Changes from plenary report to adopted text

AMENDMENTS BY THE EUROPEAN PARLIAMENT*

to the Commission proposal

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2023/0200 (COD)

Proposal for a

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

on establishing the Ukraine Facility

THE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty on the Functioning of the European Union, and in particular Article 212 and Article 322(1) thereof,

Having regard to the proposal from the European Commission,

Having regard to the opinion of the Court of Auditors,

Acting in accordance with the ordinary legislative procedure,

Whereas:

(1) Since 2014, Ukraine has embarked on an ambitious reform path leading to a progressive integration with the European Union, as materialised in the signature on 27 June 2014 of an association agreement between the Union and Ukraine, including a Deep and Comprehensive Free Trade Area, which entered into force on 1 September 2017.

(2) Since the beginning of Russia’s unprovoked and unjustified war of aggression against Ukraine on 24 February 2022, the Union, its Member States and European financial institutions have mobilised unprecedented support to Ukraine’s economic, social and financial resilience, combining support from the Union budget, including the exceptional macro-financial assistance and support from the European Investment Bank and the European Bank for Reconstruction and Development, fully or partially guaranteed by the Union budget, as well as further financial support by Member States.

(3) The European Council of 23 June 2022 decided to grant the status of candidate country to Ukraine, which expressed a strong will to link reconstruction with reforms on its European path. Ongoing strong support to Ukraine is a key priority for the Union and an appropriate response to the Union’s strong political commitment to support Ukraine for as long as necessary.

(4) The provision by the Union of macro-financial assistance of up to EUR 18 billion for 2023 under Regulation (EU) 2022/2463 of the European Parliament and of the Council was considered an appropriate response to Ukraine’s financing gap for 2023 and helped to mobilise significant financing from other donors and international financial institutions. This constituted a major contributing factor to Ukraine’s macroeconomic and financial resilience at a critical time.

(5) The Union is also providing significant financial support through an additional package combining funds under the Neighbourhood, Development and International Cooperation Instrument – Global Europe (NDICI) established under Regulation (EU) 2021/947 of the European Parliament and of the Council, loans by the European Investment Bank. In addition, continuous support is being provided by the authorities, communities, NGOs and volunteers’ groups within the Member States.

(6) In addition, in its Decision (CFSP) 2021/509, the Council decided on off-budget assistance measures to support the Ukrainian armed forces under the European Peace Facility, in the amount of EUR 5,6 billion, and a military assistance mission in support of Ukraine with EUR 0,1 billion for the common costs. The Union and its Member States have also delivered unprecedented in-kind emergency response via the Union Civil Protection Mechanism under Decision No 1313/2013/EU of the European Parliament and of the Council, as amended by Regulation (EU) 2021/836 of the European Parliament and the Council , constituting the largest emergency operation since the creation of that mechanism.

(7) Furthermore, the EU-Ukraine Solidarity Lanes established in May 2022 have contributed to generating an estimated export value of EUR 31 billion for the Ukrainian economy until end May 2023.

(8) Russia’s war of aggression against Ukraine has caused Ukraine damages amounting to more than EUR 270 billion as of 24 February 2023, and reconstruction costs being estimated at EUR 384 billion, as well as a loss of access to financial markets and a significant drop in public revenue, while public expenditure to address the humanitarian situation and to maintain the continuity of State services has increased markedly. Such estimates, as well as the analytical information from all other appropriate and subsequent sources, provide a relevant basis to establish the respective funding needs for the coming years, including regional and sectoral considerations.

(9) On 30 March 2023, the International Monetary Fund (IMF) estimated the State financing gap up to 2027 at EUR 75.1 billion and agreed with Ukraine a EUR 14.4 billion four-year programme to anchor policies that sustain fiscal, external, price and financial stability and support economic recovery, while enhancing governance and strengthening institutions to promote long-term growth in the context of post-war reconstruction and Ukraine’s path of accession to the European Union.

(10) Given that as long as Russia’s war of aggression against Ukraine lasts, tax revenues collected by the Ukrainian government will continue to be largely allocated to the war effort, and that a residual gap remains in Ukraine’s financing needs for at least until 2027, significant and flexible support has to be provided quickly to the Ukrainian government to maintain its functions, provide public services, as well as to support the recovery, reconstruction and modernisation of the country ▌.

(11) Given the damage caused by Russia’s war of aggression to the Ukrainian economy, society and infrastructure, Ukraine will require significant support and institutional management capacity to maintain its functions, as well as short-term relief and assistance for fast recovery, reconstruction and modernisation of the country. Ukraine will require comprehensive support to ”build back better” through a people-centred recovery that focuses on sustainable development, improves inclusiveness and cohesion, reduces inequality, and creates the foundations for a free and prosperous country with a strong market economy, anchored in European values, well integrated into the European and global economy, and progressing fast towards accession to the European Union.

(12) In this context, it is necessary to set up a medium-term single instrument that brings together the bilateral support provided by the Union to Ukraine, ensuring coordination and efficiency. To that end, it is necessary to establish a Ukraine Facility (‘the Facility’), providing a balance between flexibility and programmability of the Union’s response to address Ukraine’s financing gap, recovery, reconstruction and modernisation needs, while at the same time supporting Ukraine’s reforms effort as part of its accession path to the Union.

(13) The Ukraine Facility should be underpinned by a coherent and prioritised plan for reconstruction (the ‘Ukraine Plan’), prepared by the Government of Ukraine following consultation with representatives of civil society organisations, approved by the Verkhovna Rada and endorsed by the Union, providing a structured and predictable framework for the recovery, reconstruction and modernisation of Ukraine with Union budgetary, reform and investment support and clearly articulated with Union accession requirements.

(14) Union support to Ukraine from 2024 to 2027 should be provided primarily and mainly under the Ukraine Facility, ensuring a consistent approach through a unified instrument, by replacing or, where appropriate, complementing activities under the existing instruments.

(15) In this regard, Union support under the Facility should replace the bilateral support provided under the Neighbourhood, Development and International Cooperation Instrument – Global Europe (NDICI) established under Regulation (EU) 2021/947 of the European Parliament and of the Council, insofar as the latter will be progressively replaced by the Facility and be complementary with the funding provided under the IPA regulations, in case Ukraine becomes eligible. It is nevertheless important to ensure that Ukraine can continue to benefit from regional, thematic, rapid response, and other forms of support under NDICI, including cross-border cooperation programmes, and more generally continue to advance regional, macro-regional and cross-border cooperation and territorial development, including through the implementation of Union macro-regional strategies.

(16) Humanitarian aid, defence or support to Member States providing protection for Ukrainian refugees fleeing the war should be humanely, adequately, consistently and in a timely manner provided outside the Facility and constructively coordinated with other donors. In addition, Ukraine may continue to benefit from relevant existing Union programmes.

(17) The Facility should contribute to closing the funding gap of Ukraine until 2027, by providing grants and highly concessional financial relief in a predictable, continuous, orderly and timely manner. Such support should be provided based on concrete reforms and investments, including reconstruction projects proposed by Ukraine, with milestones and timetables. The assistance should support macro-financial stability in Ukraine, and ease Ukraine’s external financing constraints. In the interest of ensuring Ukraine’s debt sustainability, preference should be given, to the extent possible, to grants. Loans should not undermine the long-term debt sustainability. A reappraisal of the dynamics of the Ukrainian public debt and the need to reduce it as a percentage of Ukraine’s GDP should take place in 2026, ahead of adoption of the next Multiannual Financial Framework and the necessary financing arrangements.

(18) Under the new Facility, investment in Ukraine’s sustainable recovery, reconstruction and modernisation should start as a matter of urgency to provide decent living conditions for the Ukrainian population and reconstruct critical infrastructure, to ensure generation of employment and revenues and progressively lower the volume of international assistance needed, while also ensuring the mitigation of pressing environmental damage, to the extent possible in a war-torn country, and supporting Ukraine in the dual green and digital transition.

(19) The Facility should tie the recovery, reconstruction and modernisation closely to the Union accession requirements and process, by linking financial support to the fulfilment of reforms and investments in view of accession.

(20) The medium-term perspective provided by the Ukraine Plan through a single instrument should also encourage building back better, while encouraging and leading Ukraine to channel investments and reforms towards the transition to a green, sustainable, digital and inclusive economy, and help mobilise like-minded donors, including from the private sector, for multiannual contributions to support Ukraine. Investments should be aligned, to the extent possible, with the Union climate and environmental acquis, and should contribute to the implementation of the Ukrainian National Climate and Energy Plan.

(21) The recovery, reconstruction and modernisation effort should build on Ukraine’s ownership, close cooperation and coordination with supporting countries and organisations, and Ukraine’s path towards accession to the Union. Regional and local administrations as well as Ukrainian civil society organisations and experts are also expected to play an important role in this process by fully participating in its design and scrutiny. Peer-to-peer cooperation and programmes embedded in partnerships between cities and regions in the Union and those in Ukraine have already facilitated the delivery of humanitarian aid to Ukraine and thus provide a basis to enrich and accelerate the recovery, reconstruction and modernisation process.

(22) The Union should also ensure the involvement in policy shaping, close consultation and association of local and regional authorities, which embrace a large variety of sub-national levels and branches of government, including regions, municipalities, rayons and hromadas and their associations, as well as close consultation and participation of Ukrainian civil society organisations and experts. The Union should ensure their meaningful participation in the recovery, reconstruction and modernisation of Ukraine, based on sustainable development and through the implementation of the Sustainable Development Goals at local and regional level. The Union should recognise and support the multiple roles played by the local and regional authorities and civil society actors as promoters of a territorial and inclusive approach to local and regional development, including decentralisation processes, participation and accountability, which should be developed with the introduction of a public legal entity for municipalities, and further enhance its support for local and regional authorities’ capacity building, as well as the provision of expertise necessary for the implementation of projects under the Facility.

(23) The Union should provide support to the transition towards accession for the benefit of Ukraine, drawing on the experience of the Member States. Such cooperation should focus particularly on the sharing of experience that was acquired by the Member States during their own reform processes.

(24) Support under the Facility should also build on and maximise synergies with key organisations supporting Ukraine’s reforms and reconstruction, such as the European Investment Bank, the European Bank for Reconstruction and Development, the World Bank, the Organisation for Economic Co-operation and Development, and the International Monetary Fund.

(25) Given the uncertainties linked to the war, it is appropriate that the Facility should be able to provide support to Ukraine in duly justified exceptional circumstances, in particular in the event of a significant deterioration of the war, and in order to maintain its macro-financial stability and to ensure the achievement of the objectives of the Facility. Such exceptional financing should only be provided, through a delegated act, if it is concluded that it is impossible for Ukraine to fulfil the conditions attached to the forms of support under this Regulation, when it is the beneficiary of the support, and should cease as soon as the fulfilment of the conditions becomes possible again. Such financing should not affect funding from other specific Union instruments which should be mobilised in case of natural disasters or other humanitarian or civil protection emergencies.

(26) The enlargement policy framework defined by the European Council and the Council, the association agreement, partnership and cooperation agreement, multilateral agreements to which the Union is a party and other agreements that establish a legally-binding relationship with Ukraine, as well as resolutions of the European Parliament, communications of the Commission and joint communications of the Commission and the High Representative of the Union for Foreign Affairs and Security Policy should constitute the overall policy framework for the implementation of this Regulation. The Commission should ensure coherence between the assistance under the Facility and the enlargement policy framework.

(27) Article 49 of the Treaty on European Union provides that any European State which respects the values of respect for human dignity, freedom, democracy, equality, the rule of law and respect for human rights, including the rights of persons belonging to minorities, and is committed to promoting those values may apply to become a member of the Union. Those values are common to Member States in a society in which inclusiveness, pluralism, non-discrimination, tolerance, justice, solidarity and equality between women and men prevail.