EU High Representative for Foreign Affairs and Security Policy Catherine Ashton voiced deep concern on Saturday over the fragility of Ukraine’s economy and urged the rest of the world to rally round to support it.
“We have to make sure that Ukraine, economically, does not fall over... My biggest fear right now is the state of economy and the need for us all to offer the support that they need,” Ashton told an event organized by the German Marshall Fund think tank. “How do we make sure this economy holds together?”
Ukraine’s new government, which took power when pro-Russian former Ukrainian president Viktor Yanukovych was ousted after months of street protests, has said it desperately needs cash to cover expenses including gas imports and avert a possible debt default.
Ashton said a short-term budget deficit problem had to be resolved “relatively quickly.”
Another problem was the “economic viability of industry, many parts of which need to be modernized, an issue ... which needs a slightly longer-term plan,” Ashton said.
“And then there are the underlying structural problems in how to make sure that they are able to generate the resources they need to be able to pay their bills and to be able to develop that economy without running into the buffers of not having enough money day-to-day,” she said.
US President Barack Obama’s administration has asked Congress to approve a US$1 billion loan guarantee package for Ukraine, while the EU has said it is willing to provide US$15 billion in loans and grants over several years to help get the economy back on its feet.
The EU aid requires widespread reforms by the new Ukrainian government and the signing of a deal between Ukraine and the IMF, which is due to report tomorrow on advanced talks with Ukraine on a loan program.
The EU has also agreed to extend nearly 500 million euros (US$690 million) of trade benefits to Ukraine, removing duties on a wide range of farm goods, textiles and other imports.
Before Yanukovych jilted the EU in November last year, Moscow had put pressure on Ukraine by tightening checks on imports and threatening to cut off its gas supplies in the depth of winter.
That has fueled fears in the EU that Moldova and Georgia, two other former-Soviet republics that have negotiated free-trade agreements with the EU, could come under Russian pressure to change their minds before they sign them, most likely in June.
“We are being extremely active with Moldova and with Georgia. We are concerned about things that can suddenly happen — how their wine is suddenly not accepted, what can happen in terms of pressure, and we are ready for that,” Ashton said.
Russia responded to Moldova’s overtures toward Brussels last year by cutting off imports of Moldovan wine.