The invasion of Ukraine decided by Vladimir Putin has already killed thousands of civilians, displaced millions, devastated homes, schools, infrastructures and factories. The destruction seen in recent weeks in Kiev, Mariupol, Kharkiv at the end of the conflict will have to be canceled: Ukraine will have to be rebuilt.
Researchers at the Center for Economic Policy Research (CEPR) estimate the total cost of the operations at a figure that can fluctuate between 200 and 500 billion euros, based on how and how much you want to reconstruct – a figure in line with the calculations of the Ukrainian government.
The Kyiv School of Economics estimated, a few days ago, that “at least 4,431 residential buildings, 92 factories / warehouses, 378 secondary and higher education institutions, 138 health establishments, 12 airports, 7 thermal / hydroelectric plants have been damaged, destroyed or seized in Ukraine ”by Russian forces. But it should be considered that when a Russian missile demolishes a very old residential building, perhaps from the Soviet era, the cost of reconstruction is not equal to the value of the building, but to a modern and sustainable building that can represent a housing solution for it. Number of person. Likewise, if an old coal-fired power plant is bombed, what matters is not the value of the old power plant but the cost of a facility capable of producing an equivalent amount of energy from sustainable sources.
The way in which we decide to start the reconstruction, with the reforms that will accompany it, will be as important as the amount invested: a well thought-out political and economic project could transform the Ukrainian economy and the future of its citizens.
“Three main tasks await us to start the reconstruction,” writes the Economist. “The first is to clean up the areas full of mines and other explosive devices and debris”, and even before this war the Ukrainian Ministry of Defense estimated the cost of demining in the Donbass region alone, invaded by Russia in 2014, at 650 million. EUR.
“Then it will be necessary to resolve the criticality linked to internally displaced persons”, reads the Economist. At the moment, the displaced Ukrainians exceed 7 million (another 4.5 million have fled the country): the Kyiv School of Economics estimates the value of the houses destroyed at around 29 billion dollars. And the rebuilding of damaged infrastructure and industrial structures – power plants, factories, bridges, roads – will also be needed.
“The final phase of the reconstruction of Ukraine – he writes again in the article – will consist in helping its economy to prosper in the long term”. In 2019, GDP per capita, in real terms, was lower than that of the country at the time of the fall of the Soviet Union, and many of the 1,500 state-owned enterprises in Ukraine are at a loss or not very profitable.
However, economic investments must be accompanied and supported by political commitment. The history of the twentieth century suggests that the success of a reconstruction also depends on closer integration with Europe. It happened, for example, with West Germany decades ago, to a different extent with Italy itself after World War II, and Poland’s rapid growth is often also attributed to integration into the European Union: in the 15 years following the accession of Warsaw , the country’s per capita GDP has increased by over 80%.
Ukraine was somehow already facing west: the share of its exports to the European Union went from around 30% in 2014 to 36% in 2020, while the share destined for Russia dropped from 18% to 5%. 5% – according to the data reported by the Economist.
But it is clear that the European Union will have to lead this political transition. For the Financial Times, Brussels should replicate what the United States did with the Marshall Plan after the Second World War – that huge influx of dollars from Washington that helped European countries not only to emerge from the crisis of the conflict, but also to start a period of growth and prosperity.
“We must not wait for the country to be at peace: reconstruction must be prepared now,” writes the Financial Times. And to achieve this goal, the British business newspaper continues, there are six small steps: preparing Ukraine for membership of the European Union; direct funds for reconstruction in strategic sectors; leave a certain degree of decision-making autonomy – in economic and political matters – in the hands of Ukraine; encourage inflows of both foreign capital and technology; use grants instead of loans; and sixth, align reconstruction with a sustainable, zero-carbon economy.
In short, Ukraine needs both huge immediate aid to manage the social and military costs of the conflict, and a promise of rapid and complete reconstruction in collaboration with Western states. As David Frum wrote in Atlantic, “the economic stimulus would be felt all over Europe. A strong and prosperous post-war Ukraine would serve as further proof of the power and appeal of democracy, European integration and trade openness ”.
The reconstruction of Ukraine is likely to become the largest European reconstruction project since German reunification and the reintegration of East Germany into the Western world in the 1990s. It will certainly be a long process full of obstacles. «Reforming rooted institutions – are the words of the Economist at the end of the article – requires political will. The longer the war continues, the more damage is inflicted on Ukraine and the more difficult the task of reconstruction becomes. No expense will ever compensate for the horrors of war, but careful planning could, at least, guarantee a brighter and richer future for the country ”.
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