Ukraine won’t default but financial situation is ‘dire,’ warns EU ambassador to Kyiv

Ukraine is not likely to default on its foreign debt, but the financial situation inside the war-torn country is ‘dire’ and requires urgent foreign aid to make up for a monthly budget shortfall worth €5 billion, the EU’s ambassador to the country has warned.

The funds are needed to keep the economy afloat and pay for pensions, salaries and basic public services, all the while Russian forces march ahead with their brutal invasion.

“International financial assistance is coming from different sources. But it’s not enough yet to bridge that gap,” Ambassador Matti Maasikas told Euronews during a recent visit to Brussels.

Last week, EU countries agreed to release the first €1 billion tranche of the €9 billion package of financial aid that the bloc promised in May.

Member states are yet to reach an agreement on the remaining €8 billion.

The money is raised by the European Commission on the capital markets and is then being disbursed to Kyiv in the form of long-term, favourable loans.

The interest costs arising from the transaction will be directly covered by the EU budget.

Italian newspaper Corriere Della Sera has reported that Germany is blocking the assistance because it entails the issuance of fresh common EU debt.

A spokesperson from Germany’s permanent representation to the EU did not comment on the media reports. Officials in Brussels have not confirmed the funding block but said discussions about additional guarantees were still ongoing among capitals.

“The decision on the rest is awaited. The budget gap is a reality,” Maasikas said. “I can only express my hope that the discussions amongst EU member states would proceed more quickly.”

Asked about the possibility of Ukraine defaulting on the loans, the Ambassador said the prediction was not based on the country’s past or present economic situation.

“I do not have the feeling. I think I would know if they were really at the very brink [of default],” he said. “But the situation is dire.”

‘No shortcuts to EU membership’

As the EU’s main point of contact in Kyiv, Maasikas played a leading part in Ukraine’s bid to join the bloc. He personally received the two-volume accession questionnaire from the hands of President Volodymyr Zelenskyy.

Following a positive assessment from the Commission and the unanimous endorsement from the 27 EU leaders, Ukraine was granted candidate status, setting in motion a lengthy, arduous and complex process of reforms and negotiations.

“Things could be done pretty quickly. The speed at which the Ukrainians responded to the Commission’s questionnaire [broke] the European record,” Maasikas said.

“There cannot be shortcuts or fast tracks to the membership itself. The EU covers so many areas, and at the very heart of the EU is the single market. And the single market cannot function if, in one part of it, not all rules, regulations, standards are being followed,” he noted.

“So, a very thorough work needs to be done by the Ukrainians.”

The Ambassador denied rumours that the questionnaire was mostly filled by EU officials, rather than by the Ukrainian government itself, and said the association agreement currently in place helped speed up the work.

“The EU has opened the door, but in order to get there and to enter that door, it’s more in the hands of Ukrainians and they know that,” the envoy said.

“Ukraine, as a nation, has chosen the EU as their destiny and their destination. The European Union at the moment symbolises hope for Ukrainians. They are absolutely sincere in their pursuit.”

‘Western weaponry is making a difference

Regarding the shocking dismal of Iryna Venediktova as prosecutor general, Maasikas simply said she has been “a very good partner” in the investigation of war crimes.

Venediktova is accused of failing to root out pro-Russian activity across her organisation.

“For us, the most important thing is that the Ukrainian institutions continue working and that all is done under Ukrainian law,” Maasikas remarked.

He also said the country was “firmly” behind President Zelenskyy and a majority of citizens were opposed to making any sort of concessions to secure a ceasefire from the Kremlin.

The war has entered its fifth month with no resolution in sight. The fighting is now focused on the Donbas, a large part of which is now under Russian control.

“What we hear from the frontline is that the situation is very grave,” Maasikas said. “It is a war of artillery. Of course, the range counts, but also the sheer amount of ammunition counts. The Western artillery is starting to make a difference. The Russians have withdrawn much farther.”

Asked about when the conflict could end, the Ambassador avoided giving a specific timeline but predicted: “the outcome will be decided on the battlefield.”

“If the shooting were to stop today, then the negotiation process would go on,” he said.

Maasikas wondered if the invasion could have been prevented if Kyiv had received weaponry already last year, when the first signs emerged of a Russian military build-up along the border, and if Western nations had imposed “preventive sanctions” on the Kremlin once tensions began rising.

“Would that have made a difference? It’s a very big discussion to have right now,” he said. “All we can say is we need to arm Ukraine now so they can win the war.”