Meeting of G7 finance ministers and central bank governors
Keeping Ukraine’s finances afloat, countering rising food prices, supporting vulnerable countries: the big moneymakers of the G7 will not have enough from their meeting in Germany to deal with all the economic fallout from the war instigated by Moscow in Ukraine.
The first priority of this meeting of finance ministers from the seven industrial powers – the United States, Japan, Canada, France, Italy, the United Kingdom, Germany – on Thursday and Friday is to finalize a new round of the table to cover Ukraine’s budget for the current quarter. To keep the country’s economy afloat, Kyiv estimates it needs $5 billion a month.
“We ask for high financial support, but the price is also high. This is how we can survive,” Ukrainian Finance Minister Sergii Marchenko recently told Agence France-Presse.
Of the whopping $40 billion extension for Ukraine launched by US President Joe Biden last week, around $7.5 billion should fill Ukraine’s budget in the short term, according to G7 ministerial circles.
“I will ask my counterparts to join us in increasing their financial support for Ukraine. Ukraine (…) needs our help and it needs it now,” said Finance Minister Janet Yellen upon her arrival in Koenigswinter, a leafy suburb of Bonn (West) where the meeting is taking place.
On Wednesday, the European Commission, for its part, proposed “new macro-financial assistance” to Ukraine of “up to 9 billion euros” for this year. The share of loans and direct aid in this new support package will be on the menu at G7 talks.
This is intended to ensure Ukraine’s solvency “for the next few days, the next few weeks,” said Federal Finance Minister Christian Lindner on the eve of the main meetings. “We all have a responsibility to make a visible contribution,” added the minister, whose country is chairing the G7 this year.
As the war continues to devastate large parts of Ukraine’s territory, talks are already underway about aid for the country’s reconstruction. The talks “have only just begun”, emphasized Ms. Yellen in Koenigswinter, but financing routes are also mentioned, such as the use of Russian assets frozen by Western sanctions.
If Germany considers this hypothesis to be “politically conceivable”, it emphasizes, like France, that the legal obstacles are numerous. “We have to take a close look at the constraints that are being imposed on us,” says the French Ministry of Finance. “We have to respect the rule of law, even if we’re dealing with Russian oligarchs,” says the German minister.
The war started by Russia was to cause a massive contraction in Ukraine’s economy, estimated at 30% by the European Bank for Reconstruction and Development (EBRD) and as much as 45% by the World Bank.