EC proposes new 9BN euro for Ukraine, plan to cut reliance on Russian energy

The European Commission (EC) is proposing to top up the significant short-term financial relief provided to Ukraine up to now, with new exceptional macro-financial assistance for Ukraine of up to nine billion euro in 2022, EC President Ursula von der Leyen said on May 18.

Von der Leyen announced the proposal, along with steps to aid the reconstruction of Ukraine, as well as moves to reduce reliance on energy supplies from Russia and steps towards effective defence spending by EU countries.

She described Russia’s war on Ukraine as “the driver of this acceleration in our efforts to strengthen Europe’s resilience”.

“Ukraine is on the frontline and defending European values. We will continue to be at their side throughout this war and when they rebuild their country,” Von der Leyen said.

The reconstruction principles should combine investment with reforms, she said.

The plan would tackle key reforms in areas such as anti-corruption, administrative capacity, rule of law, and independence of the judiciary.

“And it should be firmly anchored in the green and digital transitions and fundamental European values,” Von der Leyen said.

She said that the EU would and should not be the only one contributing to this effort.

“That is why we propose a reconstruction platform as part of this plan jointly led by Ukraine and the Commission and bringing together EU member states, other bilateral or international donors, international financial institutions, and other like-minded partners,” Von der Leyen said.

“The aim of this platform would be to agree on the direction of travel and to ensure maximum synergies of all efforts. These investments will help Ukraine to emerge stronger and more resilient from the devastation caused by Putin’s soldiers.”

She said that Europe must now reduce as rapidly as possible its reliance on Russia in energy: “We can”.

“Today, we present our plan to realise these REPowerEU objectives.

“We can replace Russian fossil fuels by working on three levels: On the demand side, saving energy. On the supply side, diversifying our energy imports away from fossil fuels and accelerating the clean energy transition,” Von der Leyen said.

She said that the foundation for doing this was already in place.

“We have already embarked on a transformation of our energy system to become climate neutral – our famous European Green Deal. And this was already ambitious. But today, we are taking our ambition to yet another level to make sure that we become independent from Russian fossil fuels as quickly as possible. This is REPowerEU.

“REPowerEU will help us to save more energy, accelerate the phasing out of fossil fuels and kick-start investments on a new scale. This will be speed-charging for our European Green Deal.”

Energy savings were the quickest and cheapest way to address the current energy crisis.

“We will therefore increase the EU energy efficiency target for 2030 from nine per cent to 13 per cent. And we are increasing the 2030 target for EU renewable energy from 40 per cent to 45 per cent.”

The EC was also putting forward a host of actions to scale up and speed up the clean energy transition, Von der Leyen said.

“For example, we are proposing to speed up permitting procedures for renewables and associated infrastructure like grids.

“We are proposing a solar rooftop obligation for commercial and public buildings by 2025 and for new residential buildings by 2029,” Von der Leyen said, describing this as “ambitious but realistic”.

The EU 27 government leaders agreed to set up a platform for the joint purchase of gas, LNG and hydrogen.

“As part of our REPowerEU plan, we propose an operational way forward, with a joint procurement mechanism and a joint outreach to supplying countries.

“This way, we can secure the energy imports we need without competition between our member states.”

She said that all of this would require massive investments and reforms.

“We mobilise close to 300 billion euro. Approximately 72 billion euro in grants and 225 billion euro in loans.

“This will include some financing – up to 10 billion euro – in missing links for gas and LNG so that no member state is left in the cold.

“And up to two billion euro for oil infrastructure in view of stopping the shipment of Russian oil. All the rest of the financing will go into speeding and scaling up the clean energy transition,” Von der Leyen said.

On defence, Von der Leyen said that the return of warfare to Europe had underlined the effects of years of defence under-spending.

However, EU countries were now reversing this trend, she said. They had announced an additional 200 billion euro in defence spending over the next few years.

“We must make sure that this money is spent in a coordinated way, that it addresses the capability gaps Europe has identified by both EU and Nato. And that it strengthens our European defence industrial base in the long term.

“We ask for joint procurement because it is better operationally for the armed forces, financially and industrially. And it strengthens our vast network of innovative SMEs.”

She said that a task force with EU countries would be set up immediately to co-ordinate immediate replenishment and procurement needs. This would be accompanied by a financial incentive instrument to purchase jointly.

In the autumn, the EC would propose a regulation to make sure that joint procurement benefits from full VAT exemption.

“This will strengthen our independence and resilience. And at the same time it will strengthen Nato,” Von der Leyen said.

(Photo: EC Audiovisual Service)

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