President of the European Commission, Dombrovskis, and Spanish Minister of Economy, Nadia Calvinho, attending a press conference on July 14th.
The meeting also emphasized that the current EU economy is still at a critical moment. The latest data confirms that the weak situation experienced by the EU economy in the first quarter continued to exist in the second quarter.
The meeting pointed out that although the overall inflation is slowing down due to the drop in energy prices to the level before the Russia-Ukraine conflict, the EU is still in a high inflation environment and has not yet extricated itself from the predicament. Therefore, it is crucial to ensure fiscal sustainability while stimulating reform and investment.
On July 14th, at the EU Finance Ministers' Meeting.
The European Union announced last month that it will provide Ukraine with 50 billion euros in financial support. On the 14th, the Executive Vice President of the European Commission, Dombrovsky, stated that in order to receive relevant assistance, Ukraine must develop a reconstruction plan that includes investment and reform.
Liu Mingli, Deputy Director of the European Institute of the China Institute of Modern International Relations, pointed out in an interview with the Global Information Radio of China Central Television that setting "prerequisites" for financial aid to Ukraine indicates that the EU has "difficulties" in terms of "financial resources" from one side:
For the EU, this funding is not small in scale and also involves the issue of future fund recovery. Because most of the 50 billion euros are loans, the EU hopes that Ukraine can provide a reliable plan to ensure smooth recovery.
For Ukraine, 50 billion euros is far from enough for post conflict reconstruction and more investment is needed. Market funds require returns, and Ukraine itself needs to propose corresponding plans to ensure investment confidence.
The minutes of the June monetary policy meeting recently released by the European Central Bank show that the momentum of price increases in the eurozone remains strong, and core inflation is very stubborn and continues to be higher than expected, indicating that inflation has stronger persistence.
Liu Mingli believes that in the future, the European Central Bank is likely to continue to maintain a pace of interest rate hikes, which will further put downward pressure on the European economy:
The inflation rate in Europe has not yet fallen below the ECB's monetary policy target of 2%, so the ECB's interest rate hike process is not over. It is necessary to continue to maintain a tight monetary policy to curb inflation.
At present, European countries have generally lowered their expectations for economic growth, and Germany also experienced a technical recession in the fourth quarter of last year and the first quarter of this year.
On the one hand, its own economic growth prospects are worrying, and on the other hand, it promises to provide Ukraine with a large amount of financial support. Liu Mingli bluntly stated that this will "add insult to injury" to the economies of EU countries:
Previously, due to poor fiscal discipline, Europe experienced a debt crisis. However, whether the EU can control the continuous deterioration of its fiscal situation this time is a test for the EU.
