Keep­ing Europe’s Eastern Prom­ise

Financial Mirror (Cyprus) - - FRONT PAGE -

For many years, the Euro­pean Union’s east­ward ex­pan­sion seemed un­stop­pable. But with Rus­sia’s in­va­sion of Ukraine, Pres­i­dent Vladimir Putin ap­pears to have suc­ceeded in order­ing a halt to Europe’s ef­forts to ex­tend democ­racy, the rule of law, and open mar­kets through­out the con­ti­nent.

The EU must not kow­tow to his de­mands. Ukraine’s fate has be­come Europe’s fate. In­deed, Putin not only wants to stop Euro­pean po­lit­i­cal, civic, and so­cial norms from tak­ing root within Ukraine; he wants to roll them back in the Baltics, the Balkans, and any­where else in Europe made po­lit­i­cally brittle by eco­nomic cri­sis and/or dem­a­gogic pop­ulism.

The EU Eastern Part­ner­ship sum­mit in Riga must demon­strate Europe’s de­ter­mi­na­tion to de­fend its unity, se­cu­rity, and val­ues in the face of Rus­sian ag­gres­sion. And it must do so in con­crete ways, not sim­ply with quickly forgotten of­fi­cial com­mu­niqués for which the Krem­lin and its Ukrainian sep­a­ratist prox­ies have only contempt.

Of para­mount im­por­tance is to make the new pol­icy a true part­ner­ship among peo­ples. The cit­i­zens of the part­ner coun­tries must be­come the real ben­e­fi­cia­ries if this part­ner­ship is to be­come more than the in­ert agree­ment that it has been. Gen­er­ous EU com­mit­ments on mo­bil­ity, aid to SMEs and en­trepreneurs, and a vast in­crease in ed­u­ca­tional op­por­tu­ni­ties are among the key in­gre­di­ents that could make such a part­ner­ship po­lit­i­cally popular for a vast ma­jor­ity.

Ukraine should be the cen­tre­piece of any ef­fort to re­vive the Eastern Part­ner­ship as a way to at­tract the sup­port of Euro­peans who re­main out­side the EU. Yes, the news from my coun­try re­mains bad. Thou­sands of our cit­i­zens are dead. Hun­dreds of thou­sands are now refugees in their own home­land. The Minsk II cease-fire agree­ment has failed to re­strain Rus­sian/sep­a­ratist forces.

Although Ukraine’s econ­omy is no longer in free-fall, as it was last win­ter, GDP has de­clined by a quar­ter since Rus­sian troops first in­vaded in Fe­bru­ary 2014. Of­fi­cial un­em­ploy­ment now stands at over 10%, com­pared to 7.3% be­fore Rus­sia’s oc­cu­pa­tion and an­nex­a­tion of Crimea. Our na­tional debt is mount­ing by the day to lev­els that in­spired The Econ­o­mist to sug­gest that we may be­come the “Greece of the east.” More­over, much of our econ­omy re­mains in sep­a­ratist hands, and they, no sur­prise, are run­ning the stolen as­sets into the ground.

In the face of such calami­tous con­di­tions, Ukraine’s gov­ern­ment is a bit like the prover­bial Dutch boy who put his fin­ger in a dike to stop the sea from leak­ing through. De­spite her­culean ef­forts, more leaks con­tinue to ap­pear. The sim­ple truth that Europe must grasp is that we Ukraini­ans sim­ply do not have enough fin­gers to plug all the leaks, and thus rebuild our econ­omy, on our own.

De­spite the depth of Ukraine’s plight, Europe can­not avoid tak­ing up the chal­lenge that Putin has set be­fore it. Af­ter all, if Putin suc­ceeds in turn­ing Ukraine into a failed state with a frozen con­flict em­bed­ded within it, he will seek the same out­come all along the EU’s bor­ders, from Es­to­nia to Greece.

For­tu­nately, the EU has a real part­ner in Ukraine, whose peo­ple’s de­vo­tion to Europe has been tested by snipers in the streets of Kyiv and now by the Rus­sian army. Their courage, and their new­found po­lit­i­cal ac­tivism, has stiff­ened the gov­ern­ment’s back­bone in im­ple­ment­ing needed re­forms and made it im­pos­si­ble for any po­lit­i­cal ac­tor in Ukraine to buck the pro-EU con­sen­sus. The EU can stiffen it even more by de­mand­ing much greater clar­ity in the fight against cor­rup­tion.

Yet, given the war in the eastern Don­bas re­gion, the shat­ter­ing of so much of our econ­omy, and the pre­car­i­ous na­ture of our gov­ern­ment’s fi­nances, the In­ter­na­tional Mon­e­tary Fund and oth­ers are clearly ask­ing too much of Ukraini­ans. The idea that Ukraine can em­brace the eco­nomic “shock ther­apy” that Poland pur­sued a quar­ter-cen­tury ago is the type of cookie-cut­ter pol­i­cy­mak­ing that re­sulted in the 2008 global fi­nan­cial cri­sis.

That is why a re­newed Eastern Part­ner­ship must em­brace bold new ini­tia­tives for Ukraine, and not try to re­heat old poli­cies de­signed for very dif­fer­ent cir­cum­stances. A re­cent re­port from the Vi­enna In­sti­tute for In­ter­na­tional Eco­nomic Stud­ies pro­vides some guid­ance con­cern­ing what the EU should now try to do for Ukraine.

For starters, the EU should help us cre­ate a more sta­ble ex­change-rate regime to over­come the cur­rency volatil­ity that has wracked our econ­omy since Rus­sia’s in­va­sion. And, although fis­cal con­sol­i­da­tion is nec­es­sary, given the state of our econ­omy, Ukraine’s most vul­ner­a­ble peo­ple are now en­dur­ing a hand-to-mouth ex­is­tence. They have noth­ing more to sac­ri­fice. On the con­trary, they need re­lief, and Europe should in­sist that its pro­grams, and those of the IMF, take their needs into ac­count.

Per­haps most im­por­tant for the long term, the EU must hon­our its com­mit­ment to the deep free-trade and as­so­ci­a­tion agree­ment that Ukraine’s pre­vi­ous gov­ern­ment re­fused to sign in late 2013. Af­ter all, it was to se­cure that agree­ment that young Ukraini­ans braved for­mer Pres­i­dent Vik­tor Yanukovych’s snipers, and are now brav­ing the might of the Rus­sian army.

To fol­low through would do more to an­chor Ukraini­ans’ con­fi­dence in their Euro­pean fu­ture, and to con­vince the Krem­lin that it can­not suc­ceed in rolling back Euro­pean val­ues, than any­thing else the EU might do.

One clear way that Europe can demon­strate that its as­so­ci­a­tion agree­ment with Ukraine re­mains alive is to en­cour­age in­vest­ment in my coun­try. Since Rus­sia’s in­va­sion, FDI into Ukraine has col­lapsed, which is pre­cisely what Putin wants.

The EU can demon­strate its com­mit­ment to Ukraine’s eco­nomic re­newal by hav­ing the Euro­pean In­vest­ment Bank in­vest in a show­case in­fra­struc­ture project, say im­proved rail links to the EU.

The EU faces a stark choice: a re­newed Eastern Part­ner­ship or a re­newed di­vi­sion of Europe. The de­ci­sions that it makes, be­gin­ning at the Riga sum­mit, will de­ter­mine Europe’s fate for decades to come.

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