Expectations were not high going into Tuesday’s conference in Berlin convened by the German Presidency of the G7 and the European Commission on Ukrainian recovery and reconstruction. In one respect, those low expectations were met: The conference failed to deliver concrete pledges of donor money or agree upon an architecture to deliver reconstruction assistance.
But the good news is that Tuesday’s extensive remarks by German Chancellor Olaf Scholz and European Commission President Ursula von der Leyen reveal that the international community is in the process of actively developing a donor coordination platform that will feature a big tent needed to fund Ukrainian recovery on a scale that lives up to the ambitious calls for a modern Marshall Plan. It sounds like the platform will be launched by the G7, convened by the European Commission, co-led by the United States, and reliant upon international financial institutions (IFIs). The expert panels that came between the European leaders’ opening remarks and concluding session provided useful context and included panels chaired by representatives of our two organizations, the German Marshall Fund (GMF) and the Brookings Institution, respectively.
While we would have preferred that the G7, the EU, and the US agree on the details in time to fully unveil the coordination platform this week, the launch is expected within the next few months.
A Slow Process
The first international conference on the topic of funding Ukrainian recovery—in July, at Lugano, Switzerland—was a missed opportunity, because the donor countries did not come prepared with any agreement on coordination mechanisms, a division of labor, or necessary funding levels. In addition, the United States was not represented by officials with seniority commensurate to the European representation.
Nearly four months later, those same terms describe this week’s international donor conference in Berlin. Scholz opened the session by managing expectations, stressing that “this is not a regular donor conference,” just a gathering of experts to discuss possible mechanisms to facilitate and finance Ukraine reconstruction. He said he looks forward to Japan following up as it takes over the next rotating presidency of the G7 and to Britain hosting next year’s event following up on the Lugano conference. Scholz confirmed that after Britain in 2023, Germany will host another Lugano follow-up conference in 2024. He was followed by von der Leyen, who similarly framed this week’s conference in Berlin as a venue to hear from experts rather than to make any new big financial commitment. Von der Leyen touted her recent announcement that she wants the EU to give Ukraine €18 billion in financial assistance for 2023, but she acknowledged in Berlin that negotiations over this with EU member states are ongoing.
G7 to Launch a Coordination Platform in the Months Ahead
However, there is an important silver lining to the absence of any big reveal by the Europeans: It is seemingly because an even more globally inclusive coordination platform is in the works. As recommended by GMF and the authors, such a coordination platform would be responsible for aligning donors around funding needs, sectoral prioritization, reform conditions, and governance oversight—and it would be launched by the G7 and probably co-chaired by the US, the EU, and Ukraine.
By contrast, von der Leyen has been wanting to announce a more Eurocentric platform that would be co-chaired by the European Commission and the Ukrainian government. But the US government also wants a seat at the leadership table and appears to see the G7 as a forum that offers more globally inclusive political leadership. The Berlin conference indicates that the latter, more global vision seems to be winning the day. We think that’s a good thing because US leadership is needed to build a broader international coalition—to raise more money and attach tough conditions—for Ukrainian reconstruction.
Von der Leyen gave the most important remark of the conference when she revealed that over the past months, the international community has been discussing an even more globally inclusive coordination platform—led together with the G7 and the United States and tapping into the expertise of the IFIs—to be launched within the next few months:
Now it is time to bring the platform to action, together with the international donors, international businesses and, of course, civil society. We have no time to waste. The scale of destruction is staggering. The World Bank puts the cost of the damage at EUR 350 billion. This is for sure more than one country or one Union can provide alone. We need all hands on deck. The G7, the European Union, Europe, strong partners like the United States, Canada, Japan, the UK, South Korea, Australia, New Zealand and many more. And of course, we need the expertise of our partners from the European Investment Bank and the EBRD to the World Bank and the IMF. We will discuss today how to involve these sectors and actors, how to map investment needs, how to coordinate action, and, of course, how to channel resources in a reliable and accountable way. The coordination platform that the international community has been discussing in the past months needs to get off the ground as soon as possible, preferably before the end of the year or early next year. We stand ready to offer the European Commission to provide the secretariat to the platform. We want the work to start and to be done.
Housing the secretariat is the role for the European Commission recommended by GMF and the authors because integrating the recovery process into the Brussels bureaucracy would make this a pathway toward Ukraine’s EU accession. Von der Leyen noted that this usage of Commission staff to convene the coordination platform is logical, given its technocratic expertise on EU enlargement.
But staffing the secretariat does not mean that the Commission alone would lead the platform. Asked who is in charge, von der Leyen said, “everyone needs to be on board, because the EU cannot shoulder this burden on its own, so the initial sketches call for broad political leadership.” Scholz said it should come under the leadership of the G7.
A panel chaired by Brookings senior fellow David Wessel on macroeconomic and financial stability discussed how broader global ownership would help raise the scale of capital needed by Ukraine. In a panel chaired by GMF President Heather Conley, Ukrainian Prime Minister Denys Shmyhal said Ukraine wants the platform to be driven by the G7 and co-chaired by the US, the EU, and Ukraine:
The government of Ukraine wants to invite all partners to start a financial coordination platform and meetings under the co-chairmanship of the USA, the European Union, and Ukraine. We have to regularly hold meetings at the ministers of finance level of G7 countries and other partners and leaders of the [IFIs]. The purpose of these meetings is to coordinate financial assistance to Ukraine, determine directions for priority and long-term recovery as well as sources of financing, coordinate funding approaches, and consider military risk insurance options. And in the end, to find a solution how to most effectively confiscate or use the frozen Russian assets for the recovery of Ukraine.
In a panel on recovery financing, the leaders of the IMF, EBRD, and European Investment Bank all expressed support for the planned coordination platform. They emphasized the need to share assumptions about funding needs so they could all operate off the same numbers and not work at cross purposes. IMF Managing Director Kristalina Georgieva said she personally promised to Ukrainian President Volodymyr Zelensky that the IMF would support the coordination platform with its most prized capacity, which is rigorous macro-financial staff analysis.
That reliance on the IFIs and a truly global donor coalition will make this somewhat of a reverse Marshall Plan. Whereas the original Marshall Plan involved one country helping many, this will involve many helping one. Instead of founding new IFIs—as was needed in the 1940s, because none yet existed—this coordination platform will rely upon the IFIs founded in the 1940s. Instead of laying the foundation for the eventual creation of the European Union, the aim is now to bring a new member into the European Union. This solid approach appears to be on track, even if the arrangements and commitments are taking a few months longer than we would like and thus risk becoming less ambitious as political fatigue sets in over time.
Time to Start Elevating Civil Society and Prioritizing Anti-Corruption
One more difference from the original Marshall Plan is not getting sufficient attention: The need to include civil society and prioritize anti-corruption. That must include the robust transparency and enforcement mechanisms that history teaches us are necessary for massive reconstruction efforts to succeed. We must not neglect innovative new approaches either, such as one that was raised in a floor intervention at the conference by one of the authors: funding a massive increase in investigative journalism in Ukraine and in surrounding countries where the tentacles of reconstruction corruption will inevitably reach.
In the 1940s, the geopolitical objective of the free world was to keep Stalinist communism out of Europe. Since the Cold War ended, corruption has replaced communism as the organizing principle of modern autocracy and the weapon that the Kremlin and allied autocrats wield against democracy at home and abroad. Nowhere has this been on display more than in Ukraine, where Putin has always tried to undermine democracy by bankrolling pro-Russian political parties through his favored oligarchs. Anti-corruption reform is an unfinished generational project in Ukraine. And with US congressional support for Ukraine increasingly challenged by some progressives on the left and some conservative leaders on the right, it may not take more than one or two major corruption scandals to harm bipartisan support for giving Ukraine billions in assistance.
We have urged US and EU leaders to insist upon only sending Ukraine hundreds of billions of dollars for recovery and reconstruction if the aid architecture and reform agenda aggressively prioritize anti-corruption. That is, anti-corruption priorities should cover both safeguarding the reconstruction process itself and continuing to advance broader anti-corruption reforms. Given that the coordination platform will not be ready until a few months from now, the G7 should privately tell the Ukrainian government now that they will not launch it until Kyiv implements the top three of seven preconditions for EU accession, all three of which relate to the rule of law. And when the G7 does announce the coordination platform, it should include an independent inspector general (IG) empowered to investigate IFI programs and share information among multilateral and national IGs. Finally, in terms of national IGs, the G7 countries should each announce plans to establish independent investigators, either modeled after the Special Inspector General for Afghanistan Reconstruction (SIGAR) or integrated into existing EU bodies like the European Public Prosecutor’s Office and the European Court of Auditors.
While Scholz, von der Leyen, and other European leaders made references to the importance of anti-corruption, it was a significant focus of remarks by Olena Halushka, board member of the Anti-Corruption Action Centre. She was the only representative of Ukrainian civil society among the more than 30 speakers at the conference, although she took advantage of her remarks to recognize the Ukrainian anti-corruption coalition RISE Ukraine, which was well represented at the conference, including by leaders from Transparency International Ukraine and the Open Government Partnership in that country. Halushka advised that instead of merely including civil society as a monitor and observer of the reconstruction process, civil society should be empowered to help shape the structure, influence the priorities, and hold the government accountable for implementing reforms needed for EU accession.
Engaging with civil society and cities is the most important way to improve upon the original Marshall Plan, which was designed as a government-to-government tool with robust private sector involvement. Ukraine has one of the most vibrant civil societies in the world, having been a driving force behind the 2014 Revolution of Dignity and the country’s anti-corruption reform journey since then. Over the same period, Ukrainian decentralization has led to the establishment of more than 1,000 new territorial governance units that are more accountable to local populations and well-placed for responsive involvement in reconstruction. Based on Tuesday’s discussion in Berlin, von der Leyen acknowledged in her closing remarks that civil society, decentralized governance, and anti-corruption reforms will be essential to a modern Marshall Plan.
The Berlin conference did not deliver concrete plans for funding Ukrainian recovery. But the discussion set the stage for the G7 to announce a truly global coordination platform featuring US leadership and IFI expertise. Let’s hope it also prioritizes anti-corruption and empowers civil society.