How can the European Union's Ukraine Facility assist Ukraine's accession path?

On 6 February, the European Union institutions reached an agreement on a new instrument to support Ukraine. The goals are to support Ukraine's recovery, reconstruction, modernisation and transition towards a green, digital and inclusive economy. Measures to prepare the country for EU membership will also be part of the instrument – the Ukraine Facility – with a strong focus on democratic norms and the rule of law.

Total EU financing in 2024-27 will amount to €50 billion, composed of €17 billion in grants and €33 billion in loans. Loans will have a maximum duration of 35 years, and the repayment of the principal will not start before 2034. Interest costs on 2024-27 loans will be waived.

In return, Ukraine will have to prepare a comprehensive reform and investment plan integrated into an economic and fiscal policy framework, and will have to agree with the European Commission on a set of qualitative and quantitative benchmarks. Assuming the EU endorses the plan, payments will be made in instalments as progress is made on implementation.

The adoption of the Facility is an important step. It demonstrates EU solidarity with war-hit Ukraine and can smooth the country’s EU accession path. It consolidates various earlier EU and EU country support measures into a single instrument, exploiting synergies and avoiding overlaps. It will also help in coordination with non-EU donors. Preparation of the Ukraine plan will help Ukraine and its donors better evaluate the needs of the country and monitor the progress made.

Ukraine Facility funding will cover just a small portion of the estimated €400 billion reconstruction and recovery needs for the next ten years. And reform challenges are mounting: even before the war, the Ukraine’s governance framework was ranked second worst of the current ten EU candidates and even worse than Russia and Belarus.

However, the EU accession process is a powerful tool to encourage institutional change. The accession process will likely be long, yet the new facility might strengthen Ukrainian efforts in dealing with the most difficult reforms.

In an upcoming policy brief, authors will analyse how the EU accession process can be used to encourage institutional change.

The Why Axis is a weekly newsletter distributed by Bruegel, bringing you the latest research on European economic policy. 

Sign up for the newsletter.