We will have to wait for the end of the war to physically rebuild everything that Putin destroyed, but we do not have to wait for other aspects of the reconstruction.
The last 75 years of freedom, peace and prosperity in Western Europe owes much to the US decision to pay for the postwar reconstruction of the continent. The Marshall Plan, named after the US Secretary of State, offered financial support to alleviate the capital and liquidity shortages that hindered Europe's own development. Today, the continent is able to do the same for Ukraine.
No need to wait for peace in the country. Reconstruction must be prepared now, – writes the Financial Times. Last week, the Center for Economic Policy Research published an excellent guide to this. The main achievement of the Marshall Plan was that it prepared its recipients for greater prosperity than it had before World War II. The authors of the new plan, including respected economists from Ukraine, Russia and Western countries, argue that today the goal should be the same.
“The cornerstone of Ukraine's success is its radical modernization,” they said.
To achieve such modernization, six principles must be followed. First, Ukraine needs to be prepared for EU accession. Secondly, the funds allocated for reconstruction and planning should be managed by a new EU-sponsored body. Third, significant control must remain in Ukrainian hands. Fourth, the inflow of foreign capital and technology must be encouraged. The fifth principle is that it is better to give grants than loans. And the sixth is to build “better than it was”, ie reconstruction should create a modern economy without harmful emissions.
The physical reconstruction of everything that Vladimir Putin destroyed will have to wait until the end of the war. But other aspects of Ukraine's reconstruction should not be postponed. You can attract investors, negotiate with suppliers and sign the necessary agreements. Urgent assistance is also needed for the millions of Ukrainians who have moved to regions away from the war. With the right support, a relocated business can continue to operate. All this can be a test of best practices, which can then be applied on a larger scale.
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The first principle is key. Reconstruction must be used to make Ukraine able to join the EU. From now on, the infrastructure must “weave Ukraine into the common European market.” For example, railways can be built or rebuilt according to EU standards. On March 16, when the war was already going on, Kyiv was able to successfully connect its power grid with the European one. And this is another example of Ukrainian-European success that has gone unnoticed.
Reconstruction should also renew Ukrainian institutions. The transition to EU rules could help “break with the Soviet past.” Institutional renewal based on European practices and rules will “shoot two birds with one stone”: it will prepare Ukraine for EU membership and solve old Ukrainian challenges in public administration. It will also benefit the economy. The prospect of investment disputes being resolved within the EU legal framework will attract capital.
Ukraine's reconstruction plan also calls for building a completely “green” transport infrastructure. Houses need to be rebuilt to the highest energy efficiency standards. And the devastated cities in the country should be rebuilt under a zero-emission economy. The publication writes that the authors of the plan are not ambitious enough. In some areas, Ukraine may surpass the EU. You can manage the inflow of capital for reconstruction through a stock-oriented financial market to avoid excessive dependence on banks. The plan rightly promotes the idea of concluding open contracts for reconstruction. Similar transparency is needed in property and tax registers (as in the Nordic countries).
According to preliminary estimates, the reconstruction of Ukraine will cost 200-500 billion euros. The Financial Times writes that this figure is likely to underestimate the real costs. But the EU, which has to bear a significant part of this amount, should not see it as a cost. Companies from the participating countries will receive contracts for the construction of infrastructure, housing, transport systems and more. But they also need to share skills and technology with Ukrainians. It is also an investment in the European values and security of the continent. About 44 million people will firmly enter the realm of liberal democracy and a social market economy. This will be a historic achievement for the reunification of the continent after the Cold War.
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In a speech in 1947, Secretary of State George Marshall declared that his goal was “to create the political and social conditions for free institutions to exist.” Washington's unspoken goal was also to protect European countries from the imperialist dictator in the Kremlin. The demand for a Marshall Plan to remove economic barriers has led to what is now the EU. Today, all these achievements are at stake. So the EU has to pay its long-standing debt.
Earlier, the Wall Street Journal reported that one should beware of a false peace in Ukraine. Vladimir Putin is likely to propose conditions that will seem concessions at first glance, but are designed to hamper Ukraine's development and threaten security even abroad.
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