Macro-Financial Assistance: Europe’s way to control Ukraine?

Petro Poroshenko

Handshake between Petro Poroshenko, new President of Ukraine, on the right, and Catherine Ashton, High Representative of the Union for Foreign Affairs and Security Policy and Vice-President of the EC (EC Audiovisual Services)

The European Commission (EC) paid out €500 million to Ukraine on Tuesday, a financial support to be the first loan tranche of the second Macro-Financial Assistance (MFA) programme of the EU. While the crisis in Ukraine is still raging and the need for economic reforms is more crucial than ever, the EU is adding to International Monetary Fund’s (IMF) and World Bank’s financial aid by the first two MFAs.

MFA at a glance

But what exactly is the MFA programme and how does it work? Why is Ukraine eligible for and what interest rates will the country face in order to take these funds-loans? First of all, MFA is a purely financial support programme to countries that are geographically, politically and economically close to the EU. These countries have to be in a situation of serious balance-of-payments problems and have also previously been funded by the IMF.

Consequently, Ukraine qualifies and justifies its place in this programme.  Furthermore, MFA is provided only in emergent and non-regular circumstances and its main purpose is to better the financial situation of the country by imposing structural reforms. Last but not least, the EU is borrowing the money in capital markets and lends it afterwards to the beneficiary countries under the same financial conditions as obtained by the EU. This sounds very appealing for these countries that are benefited from the exceptional conditions (AAA rating from Moody’s and Fitch) issued to the EU.

Europe supports Ukraine

The EC has come to an agreement to provide financial support to Ukraine of at least €11 billion in total over the coming years from the EU budget and EU-based international financial institutions. MFA is contributing to this subsidy by  €1.61 billion from which  €600 (€500 + €100) million have already been disbursed through the first two MFA programmes (MFA I & II). The EC is now aiming to propose further MFA to cover the rest  €1.01 billion which doesn’t seem far away if we take into account the sayings of EU officials.

Olli Rehn, European Commission Vice President for Economic and Monetary Affairs and the Euro, said on Tuesday: “The European Union is providing essential support for Ukraine’s efforts to address its major economic challenges. Today’s disbursement is a further concrete sign of European solidarity towards the people of Ukraine. It is vital that Ukraine seizes this opportunity to take forward reforms to deliver budgetary stability, sustainable growth and job creation.”

Europe’s true reason for the support

Why does the EU help Ukraine with all the financial means that has in its quiver? Is it because the EU is a good Samaritan? I am afraid this is not the case. There should be always another cause which justifies these loads of money that are granted or loaned to Ukraine.

The Crimean crisis situation has changed dramatically the relationship between Russia and Ukraine, which was its main financial supporter, if not the only one. Particularly, Russia’s help relative to Ukraine’s energy supplies is huge. But because of Ukrainian overwhelming debt, Russia is forcing Europe to provide financial aid to Ukraine in order to receive eventually their money back.

Is this really happening? The result shows that it could be part of the truth behind the financing of Ukraine. Moreover, Europe brings Ukraine closer to the West and by exercising greater influence to the country it can benefit from the increased trade with it. Thus, Ukraine is currently situated somewhere in the middle of a bigger ‘game’ between the Old Continent and Russia. 


the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

Stopping antimicrobial resistance would cost just USD 2 per person a year

Globalization is changing. Here’s how your business can adapt

Tributes for ‘role model’ former UN refugee agency chief, Sadako Ogata

‘Internal security’ or how to compromise citizens’ rights and also make huge profits

Future EU-UK Partnership: European Commission takes first step to launch negotiations with the United Kingdom

2030 development agenda: Major breakthrough for world of work

The European brain drain and the deteriorating medical workforce

‘The green economy is the future,’ UN chief says in Beijing, urging climate solutions that strengthen economies, protect the environment

Trump’s self-centered politics unravels

Portugal wants its emigrants back – so it’s paying them to return

Digital Assembly 2019: new actions on quantum, EU-Africa taskforce report and digital start-ups

Over 820 million people suffering from hunger; new UN report reveals stubborn realities of ‘immense’ global challenge

Scientists have created the world’s ‘first psychopath AI’

“None of our member states has the dimension to compete with China and the US, not even Germany!”, Head of EUREKA Pedro Nunes on another Sting Exclusive

7 ways the ‘biological century’ will transform healthcare

The Amazon is reaching a dangerous tipping-point. We need to scale solutions now if we have any chance of saving it

A profitability roadmap for the fast-changing automotive sector

British PM May’s Brexit proposal remains obscure while her government unravels

It’s getting harder to move data abroad. Here’s why it matters and what we can do

ILO and EIB join forces for more and better quality employment

France sneaks into the Geneva US-Iran talks to claim its business share in Tehran

Is Germany closer to Russia than the West? Nord Stream II and Iran count more

The Social Committee may accept the new ‘contractual’ Eurozone

The digital skills gap is widening fast. Here’s how to bridge it

Central Africa Republic: Violence drives thousands of refugees into neighbouring DR Congo, says UN agency

Draghi reveals how failing banks will be dealt, may cut interest rates soon

These are the countries that have made their climate commitments law

Is Eurozone heading for disinflation?

It’s time for the world to stand up behind South Africa

Food safety critical to development and ending poverty: FAO deputy chief

Τhe EU Refugee Crisis: a day in the life of a Refugee in Greece

We need to talk about failure in the social sector

MEPs cap prices of calls within EU and approve emergency alert system

The Commission breathless behind the horsemeat scandal

EU and China to do more in common if the global scene gets worse

Seaweed, enzymes and compostable cups: Can ‘Big Food’ take on plastic and win?

What the global Internet’s stakeholders can learn from Europe’s new data law

VAT Gap: EU countries lost €137 billion in VAT revenues in 2017

EU-U.S. Trade Talks: European Commission presents draft negotiating mandates

Cancer is a growing global threat and prevention is key, UN study shows

ECB’s new money bonanza handed out to help the real economy or create new bubbles?

Coronavirus: urgent response to support citizens, regions and countries

Yemen talks: Truce agreed over key port city of Hudaydah

Rule of law in Hungary: Parliament calls on the EU to act

What could a no-deal Brexit mean for developing countries?

‘Be the change’ we desperately need, UN deputy chief urges global youth

High level political talks didn’t break the stalemate in Ukraine

The vegan economy is booming – and Big Food wants a slice of it

10th ASEM in Milan and the importance of being one: EU’s big challenge on the way to China

Meet the woman prescribing books as a cure

We probably should go back to the therapy in Primary Healthcare

JADE Spring Meeting 2017 – day 3: JADE Academy trainings, networking session and gala dinner – Excellence Awards winners revealed

Climate change: ‘A moral, ethical and economic imperative’ to slow global warming say UN leaders, calling for more action

The EU Commission openly repudiates the austere economic policies

A Sting Exclusive: “eHealth can change many dimensions of how the healthcare area functions”, Polish MEP Michal Boni underscores from Brussels

Draghi to lay his print on long term ECB policies prior to exiting next year

Freshwater is saltier – and it’s bad for the planet and our health

World Economic Forum launches COVID Action Platform to fight coronavirus

Renewal of cross-border aid operation critical to northern Syria: UN relief chief

JADE May Meeting last call for participants – join us in Zagreb

EU and China resolve amicably solar panel trade dispute

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s