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| Dionis Cenuşa | |
The impact of the European assistance on Ukraine was limited, but showed more positive dynamics after 2014. The conclusions belong to the European Court of Auditors that published an audit report (December 7, 2016) on the efficiency of the EU assistance provided to Ukraine in 2007-2015 in thee specific areas (public finance management, fight against corruption, natural gas sector). The conclusions of the report deserve being devoted increased attention in Chisinau because they describe the deficiencies of the EU assistance in reforming Ukraine. The failure of reforms in the neighboring states diminishes the stability and predictability of Ukraine, including as regards the Transnistrian conflict, but encourages an aggressive behavior on the part of Russia in the region.
The appraisals of the European Court of Auditors of how the money of the European taxpayers is spent are rather modest. According to the audit, the EU assistance has been ‘partially effective’ in transforming Ukraine into a well-governed state. An identical level of efficiency was ascertained by the European Court of Auditors in the case of the EU assistance for Moldova, intended for strengthening the local public administration, in a report published this September (IPN, September 2016).
Thus, after Moldova, Ukraine is the second Eastern Partnership country where the European Auditors assesses individually the impact that the EU assistance has on reforms. Though the two countries face common systemic problems and despite the institutional inefficiency and insufficiency or the lack of a strategic approach on the part of the EU, both Moldova and Ukraine experience individual problems that prevent them from advancing the pace and improving the quality of reforms.
EU assistance for Ukraine until and after 2014
The efficiency of the European assistance directed to Ukraine until 2014 was powerfully affected by internal shortcomings characterized by the evident absence of political will and plenary commitment to do reforms (presidencies of Iushchenko, but mainly during the term in office of Yanukovich).
Reforms with better results started to appear only after 2014, following the “dignity revolution” (“Euromaidan”) and amid a consequent series of political, economic-financial and security crises, many of which were caused by Russia’s interventions (annexation of Crimea, encouragement of separatism in Eastern Ukraine, etc.). The new authorities, which, even if they are still influenced by oligarchic groups that weren’t covered by the “Euromaidan”, had to grow up in the relationship with the EU and other foreign partners. Otherwise, these wouldn’t have survived when pressurized by the internal civil society, on the one hand, and the Russian factor on the other hand.
The volume of assistance that is to be provided to Ukraine during the next seven years (2014-2020 package to the value of €11.2bn), including in budget support (grants), shows why the European Court of Auditors is so eager to find out details of how the European assistance is used and works.
Also, the Court’s interest in the assistance provided to Ukraine results from the way in which the EU offered significant financial assistance after 2014 (about €1.5bn), assuming the role of ‘firefighter’ in relation to Ukraine. Owing to the political, financial and security constraints, which are existential in nature for Ukraine, the EU was practically forced by circumstances to disburse enormous sums of money. Consequently, the principles of provision of assistance in tranches, which imply ex-ante evaluation, were avoided. It should be noted that the EU’s hesitations would have caused serious consequences for the security of its eastern borders. This argument was stated by the European Commission following the observations of the European Court of Auditors.
Particularities of EU assistance in Ukraine and Moldova
Two major aspects are revealed in the report on Ukraine: the rapid and consistent assistance provided by the EU during the crisis of 2014 and the role of the oligarchs in stopping reforms. On the one hand, the European Court of Auditors reiterated the fact that the European officials started to offer assistance to the Ukrainian state in March 2014 already, setting an enormous support package for 2014-2020 (€11.2bn). In this situation, the EU actually showed an advanced capacity of solving crisis situations. But this happened by violating the usual European practices (ex-ante comprehensive evaluation), applied before the allocation of assistance for third countries.
On the other hand, the European Court of Auditors confessed that even after the reforms were resuscitated in 2014, the old problems still persist (legislative and, in general, political incoherence and inconsistency, corruption risks in public institutions) in Ukraine. The list of major problems contains the intrusion by oligarchic groups into the political, economic and media sectors. Among the consequences of the influence exerted by the activity of the ‘oligarchic clans’, the audit report on Ukraine enumerates the imbalances in public administration, up to down corruption, use of public finance for private goals, etc. The report invokes, even if indirectly, the European Commission’s low capacity to change the state of affairs. The maintaining of the practically the same situation is caused by the sporadic and challenging fulfillment of the commitments to diminish the share of oligarchs, assumed towards the European institutions in 2015.
In the report on Moldova, the situation in the banking sector and, respectively, the freezing of European assistance were the key highlighted problems. Thus, the report included a detailed description (provided by the European Commission) concerning the EU’s decision to suspend the direct budget assistance in February 2015, after it classed the situation in Moldova as highly risky. The report on Moldova didn’t at least mention the phenomenon of captured state and the Moldovan oligarchs who contributed to the banking frauds.
Distinct recommendations for European assistance in Ukraine and Moldova?
The recommendations formulated by the European Court of Auditors concerning the European assistance in Ukraine include the following: increased concentration on public finance; improvement of the instruments of conditionality and allocation of payments; strengthening of the monitoring over the assistance offered by the EU, and concentration on durability and efficiency of reforms.
Particularly, the Auditors suggested that the EU should develop more specific projects centering on the public finance reform and corruption fighting. At the same time, the European assistance should be allocated in smaller tranches and depending on the results achieved by the authorities. The stimulation of reforms must take place through better cooperation between the EU and the other donors active in Ukraine.
Moreover, the European institutions are urged to resort to the suspension of assistance as often as needed, as it was done in the case of the budget support (in 2011-2012, €120m) and the macro-financial disbursements (in 2014 and 2015). This enables to penalize the Ukrainian authorities for the accumulated drawbacks. The application of such instruments should result from the attentive monitoring of the way the commitments made by the Ukrainian authorities to the EU are fulfilled.
Though the recommendations for improving the European assistance in Ukraine are important, these are vaguer than those formulated in the audit report on Moldova.
So, the European Court of Auditors advised the EU to more rigorously apply the early warning system so as to prevent the risks related to the improper use of the direct budget support. Also, it suggested aligning the EU assistance with the national strategies, if the latter are credible and feasible.
The improvement of the conditioning instrument is also among the Court’s recommendations. It recommended introducing performance indicators and a firm and rapid reaction if the Moldovan authorities deviate from the made commitments. Least, but not last, the European assistance should take into account the sustainability of the financed projects, which cannot last in time if the public authorities do not have the necessary capacities and/or will.
Instead of conclusion
The assistance offered by the EU needs a number of improvements in order to produce real transformations, with effects that will last in time.
The EU must apply the same rules towards all the Eastern Partnership countries when it provides financial assistance. However, the criteria for the states that signed Association Agreements and DCFTAs should be harsher. The EU must be tough when the rules are violated and extremely rapid when it must suspend the assistance. Only this way can the authorities in the Eastern Partnership countries be forced to deliver tangible results.
The influences of the oligarchic groups must be harshly penalized, as the shortcomings in implementing the anticorruption policies must be. The transparency and improvement of the administration of public finance, as the purification of justice and rooting out of corruption, are essential for the functioning of the states in the European neighborhood and the diminution of their dependence on foreign assistance.
It is essential for the European assistance to contribute to the building of autonomous states and to decrease in time, not vice versa. For now, such countries as Moldova and Ukraine risk any time experiencing default if the foreign assistance, in particular the EU one, diminishes or, in general, disappears.
IPN publishes in the Op-Ed rubric opinion pieces submitted by authors not affiliated with our editorial board. The opinions expressed in these articles do not necessarily coincide with the opinions of our editorial board.