3 trillion dollars: this may be the price of peace for Ukraine and Europe
13 February 13:35
Whatever the US president decides on Ukraine, it is clear that Europe is not yet ready to shoulder its huge share of the burden. This conclusion is based on Bloomberg’s own calculations and estimates, Komersant ukrainskyi reports.
The publication has calculated how much the implementation of Donald Trump’s current peace plans for Ukraine could cost Europe. To do so, Bloomberg Economics considered the cost of supporting Ukraine following the peace talks, restoring the war-torn country and its defense capabilities, and ensuring that Europe maintains a reliable military deterrent against the threat of further Russian aggression.
Rebuilding the Ukrainian army
This could cost, according to the publication, approximately $175 billion over 10 years. The final amount will depend on the state of the Armed Forces at the time of the settlement and how much territory will need to be defended. a 40,000-strong peacekeeping contingent would cost about $30 billion over the same time period. Although, as Bloomberg Economics reminds us, Ukrainian President Volodymyr Zelenskyy believes that much more troops will be needed.
Strengthening the defense capabilities of European countries
The bulk of the money, according to the publication, will be spent on building up the armed forces of EU member states and raising the total defense budget to about 3.5% of GDP. This is being discussed at NATO headquarters in Brussels.
Additional funding will be needed to create artillery stockpiles, develop air defense and missile systems. This will strengthen the EU’s eastern borders, prepare the EU armed forces for rapid deployment, and lead to a significant growth of the European defense industry.
According to Bloomberg Economics, if financed by debt, it would add $2.7 trillion to the borrowing needs of NATO’s five largest European members over the next decade.
To mobilize the resources on the scale required, European governments will have to radically rethink how they structure their budgets, work with business leaders to reorganize their defense industries, and almost certainly agree to jointly issue debt. This will require a certain level of political will, especially in Western Europe, where some still see war as a distant problem. This will mean that European leaders will have to make difficult choices in terms of spending on health, education, and social security.
Ukraine’s recovery
Bloomberg Economics estimates that Ukraine will need to spend about $230 billion to rebuild war-damaged buildings and infrastructure. If it gets the funding to do so and the settlement is stable, Ukraine’s energy, manufacturing, and construction sectors are likely to rebound. This will eventually ease the burden on EU members. Kyiv has also managed to interest Trump in its reserves of critical materials such as uranium, lithium, and graphite.
However, according to Bloomberg Economics, there is currently a $130 billion shortfall between Ukraine’s reconstruction needs and the funding that has been promised. This jeopardizes economic recovery and could jeopardize Ukraine’s long-term sustainability.
