We estimate the total direct cost of Ukraine to current EU members via the regular EU budget at €19bn per year (Photo: EU Commission)
It is often assumed that, if Ukraine does become a European Union member, it would place enormous strain on the EU budget. This perception might be an obstacle to the country’s accession, but such fears are exaggerated.
The impact on the EU budget would be manageable, with little change to the large net payments obtained by current net beneficiaries.
Assuming the current EU budget rules are applied and there are no transition periods — which is unlikely — we estimate the total direct cost of Ukraine to current EU members via the regular EU budget at €19bn per year. Over a seven year period (in line with EU budget plans) this would amount to €136bn. This is 0.13 percent of EU GDP.
(In making this calculation, we also assume that Ukraine will regain its territorial integrity, and its GDP and population will not permanently decline due to the war.)
The largest chunk of EU money to Ukraine would finance agriculture — €85bn for seven years – followed by cohesion policy to support the growth of poorer regions — €32bn. Other payments to Ukraine would amount to €7bn, while European public administration costs could increase by €4bn.
Some spending — on the EU’s neighbourhood — would fall, perhaps by €2bn, since Ukraine would no longer receive this funding. Ukraine would pay €14bn into the EU budget.
The present EU members would obtain €24bn less in cohesion funding because Ukraine’s membership would reduce the EU average per-capita income. Cohesion funding depends on a region’s position relative to the EU average, and some EU regions would move up on the ladder after Ukraine’s entry, implying less cohesion funding.
Altogether, we calculate that the EU budget would need to grow from the currently approved 1.12 percent of EU GDP to 1.2 percent with Ukraine’s entry.
While this increase is notable, it would hardly change current EU members’ net recipient/payer positions.
In fact, many net-recipient countries faced much larger reductions in the 2021-2027 seven-year EU budget cycle compared to the 2014-2020 cycle. For example, Bulgaria received 3.6 percent of its GDP (in net terms) from the EU each year from 2014-2020, but only 2.4 percent in 2021-2022. With Ukraine’s accession, Bulgaria’s receipts would just marginally drop to 2.3 percent. Most net payers would need to contribute about 0.1 percent more of their GDP to the EU budget.
EU budget payments to a new member are not a sunk cost. A large share of it would go back to current EU members, and it would also promote common objectives.
One rather dubious Polish study argued that for every euro of EU money that goes to Poland, more than one euro goes back to Western Europe. This is too good to be true. But even if just a fraction goes back, the mechanisms are clear and would apply to Ukraine, too: its membership would benefit EU GDP via trade, foreign direct investment and migration, boosting EU employment, production and tax revenues.
Sign up for EUobserver’s daily newsletter
All the stories we publish, sent at 7.30 AM.
By signing up, you agree to our Terms of Use and Privacy Policy.
Western companies made huge profits in the central European members that joined the EU in 2004. They would do the same in Ukraine, where wages are very low, while Ukraine’s current low productivity offers the scope for major growth.
EU spending in Ukraine would generate other benefits for the EU, too, like more qualified Ukrainian workers moving to the EU and reduced Ukrainian greenhouse-gas emissions.
Thus, worries about the EU budget should not be a major hurdle preventing Ukraine’s accession. Far more pressing issues include the rule of law, corruption control and democratic institutions.
‘Even worse than Russia and Belarus’
This is serious because in terms of the quality of public governance, integrity and control of corruption, rule of law and corporate governance frameworks and practices, the European Bank for Reconstruction and Development ranked Ukraine last but one among EU applicants (only beating Bosnia and Herzegovina), and even worse than Russia and Belarus.
Democracy, a core EU accession criterion, is another Ukrainian weak point. The Economist Intelligence Unit classified Ukraine as a “hybrid regime”, halfway between democracies, as EU countries are categorised, and authoritarian regimes like Russia and Belarus. Moreover, Ukraine’s feeble democratic institutions have been weakened by the war.
National rule-of-law and democratic standards and practices (or their absence) are deeply rooted and hard to change. Only a credible accession prospect could catalyse changes to lift Ukraine’s poor performance in these areas. If Ukraine achieves the standards required to be an EU member, managing the EU budget implications of accession will not be a major hurdle.
Source: euobserver.com
