Ukraine’s EU Accession: Something to Watch Carefully

Ukraine is still a country at war, even more in these days due to the delayed provision of weapons from its Western allies. Eventually, the war will end, and both the Ukrainian people and the international community will need to address how to rebuild the country and secure a safe future for it. The next years will be key to this end, and the question of Ukraine’s accession to Europe will come to the forefront of the debate.  

Discussions on Ukraine's post-war reconstruction inevitably begin with recognizing the extensive physical damage the country has endured and the subsequent need to rebuild hospitals, housing, schools and other essential infrastructure. 

Consequently, given the current threat of reduced financial and military support from the US and some European countries, Ukraine must position itself to attract sufficient international capital from both public and private sources to tackle its substantial reconstruction challenges. 

The key question is how to ensure, first, that resources become available in sufficient quantity and, second, that they are channeled to the best uses to foster the sustainable development of the country. Clearly, a widely trusted and effective financial system (inclusive of banks, capital market, insurance, mortgages, financial regulation and supervision) backed by a proper system of governance at all levels of the organizations in the country are a precondition for success.  

How can this be achieved? One way to establish a credible and effective financial system, particularly within the short timeframe required for successful post-war reconstruction, is to anchor it to a well-established system from which it can adopt rules and practices. 

In this sense, the Ukraine accession to the European Union is not only a political and security matter, but also a financial one. Ukraine will be able to access global capital more successfully, the more its financial system will be integrated into European markets and institutions. This does not translate into adopting the European regulatory and legislative framework right away, but rather starting to adopt the European framework and playbook so as to be able to tap the vast European resources and experiences, in a manner compliant with the EU accession process. How feasible is this?  

The Relevance of European Elections 

Ukraine’s EU accession process started in the week following Russia’s invasion. Specifically, Ukraine submitted an application to accede to the European Union on 24 February 2022, together with the two other East European states associated with the EU, Moldova and Georgia. Since, then, several events have occurred.  

In June 2022 the Commission issued Opinions where it highlighted the conditions (or steps) that each of the three states should fulfill before the opening of a formal accession negotiation process. The Opinions on Ukraine and Moldova recommended the granting of a candidate status “on the understanding” that the enumerated conditions would be met, while for Georgia the advancement of the process was made conditional on the fulfillment of the enumerated conditions.  

Importantly, the conditions imposed by the Commission are restricted to mainly political fundamentals such as judicial reforms, fighting corruption and anti-oligarchic law, where decisions require strong political will to withstand vested interest. Economic and financial conditions were instead included in other negotiations with the EU, in particular in the implementation of the Deep and Comprehensive Free Trade Areas Agreements.  

In November 2023, the Commission issued a report for each of the three countries within the 2023 Communication on EU Enlargement Policy, where it monitored their progress relative to the conditions required the previous year. Following this report, the European Council decided to formally open the process of Ukraine membership to the EU in December 2023.  

While the accession process is very much under way from a technical standpoint, the subsequent steps will move more and more to the political level. Clearly, the development of the war in the next months will be important. But, equally, will be the upcoming European elections. 

Depending on the outcome, there may indeed be acceleration or retrenchment from the position taken so far towards Ukraine’s accession. And whatever decisions will be taken, they are likely to significantly impact Europe’s future.   

Elena Carletti co-authored the recent CEPR Report on Ukraine’s Reconstruction, supported by the Institute for European Policymaking at Bocconi University. The report can be downloaded here.