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Establishing the Ukraine Facility

Committee on Foreign Affairs, Committee on Budgets

PE751.825

ChangedAmendments adopted by the European Parliament onlegislative 17resolution Octoberof 202327 February 2024 on the proposal for a regulation of the European Parliament and of the Council on establishing the Ukraine Facility (COM(2023)0338 – C9-0210/2023 – 2023/0200(COD))

(Ordinary legislative procedure: first reading)

ChangedAMENDMENTS BY THEThe EUROPEANEuropean PARLIAMENT*Parliament,

Changed– having regard to the Commission proposal to Parliament and the Council (COM(2023)0338),

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Added– having regard to Article 294(2) and Articles 212 and 322(1) of the Treaty on the Functioning of the European Union, pursuant to which the Commission submitted the proposal to Parliament (C90210/2023),

Removed2023/0200 (COD)

Added– having regard to Article 294(3) of the Treaty on the Functioning of the European Union,

RemovedProposal for a

Added– having regard to the provisional agreement approved by the committees responsible under Rule 74(4) of its Rules of Procedure and the undertaking given by the Council representative by letter of 14 February 2024 to approve Parliament’s position, in accordance with Article 294(4) of the Treaty on the Functioning of the European Union,

RemovedREGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL

Added– having regard to Rule 59 of its Rules of Procedure,

Removedon establishing the Ukraine Facility

Added– having regard to the joint deliberations of the Committee on Foreign Affairs and the Committee on Budgets under Rule 58 of its Rules of Procedure,

RemovedTHE EUROPEAN PARLIAMENT AND THE COUNCIL OF THE EUROPEAN UNION,

Added– having regard to the letters from the Committee on Budgetary Control and the Committee on Agriculture and Rural Development,

ChangedHaving– having regard to the Treaty on the Functioningreport of the European Union,Committee andon inForeign particularAffairs Articleand 212the andCommittee Articleon 322(1)Budgets thereof,(A9-0286/2023),

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RemovedHaving regard to the proposal from the European Commission,

Added1. Adopts its position at first reading hereinafter set out;

RemovedHaving regard to the opinion of the Court of Auditors,

Added2. Approves the joint statement by Parliament and the Council annexed to this resolution, which will be published in the C series of the Official Journal of the European Union;

RemovedActing in accordance with the ordinary legislative procedure,

Added3. Approves the joint statement by Parliament, the Council and the Commission annexed to this resolution, which will be published in the C series of the Official Journal of the European Union;

RemovedWhereas:

Added4. Calls on the Commission to refer the matter to Parliament again if it replaces, substantially amends or intends to substantially amend its proposal;

Removed(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.

Added5. Instructs its President to forward its position to the Council, the Commission and the national parliaments.

Removed(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.

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Removed(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.

AddedPosition of the European Parliament adopted at first reading on 27 February 2024 with a view to the adoption of Regulation (EU) 2024/… of the European Parliament and of the Council establishing the Ukraine Facility

Removed(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.

Added(As an agreement was reached between Parliament and Council, Parliament's position corresponds to the final legislative act, Regulation (EU) 2024/792.)

Removed(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.

AddedANNEX TO THE LEGISLATIVE RESOLUTION

Removed(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.

AddedJoint statement by the European Parliament and the Council on the appropriate budgetary nomenclature for the Ukraine Facility

Removed(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.

AddedWithout prejudice to the prerogatives of the budgetary authority in the framework of the annual budgetary procedure and to the Commission’s powers to establish the draft budget, the European Parliament and the Council invite the Commission to propose the creation of at least one budget line for Pillar I of the Ukraine Facility, two budget lines under Pillar II, including for the provisioning of the Common Provisioning Fund for the Ukraine Guarantee established under Chapter IV of the Ukraine Facility Regulation, three budget lines under Pillar III for the Union accession assistance and other measures, the borrowing costs subsidies and the provisioning of the Common Provisioning Fund – Legacy, and a specific budget line for technical and administrative assistance expenditure for the implementation of the Facility

Removed(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.

AddedJoint statement of the European Parliament, the Council and the Commission relating to the exceptional nature of the Ukraine Facility

Removed(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.

AddedThe European Parliament, the Council and the Commission share the view that the Ukraine Facility is an exceptional medium-term instrument of high geopolitical importance adapted to the uncertainty and unprecedented challenges of supporting a country at war with direct implications for the security of the Union. As a result, the Ukraine Facility provides a balance between flexibility and programmability of the Union´s response to address Ukraine´s financing gap, recovery, reconstruction and modernisation needs, while supporting Ukraine´s reform effort as part of its accession path to the Union. The objectives, financing and governance arrangements agreed for the Ukraine Facility respond to the exceptional and specific context and challenges in relation to which this particular Facility has been adopted.

Removed(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 ▌.

AddedThis solution for Ukraine should not therefore be considered as a precedent for future instruments of economic assistance to third countries.

Removed(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.

Removed(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.

Removed(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.

Removed(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.

Removed(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.

Removed(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.

Removed(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.

Removed(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.

Removed(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.

Removed(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.