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

Syria: Why did the US-Russia brokered ceasefire collapse? What does the duo care for?

The Commission tries to stop the ‘party’ with the structural funds

We are on the edge of a new ‘cyber’ space age. This is how we make it a success

If people aren’t responding to climate warnings, we need to change the message

Bacteria vs. humans: how to fight in this world war?

Haiti stands ‘at the crossroads’ between peacekeeping, development – Bachelet urges strengthened ‘human rights protection’

“Mental health in times of a pandemic: what can each individual do to lessen the burden”

Here’s how we make the internet safer for children

Fears for food security and the future of farming families, as Fall Armyworm spreads to Asia

This is how many women have been nominated for best director in the Oscars’ entire history

‘We will not give up on looking for peace for South Sudan’: UN deputy chief

7 surprising and outrageous stats about gender inequality

MEPs and European Youth Forum call on EU to Invest in Youth

Are ECB’s €500 billion enough to revive Eurozone? Will the banks pass it to the real economy?

Migration crisis: how big a security threat it is?

Indonesia is buzzing with entrepreneurial spirit. And others in ASEAN aren’t far behind

Why protesters disrupted London Fashion Week

The 28 EU leaders don’t touch the thorny issues

Encryption is under attack. Here’s why that matters

Mountains matter, especially if you’re young, UN declares

With millions of girls ‘at risk’ today of genital mutilation, UN chief calls for zero tolerance

Portugal: Budget MEPs back €4.66 m in job-search aid for 730 redundant workers

Dangers of poor quality health care revealed ‘in all countries’: WHO report

Why Microsoft is a regular to Almunia’s

Tax evasion and fraud threaten the European project

MEPs spell out priorities for the European Central Bank and on banking union

Amidst high trade tensions and policy uncertainty, UN cuts economic growth forecast

Latvian economy is thriving, but boosting productivity, improving social protection and transitioning to a low-carbon productive model are vital for sustainable and inclusive growth

Vulnerable young people must not be blamed & stigmatised for violent radicalisation

How is the global economy fairing 11 years after the financial crisis?

Altruism can be good for business, as these companies show

Why flexible workspaces are the key to winning the talent war

Sahel crisis reaching unprecedented levels, warn top UN humanitarian officials

Medical students: The need for emigration

Coronavirus Global Response: EU Humanitarian Air Bridge supports Venezuela

The challenges of mental health: an inconvenient reality

Fertilisers/cadmium: Parliament and Council negotiators reach provisional deal

Concern rising over fate of Rohingya refugees sent home by India: UNHCR

Climate resilience is make or break for businesses. Here’s why

This is why attractive cities do better economically

American women are 50% more likely to die in childbirth than their mothers

At this ‘critical moment’, UN chief urges anti-corruption conference to adopt united front

Venezuela: MEPs demand free presidential elections and an end to repression

As Alan Turing makes the £50 note, how do countries design their currencies?

European Youth Forum warns of a Peter Pan generation as a result of financial crisis and response to it

Pay packet inequality growing worldwide, says new UN report

MEPs call on Russia to stop illegitimate prosecution of Lithuanian judges

OECD and European Commission join forces to further support structural reforms in European countries

4 steps towards wiping out cervical cancer

Inflation down to 0.7%, unemployment up at 12.2%: Bad omens for Eurozone

This is how New York plans to end its car culture

Supporting the recovery: MEPs adopt budget priorities for 2021

Revolutionary technologies will drive African prosperity – this is why

FROM THE FIELD: Urban Mexico moves toward better livelihoods, cleaner cities

How universities can become a platform for social change

TTIP wins first crucial EU test: MEPs give in to the trade agreement

OECD sees global growth moderating as uncertainties intensify

Why income inequality is bad for the climate

The ECB proposes a swift solution for SMEs’ financing

Meeting of top scientists underway to slow coronavirus spread

More Stings?

Advertising

Speak your Mind Here

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

WordPress.com Logo

You are commenting using your WordPress.com 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