Günther Fehlinger, Austrian economist
Today's equivalent of the Marshall Plan is Ukraine's membership in the EU
18.11.2021 17:00

Austrian economist Günther Fehlinger believes Ukraine’s greatest historical achievement is the Association Agreement and the Deep and Comprehensive Free Trade Agreement, concluded in 2016 with the European Union, which enabled a number of important reforms in the country and laid foundations for those to come. Two years prior to that, the expert adds, Ukrainians made their most important choice – leaving the "Russian world" in favor of joining the free one.

Meanwhile, the prospect of EU membership still remains Ukraine's main focus. Fehlinger, who has gained extensive experience in Brussels, suggests that the reason for the delay is the hesitation of European partners and their fears of Russia – the archenemy of European Ukraine. According to him, being in the buffer zone between EU/NATO and Russia carries the risk that in time Ukraine may simply slip back into the "Russian world." That is why Kyiv needs to act more decisively toward implementing the European Ukraine scenario.

According to Fehlinger, changing the skepticism of EU member states is no easy task, but it is possible to accomplish if Ukraine becomes "the most radical pro-European enthusiast-reformer."

And the country will need to act in a non-standard manner, for example, by introducing the euro in Ukraine even before achieving EU membership. Another step the Austrian proposes is creating a "pre-accession alliance" with the six countries of the Western Balkans, which are currently one step ahead in terms of EU integration.

Fehlinger also links Kyiv's path to NATO with the Balkans: Ukraine should look closely at the Adriatic Charter, which has already successfully brought a number of countries in the region into the Alliance and is now preparing two other candidates, Bosnia and Kosovo. In his opinion, an example of membership could be the model of West Germany, which joined NATO despite some of its territories being occupied, before integrating them after gaining prosperity.

These and other topics were covered in Gunther Fehlinger’s interview with Ukrinform. Fehlinger is an expert in economic consulting covering the Western Balkans and Ukraine, President of the Europeans for Tax Reform nonprofit, and founder of the Austrian Committee for European Ukraine initiative.

UKRAINE SHOULD SIMPLY COPY REFORM EXPERIENCE OF CENTRAL AND EASTERN EUROPEAN COUNTRIES

- What is your assessment of the reform process in Ukraine in the years after the Revolution of Dignity? Which of the reforms would you like to single out as the most important?

- Ukraine has made significant progress since 2014 and has left the Russian world and joined the Free World, which is most important and matters most.

Sure, of the 26 Central and Eastern European countries between the EU15 of pre-2004 and Russia, Ukraine is only better reforming than Belarus, Armenia, and Azerbaijan. Nobody can be happy with the result of being just Number 23 of 26 so Ukraine must be more ambitious, no doubt.

Why not simply copy the economic reforms of Lithuania, why not copy the tax and currency system of Bulgaria, why not copy the anti-corruption reforms of Georgia?

Ukraine is a normal European country, just very late in starting with European reforms in 2014 and under war conditions but why not just do it as 22 successful Central and Europeans countries who are all much more successful and 13 of them already in the EU. Copy the success and copy fast, Ukraine’s lost enough time.

The most important reforms were to get the DCFTA with the EU in force from the start of 2016, which is the most historic achievement of Ukraine up to now.

Second is land reform and the end of the moratorium but sadly Ukraine has not allowed us Europeans to own land in Ukraine as if we would be not welcome in Ukraine. Millions of Ukrainians work in the EU and hundreds of thousands own property in the EU but Ukraine is not allowing us Europeans the same.

Sadly Ukraine has not reformed tax code, not reformed the customs code and the currency system, and sadly, implementation of the EU DCFTA is much slower than required.

COMPARED TO THE TERRIBLE PAST OF VIKTOR YANUKOVYCH'S RULE, THE BUSINESS CLIMATE HAS DRAMATICALLY IMPROVED

- Has the business climate in Ukraine improved? What needs to be done to ease doing business in Ukraine?

- Yes, compared to the terrible past of Viktor Yanukovych’s rule, the business climate has dramatically improved but much remains to be done. I would recommend the Ukrainian authorities take the following 10 steps:

1. Peg the hryvnia to the euro to end currency volatility;

2. Cut corporate and income tax to 10% for all taxpayers;

3. Harmonize VAT with the EU fully and join the EU Customs Union on the same basis as Turkey;

4. Build common border checkpoints with four EU neighbors;

5. Fully liberalize the energy market as promised in the EU Energy Charter;

6. Privatize big energy and infrastructure companies by 49% as we did it in Austria;

7. Open Ukraine labor market unilateral fully to the EU;

8. Make your digital land register, land market, and construction permits fully open to EU investors;

9. Join the Single European Payment Area; and

10. Implement fully the European SME policy and liberate Ukraine's entrepreneurship potential by ending Soviet supervision mentality and let entrepreneurs invent, innovate, and inspire, thus lifting Ukraine to the European level by their initiative. 

- How interesting is the Ukrainian market for Austrian and other European entrepreneurs? Where do you see the potential for cooperation?

- There is major untapped potential in the food sector, energy, IT, tourism, construction material, and SME manufacturing sector, as well as in integrating Ukraine industrial manufacturing capacity fully in the European Industrial Value Chain in automotive, defense, aerospace, and about every sector. But first macro reforms must be implemented to remove political and currency risks.

UKRAINE HAS TO GATECRASH INTO THE EU WITH THE HELP OF THE EURO

- The Euromaidan, or Revolution of Dignity, showed a clear desire expressed by Ukrainians to be part of the common European family. However, eight years on, Ukraine is yet to receive clear EU membership prospects. Is it because Ukraine has been doing its European integration "homework" too slowly or is it more a matter of the EU and its member states?

- Here the European partners are to blame. The EU gave the EU Potential Candidate Status even to Montenegro, Bosnia and Kosovo and all South Eastern European countries in 2003 at Thessaloniki Summit even before Kosovo and Montenegro were independent countries.

The blame for this is fully on European appeasement group led by Paris and Rome, and on fear of Russia in Austria and Romania, as well as a dominant feeling of past guilt for the WW2 terrors in Germany exclusively towards Russia, and Russian lobby power in the EU opposing Ukraine’s future with the EU. No matter how well Ukraine reforms, these obstacles are not easy to overcome, and in fact it will take massive American support to get Ukraine into the EU.

Besides, Ukraine will have to do some spectacular measures to show the world Ukraine is Europe. One of such steps I promote is that Ukraine should adopt the euro as its currency, as Montenegro and Kosovo have done it successfully in 2002. This is exactly aimed to show Europeans how European Ukraine is.

You have to gatecrash into the EU with the help of the euro. That’s because a standard way, as it was for Poland or Croatia, is not so easily opening for Ukraine. Waiting for being invited might result in never getting invited throughout this century.

UKRAINE SHOULD BUILD A PRE-ACCESSION ALLIANCE IN EU WITH THE WESTERN BALKANS

- In May of this year, the "Association Trio" was launched – a tripartite format of enhanced cooperation between Ukraine, Georgia, and Moldova on European integration. Do you see the potential in this format to facilitate the faster accession of these three associate partners of the EU to the Union?

- This was a historic event because it marked the end of Eastern Partnership, a failed parking place for countries with EU Membership ambitions and due to the presence in Batumi of the European Council President Charles Michel there is real momentum in this format if all three – Moldova, Georgia, and Ukraine adopt the euro as their currency now to show they are fully ready for EU future. Simply meeting in this format will not be enough. All three, together, need to build alliances in the EU to open up the EU for them and build a pre-Accession Alliance with the Western Balkans 6 and all pro-Association Trio Allies in NATO and EU.

- In October, Ukraine became the first non-EU country to take over the presidency of the EU Strategy for the Danube Region (EUSDR). How Ukraine could use this presidency for enhancing its Euro-integration prospects?

-Yes, this was historic to take over the Presidency but Ukraine should use this to promote Ukraine in the EU and to transform the EU Danube Strategy into the EU Danube Dnipro Strategy to show Europe is changing to the post-2024 reality with the Dnipro now fully in the future European Union territory. And again, to reduce the military-style Customs border Ukraine has towards Poland, Slovakia, Romania, and Hungary and to reform them into the EU Balkans border facilities which are co-managed by Frontex and have one common building for both bordering states.

Ukraine, just as Georgia, should join the Regional Cooperation Council where Moldova is a full member already and where all Western Balkans work together with the EU Members. Also, Ukraine should join CEFTA, the Central European Free Trade Area, where all Western Balkans and Moldova trade much closer together and learn from each other on daily basis, while Ukraine and Georgia work only in Eastern Partnership with the EU and in GUAM with each other. So Ukraine is excluded and is excluding itself from forming stronger links with all future EU and NATO allies.

Much of this is connected to Serbia rejecting Ukraine to join RCC and CEFTA, sure, but much is connected to Ukraine not being able to develop its own strategy for the Balkans and leaving Russia to impose its policy in the name of Slavic brotherhood. And Western Partners are disappointed by Ukraine not recognizing the Republic of Kosovo for fear of Russian propaganda or anti-Kosovo prejudices while Western partners in Washington, Berlin, Vienna, and Zagreb lack any understanding of Ukraine's lack of strategy for Southeastern Europe.

UKRAINE MUST BE THE MOST RADICAL PRO-EUROPEAN ENTHUSIASTIC REFORMER TO BE WELCOMED IN THE EU

- Do you have any other advice on how Ukraine can persuade the EU to give it an explicit membership perspective and to start entry negotiations?

- Ukraine needs to show it wants to be part of a Federal EU with all our instruments, and the best tool to show that is adopting the euro.

Having problems with Hungary and Poland, there are no wishes in Brussels, Berlin, and Vienna to have problems further in the East – in Ukraine.

Understand that Ukraine in the EU will be very costly for Germany and Austrian taxpayers, and for the Dutch and Swedes who pay most of the EU.

And every time Ukraine leaders call current Poland their role model, the chances of ever getting into the EU are getting ever smaller.

Ukraine must be the most radical pro-European enthusiastic reformer to be welcomed in the EU or you will remain a convenient buffer state in-between NATO/EU and Russia. If you do not opt for the European Ukraine scenario long-term, Ukraine will glide back to the Russian World over time.  

THE MISTAKE HAPPENED BACK IN 2008 WHEN UKRAINE AND GEORGIA WERE NOT GRANTED THE NATO MAP

- Russia's armed aggression against Ukraine and further occupation of parts of its territory was a kind of punishment for Ukrainians for the chosen European integration course. In your opinion, was the EU's response to this first forcible change of borders in Europe since World War 2 effective and sufficient? What was it supposed to be like?

- The mistake happened back in 2008 when Ukraine and Georgia were not granted the NATO MAP in Bucharest by the European appeasers led by Germany and France. This led to the wars in Georgia in 2008 and Ukraine in 2014.

In 2014, there was little difference to be made by the EU and Europeans as the USA was missing in action under President Obama, while the EU had no real means to stop Russia from taking Crimea and Eastern Donbas.

Politically the EU was and remains very firm. We will never recognize Crimea annexation and we have kept the common sanctions since 2014, and they will stay for the long term.

So could we have done much better? Honestly, given our weak military position towards Russia and our own division, I am afraid we did the best we could under extremely difficult conditions.

Where we can be blamed is that from 2017 onwards we did not offer a Western Germany and Cyprus-style future for Ukraine, an EU future for a partly occupied Ukraine.

TODAY'S EQUIVALENT OF THE MARSHALL PLAN IS EUROPEAN UNION MEMBERSHIP OF UKRAINE

- Several years ago, there was a discussion of the eventual plan of large-scale EU financial assistance to Ukraine, which would not only modernize the Ukrainian economy, but also help the further reintegration of the territories currently temporarily occupied by Russia. How real is the emergence of a new "Marshall Plan" for Ukraine?

- I am against the term Marshall Plan for Ukraine as this was a very unique American tool post World War 2 and it is used inflationary. Today the EU is rich and why should American taxpayers shoulder the cost for European Ukraine when Ukraine wants to join the European Union? Today's equivalent of the Marshall Plan is European Union Membership of Ukraine.

President Zelensky this September presented to U.S. investors an estimate that the cost to bring Ukraine up to European standards is around $277 billion, that is, about what Poland will have gotten from the EU from 1990 to 2030.

So if we now start with a real EU Membership prospect for Ukraine, Ukraine will get similar levels of support by the EU not as an extra program but simply as a part of pre-accession assistance and then cohesion as a Member State.

So the efforts by Ukraine should be focused on getting inside the EU and not creating a new system or tools that will first of all not materialize and secondly condemn Ukraine to a buffer status outside the EU forever, and as I said, it’s very risky being next to Russia.

Ukraine needs a 40-year development plan, Ukraine 2060, and a clear strategy to join the European Union within 15 years after the Maidan, that is, in 2029.

WESTERN GERMANY AS AN EXAMPLE FOR UKRAINE TO ENTER NATO

- Ukraine is convinced that ensuring the country's security is possible only through NATO membership. Do you share this opinion and how do you assess the prospects of Ukraine's accession to this defense alliance?

- Yes, Ukraine must join NATO, best during the first Biden Mandate by 2024. The best way again is to join the Adriatic Charter Dialogue of NATO pre-accession with Allies from Balkans, led by the U.S. Defense Department which has successfully matured Slovenia, Croatia, Albania, Montenegro, and North Macedonia to full NATO Allies and is working hard to get Bosnia and Kosovo in NATO soon.

But Ukraine must be realistic and clear, there is only a NATO future for Free Ukraine. Similar to the Western German Federal Republic in 1995, a NATO Membership is only possible for Ukraine without the occupied territories.

Same as for FRG/BRD in 1995, Ukraine can keep the vision of national unity in the Constitution and, I am confident, achieve unity and result in NATO and EU membership in the distant future.

NATO can guarantee only clear borders so the demarcation lines to the occupied territories must be borderized and put in calm but defensible conditions similar to the German-German border where only those people who tried to fell Eastern German terror regime were dying during the 44 long terrible years of Soviet occupation of Eastern Germany.

NATO is not a tool of Reconquista. NATO can only defend Free Ukraine from further Russian aggression. And that is quite a task, So it will be a monumental task to achieve this and secure Free Ukraine as part of NATO in the long term.

But for now, the division of Ukraine must be accepted similarly as we had to learn to live with the Soviet occupation of Eastern Germany for two long generations. But ultimately, the will of the Eastern Germans for freedom was greater than the fear of the Soviet puppet regime so they started to run from the occupied territories towards rich, secure, and free Western Germany.

Ukraine has to be so attractive for the people from the occupied territories, from Crimea and Donbas, that they vote with their feet and leave the Russian occupied territories by opting for European Ukraine. Ukraine must first be three times as rich and successful as Russia to achieve such a result and this can only be possible if Free Ukraine joins NATO with all attached security guarantees, and adopts the euro fast in order to achieve a future inside the EU.

This major step by Ukraine will lead certainly to a major crisis with Russia, similar to the Berlin blockade, possibly an energy blockade which Russia is already experimenting with today, possibly even a military escalation, which will however only strengthen American resolve and determination.

Only with strong American leadership, Free Ukraine can join NATO same as only American leadership made Western German NATO membership possible against French massive hesitance back in 1955.

Today America is led by the most pro-Ukrainian President in USA history, will that be the case after 2024 is everybody’s guess, that is why I call for Ukraine to adopt the Euro now, make all efforts to join NATO during the firsst Biden administration by 2024.

Ukraine should make all steps required to achieve by 2024 the two major benchmarks – European currency and NATO Membership. And then, over time, this will result in EU membership and unity for Ukraine.

Vasyl Korotkyi, Vienna

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