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These tools could help bring Ukraine into the EU

President Volodymyr Zelenskyy’s triumphant European tour may have prodded his partners towards contributing more weapons to defend his country against Vladimir Putin’s assault. That is welcome: Europe needs Ukraine to win the war and Russia to lose.

But it also needs Ukraine to win the peace. For that, two other big Ukrainian asks — for reconstruction support and EU membership — are central. A Ukraine that stagnates in poverty, or is refused the tight political bonds that unite EU members, will be a permanent source of instability. It is in the EU’s self-interest to bring Ukraine into the community of prosperous liberal democracies.

Europe is split between politicians who fully grasp this and those who do not. The current balance between the two is why we remain far from a real political commitment — a “whatever it takes” — to rebuild Ukraine and ready it for membership.

This is understandable. No discussion about money can avoid questions over moral hazard, who bears the risk, whether loans are better than grants, and the legal basis for common financing. As for membership, big questions loom beyond economic integration. Will Ukraine be fit to join the Schengen borderless travel area? Will its judicial system be independent and effective? What about monetary union? What happens to European agriculture with the market entry of Ukraine’s huge farm resources? How would Ukraine’s voting rights change the political equilibrium of the union?

These political difficulties are real and will take great statecraft to overcome. But while they remain unresolved, paths must be found along which Ukraine can make immediate progress towards becoming the prosperous EU member it needs to be. Two overlooked approaches deserve attention.

Finding a new funding mechanism for tiding Ukraine over this year, which the EU pulled off in December, was hard enough. Creating one for vastly greater amounts needed for reconstruction is harder. But the eurozone countries have a disused mechanism available: the European Stability Mechanism, set up to grant rescue loans to financially distressed member states. The ESM has more than €400bn of unused financing capacity — enough for the 21st-century Marshall Plan promised by German chancellor Olaf Scholz. But the ESM will never be used for its original purpose again. It proved so politically toxic that no country wanted to tap it in the pandemic.

Its huge borrowing capacity should be repurposed for Ukraine’s reconstruction. The ESM treaty authorises finance ministers to revise its support instruments. They could issue ESM bonds to fund euro governments which would lend on to a reconstruction platform. Currently lending must be for “the benefit of ESM members [facing] severe financing problems, if indispensable [for] financial stability”. Since the ESM remains an intergovernmental and not an EU body, its members could allow Ukraine to join — or just revise the treaty to allow supporting a non-member.

As for EU membership, the debate has ignored the European Economic Area, which extends the single market to three European Free Trade Association countries — Norway, Iceland and Liechtenstein. They adopt EU economic regulations and enjoy frictionless exchange, apart from customs rules of origin, in all sectors except for fish and agriculture.

EEA membership is the closest existing alignment with the EU. If Ukraine qualifies for the EU, it will have qualified for the EEA. Conversely, qualifying for the EEA would fulfil important requirements for EU membership, and bring the rewards of the single market. Why not aim for the EEA as a staging post?

This path would give Efta countries a chance to advance Ukraine’s European ambitions, first by inviting it to join Efta — itself a modest advance in the country’s westward journey. Norway could then support a Ukrainian EEA candidacy: the EEA Agreement gives all Efta countries the right to apply.

Joining the EEA is a long slog too. But it is harder to stall Ukraine’s admission to the single market than full EU membership, because the thorny issues above would not be in play. Today those future difficulties create incentives to kick accession into the long grass, a move which Ukraine rightly fears. Once in the EEA, it would be well placed to hold the EU to confronting those questions without delay.

In both cases, powerful institutional vehicles are at the ready. So in the spirit of recycling, let’s find new uses for old tools. Economising on institutional engineering to leave more space for statecraft is the geopolitical version of thinking locally and acting globally.

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