In the midst of war, the groundwork must be laid for the future of Ukraine. What levers are available for a rapid and sustainable process of economic recovery?

“Return to Europe” was the label under which the countries of Central and Eastern Europe seized their historic opportunity to overcome the East-West divide after the end of the Cold War. And yet, Europe remained a continent of divided security.

The Russian full-scale attack on Ukraine on February 24, 2022 marked another watershed for Europe – the start of a new era in which a country is struggling for its very existence. The desire to offset the insecurity of being in Russia’s neighbourhood through membership of the European family became more urgent. Today, the European Union is facing a fundamental change in Realpolitik that requires the strategic determination to shape a new security architecture.

Green Reconstruction

The goal of EU membership provides Ukraine with the framework for the necessary transformation of the country. Ukrainian President Volodymyr Zelensky applied for EU membership on the fourth day of the Russian invasion. The principle of “build back better and greener” was adopted early on, initially in the National Reconstruction Plan at the first Ukraine Recovery Conference in Lugano in July 2022.

This conference was to be followed by others – the next one is planned for June 11 in Berlin. The aim is not to restore the country to its pre-war state, but ideally to set modern standards, provided that the time factor doesn’t make it necessary to accelerate reconstruction as part of emergency assistance.

While the shelling with Russian missiles and drones continues unabated throughout the country, Ukraine must try to maintain or rebuild homes and infrastructure. The government cannot wait for an end to the fighting and for security guarantees that have yet to be determined; the country’s social, economic, and political survival is at stake.

In terms of the economic Copenhagen Criteria, Ukraine certainly measures up when compared with other Central, Eastern, and South Eastern European accession and candidate countries. In the face of massive destruction and millions of refugees, the country has also demonstrated remarkable resilience, stability, and problem-solving skills.

The enormous costs caused by the war alone make Ukraine a special case. It goes without saying that it will not be able to cover these costs without international help and private investors. However, the allies should not limit themselves to providing emergency and budgetary aid but should see their contributions as strategic in order to achieve what the majority of people in Ukraine still want in the third year of the war: to decidedly support the country’s fight for democracy and enable it to catch up economically.

A key factor in this respect is the return of millions of refugees. Together with reconstruction and EU accession, Ukraine faces a three-pronged task that can only be accomplished if it has genuine social, economic, and political prospects in addition to security guarantees. Communication has a fundamental role to play in managing expectations.

In the EU, we need to talk about how important enlargement is in geostrategic terms; in Ukraine, we need to convey the fact that the changes required for membership cannot be achieved in two to six years but, if things go well, within the next decade.

The EU initiatives for democratic reconstruction, which have led to the “Ukraine Facility,” the financial package adopted in January 2024 for the remaining four years of the current EU financial framework, also focus on synergies. The €50 billion earmarked as part of the facility is intended to integrate reconstruction and modernisation efforts into the EU accession process.

Ukrainian Prime Minister Denys Shmyhal has emphasised that the country is planning to “build a completely new economy.” Successes in key sectors such as information technology and agriculture show that the potential is there. Nevertheless, Ukraine is finding it difficult to mobilise foreign capital, irrespective of the war.

Added to this are the necessary adaptations to changing standards in energy and climate protection: Unlike previous EU candidates, Ukraine must integrate into a Union that is striving to reform itself in the face of pressing global challenges.

It is only if structural reforms towards good governance and the rule of law are successful, without exemptions being negotiated by powerful interest groups within the judiciary and law enforcement or customs and tax authorities, that new investors will seize the market opportunities offered by Europe’s second largest country to the necessary extent.

Local Self-Governance Is a Successful Model

If we look at the experiences of previous EU candidate countries, we can see that reliably functioning local and regional structures have often played a key role in successful convergence processes. Strong local self-government is generally extremely resilient and a reliable foundation for political pluralism and sustainable economic development.

If, on the other hand, EU funds only go to a country’s capital city and local actors are dependent on funds being allocated to them from there, the risk arises that personal initiative and independent involvement will fade.

The public administration and decentralisation reform drive initiated with the “Revolution of Dignity” in 2014 was a first step in the right direction. At that time, the Soviet system of omnipotent central power with purely executive structures at regional (oblast), district (rayon), and municipal level was replaced by one in which municipalities function as semi-autonomous decision-making centres with extended responsibilities and powers, for example for education and health.

Urban self-government is not a new phenomenon in Ukraine; Magdeburg municipal law once applied as far east as the Kharkiv region. 500 years later, greater management efficiency and transparency are strengthening trust in community processes and conflict resolution at the local level. Digitalisation and online services are improving equal opportunities and reorganising access to local resources.

Local self-government has proven to be an effective instrument against the abuse of power by individuals who could have caused damage as Russian collaborators and representatives of larger units. Ukraine has always rejected the federalisation model demanded by Russian President Vladimir Putin, wisely assessing this as following Russian patterns of rule.

Important Achievement

The reform was successful because the reorganisation was accompanied by financial decentralisation – since then, separate municipal tax revenues and a fixed percentage of national taxes have flowed into the municipal budgets. Public services have also been reorganised. Ukraine’s Western partners, themselves committed to the principle of subsidiarity, continue to support the reform to this day with projects running into the millions.

Especially in times of war, Ukraine’s multi-level governance is an important achievement because it can form a counterweight to a new power vertical. In view of a weak national parliament and a strong presidential administration, this is becoming even more important. Local self-government also promotes the formation of political parties from the bottom up in the long term.

The 2020 local elections did not lead to a complete replacement of the elites. However, politicians who are dedicated to serving the interests of the people in their local communities now have a better chance of making a name for themselves.

Inter-municipal and international networks offer opportunities for progress. In many places, healthy competition among municipalities for residents, investors, and tax revenues has replaced old hierarchies and monopolies. Social accountability works better in units that are close to the people, which helps to prevent and combat corruption.

The advantages of participatory local governance should be used in the reconstruction process. This would also help to preserve the principles of decentralisation, which cannot currently be enshrined in the Constitution due to martial law.

Moreover, the process is not yet complete, and as long as the powers of the as-yet unreformed district and regional administrations, as well as of military administrations, remain unclear vis-à-vis the municipalities, this exacerbates disputes over the management of reconstruction or the access to tax revenues.

For the vast majority of Ukrainians, the idea of becoming part of the European Union is the light at the end of a long tunnel. The sadness that they will not be able to share this with all their friends and loved ones weighs heavy: So many have paid with their lives for the fight for human dignity, freedom, and democracy.

The Price of Enlargement

The EU recognised early on that the long-term support for Ukraine must be secured but was only able to anchor the corresponding financial package at a late stage in the current budget. Moreover, the planned funds can only be the beginning of what will need to be provided in the next EU budget.

The EU’s response to the war in Europe’s east will determine security and peace, prosperity, and progress across the whole of Europe – and its own role in the world. Paraphrasing the writer Peter Schneider on the reunification of Germany, it could be said that there are few politicians who would ask all Europeans to accept the following simple statement: The enlargement of the EU will cost an infinite amount, and it will be worth the price.

Translated from German by David Crossland.    

About the author

Miriam Kosmehl is Senior Expert on Eastern Europe and EU Neighbourhood at the Bertelsmann Stiftung.

Read more articles on our 2024 European Elections page.

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