Lagarde backs Ukraine’s economic integration: ‘It strengthens both Ukraine and Europe’

Brussels – “Closer ties with the European neighborhood can provide a strong foundation for Ukraine to rebuild and emerge stronger.” Translated: Kyiv’s economic integration into the EU pending a political process that can take years. The President of the European Central Bank, Christine Lagarde, outlines for EU leaders what she sees as the course to follow on the delicate path to Ukraine’s inclusion. She does so from the Ukrainian capital, where the country’s central bank organized a conference on economic and financial integration. 

Some in the EU are holding back on Ukraine joining the twelve-star club. It is especially Viktor Orban’s Hungary that is withholding the necessary for practical reasons: Ukraine, at the moment, is a country at war, and the Hungarian government argues that admitting a country still at war would bring the conflict into the EU and drag the EU into the conflict. Moreover, the Ukrainian borders, which in perspective would be the external borders of the EU, are not defined. In short, it cannot be done.

Lagarde, however, offers useful arguments for economic integration. “On average, countries that joined the EU in 2004 have nearly doubled their GDP per capita over the past two decades,” the ECB president recalls about the Eastern European states, those “former satellites” of the Soviet Union. “Between 2004 and 2019, the EU’s new Member States saw their GDP per capita grow 32 percent more than comparable non-EU countries.” In short, Ukraine can grow, making Europe grow.

ECB president, Christine Lagarde [archive]

From a trade perspective, “Europe’s most important trading partner is Europe itself: around 65% of euro area exports go to other European countries, including the United Kingdom, Switzerland and Norway.” In light of this, it makes all the more sense to strengthen ties with Ukraine, especially since “by deepening economic ties, we can reduce our exposure to external shocks,” Lagarde further emphasizes, referring to the US choices on tariffs and China’s decision to impose restrictions on its commodity exports.

Looking at current events, with Europe eager to revive its defense industry in the name of increased security needs, one should not forget the “drone industry, which has become one of the most advanced in the region.” Drones, a technology that Europe is pressing for, “are not only a critical component of modern warfare but also a technology with substantial spillover effects and far-reaching dual-use applications.” In short, “for both existing EU members and neighboring countries like Ukraine, regional integration is both a path to prosperity and a strategic anchor in an increasingly fragmented world.”

Lagarde’s impetus fits well with not only the intentions but also the actions of the European Commission, which, through the
White Paper on Defense, has de facto initiated the integration of Ukraine into the single market of the defense industry. Of course, she warns, Kyiv will have to do its part, which means reforms. “The benefits of regional integration are neither automatic nor permanent. Sustaining them requires continuous reform – and, just as importantly, it requires citizens to see visible, tangible improvements in their daily lives,” she reiterated.