The US is growing frustrated with Europe’s delayed economic aid to Ukraine

The US is growing frustrated with Europe’s delayed economic aid to Ukraine

The US is growing frustrated with Europe’s delayed economic aid to Ukraine

Tensions are rising between the United States and its Western allies over Ukraine’s deteriorating economy, as US officials increasingly push the European Union to increase financial aid to the war-torn country.

On several occasions this week during meetings of global financial leaders in Washington, Treasury Secretary Janet L. Yellen urged her international counterparts to accelerate both the speed and amount of money going to Ukraine. Yellen was joined in that effort by Ukrainian President Volodymyr Zelensky and Ukrainian Prime Minister Denys Shmyhal, who addressed a virtual meeting of the World Bank’s top financial officials on Wednesday.

Yellen also raised the issue in a private meeting this week at the International Monetary Fund with European Commission Executive Vice President Valdis Dombrovskis and European Economic Commissioner Paolo Gentiloni, according to a person familiar with the matter who spoke on condition of anonymity to describe the private meetings. She raised the issue again at the next meeting of all EU finance ministers, the person said.

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New projections from the World Bank last week suggested that Ukraine’s economy would contract for 35 percent this year, and financial officials in the country say inflation could reach 40 percent early next year — close to the economist’s definition of “hyperinflation.” Even as the battlefield turned in Ukraine’s favor, national exports declined, tax revenues fell, millions fled, and Russian attacks destroyed critical infrastructure, including the power grid.

International aid has not proved sufficient to close the gap. On Wednesday, Zelensky said that Ukraine needs as much as $38 billion in emergency economic aid from the West just for next year’s budget. That figure excludes an additional $350 billion that the World Bank has estimated will be needed for Ukraine long-term reconstruction after the end of the war. The United States has disbursed $8.5 billion in economic aid and will pay another $4.5 billion by the end of the year, while U.S. officials say the European Union has pledged 11 billion euros but disbursed only about 3 billion in loans.

“We call on our partners and allies to join us by quickly paying off their existing commitments to Ukraine and stepping up to do more – both to help Ukraine continue its essential government services and to help Ukraine begin to rebuild and recover.” , Yellen said Tuesday.

Yellen on Wednesday reiterated the need for quick outright cash payments — instead of loans that must be repaid — to help the nation’s economy. Yellen’s comments were a thinly veiled reference to the EU, which has provided almost all of its loan assistance.

“Donors need to continue to step up,” Yellen said. “The volume, predictability and grant component of disbursements must be improved.”

Both Ukrainian and U.S. officials are careful not to antagonize their European allies with harsh public condemnations, but they have conveyed a sense that the commission is moving too slowly.

“I know they’re very frustrated,” said one former senior Treasury official, speaking on condition of anonymity to reflect private discussions with Treasury leadership. “American officials want Europe to deliver much faster… They want Europe to deliver much faster. They have to deliver.”

In a statement, European Commission spokeswoman Nuyts Veerle strongly rejected the idea The EU has been slow or inadequate in disbursing aid. The total commitment of “Team Europe” – including not only the EU, but also its member states and financial institutions such as the European Investment Bank – is approximately 19 billion euros, Veerle said.

The European Commission has also pledged to pay 10.2 billion euros in emergency economic support to Ukraine by the end of the year, excluding military aid, Veerle said. While the vast majority of aid is in the form of loans rather than grants, these loans are given on very favorable terms for borrowers.

Part of the challenge is that such decisions by EU capitals must be supported unanimously, creating the opportunity for roadblocks, while the United States can approve aid without consulting other countries.

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“The EU welcomed millions of refugees from Ukraine and took care of them on the territory of the EU. All this should be taken into account when discussing the overall scope of support and aid,” added the European official, speaking on condition of anonymity to honestly reflect the EU’s position. “Plus, the EU has made long-term commitments for the post-war reconstruction of Ukraine. For us, this is not a race or a beauty contest. Helping Ukraine is in our vital interest and we are determined to do whatever we can to help defeat the aggressor and rebuild their country.”

The European Union is grappling with its own set of challenges amid an increasingly gloomy global economic outlook. Europe is facing a severe economic slowdown and likely recession this winter while Russia is suffocating the continent’s energy sources in retaliation for sanctions imposed because of the war. Inflation in Europe continues unabated, and energy prices have risen more there than in the United States.

But Ukraine’s economic situation is worse, and warnings have accelerated in recent weeks despite the nation’s battlefield victories over Russia.

Ukraine’s tax revenues are now almost entirely devoted to military operations, forcing the country’s government to print new money – which increases inflation and devalues ​​its currency. Inflation is already above 30 percent and the country’s currency, the hryvnia, has depreciated by roughly 70 percent, according to Maryan Zablotsky, a member of Ukraine’s parliament who sits on its finance committee. Zelensky, speaking from a distance at a World Bank meeting on Wednesday, said that Ukrainians’ inflation-adjusted incomes had fallen by more than a third.

“We understand that many Western countries have their own problems and issues, but the current aid is barely enough to feed the people,” Zablotsky said in an interview.

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Kenneth Rogoff, a Harvard economist and former chief economist at the International Monetary Fund, said he is concerned that inflation in Ukraine may continue to rise within six months to a year if additional assistance is not provided. With its large budget deficit, Ukraine has been forced to print money to cover its spending obligations – depressing the value of the currency and increasing the cost of imports and other goods.

“They’re in a desperate, desperate situation that you can’t imagine… In a sense, while they’re winning the war, their economy is losing,” Rogoff said. “Europeans should pay much more; I don’t care if they’re in a recession. Ukraine is in a war defending the border of Europe.”

Yellen’s comments this week reflect how long-building frustration among U.S. officials over European economic aid to Ukraine is now coming to the fore, said Jacob Kirkegaard, a senior fellow at Germany’s Marshall Fund of the United States and the Peterson Institute. The United States has reportedly pledged to provide $1.5 billion a month to cover the Ukrainian government next year. The European Commission has made a similar promise in recent weeks, but faces skepticism from international experts about its ability to deliver on that promise, given its inability to meet its targets so far.

“They have not been willing to come close to the extent that the US apparently wants,” Kirkegaard said Wednesday. “When you read Secretary Yellen’s comments today, it’s clearly palpable.”

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