The full economic impact of the Russian invasion of Ukraine is difficult to calculate due to the fog of war. But it is already clear that Ukraine will need more financial assistance when the fighting is over..

“It is now that major donors must draw up plans and procedures to ensure that. The potential geopolitical cost of failure is very high. G7 leaders admit Ukraine will need a Marshall Plan-like initiative. But rebuilding Ukraine will be more difficult than the US-funded project to rebuild Europe after World War II,” Megan Green, editor of the Financial Times and chief economist at US consultancy Kroll, writes in the article..

She explains that the Marshall Plan had one donor and 16 recipients.. But in the case of post-war Ukraine, everything will be just the opposite: one recipient and at least 16 donors, including individual countries, development institutions, international organizations, private companies, and possibly Russian assets and reparations.

“It brings a lot of coordination problems.. And so far there has been no progress in trying to solve them.. It may seem premature to discuss the restoration of Ukraine while the war continues and the risk of freezing the conflict for years remains high.. But now is the time to create the infrastructure for a comprehensive reconstruction so that work can begin as soon as the guns stop,” the author writes, recalling that Ukraine has already tried to start this process..

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Kyiv presented its recovery plan at a donor conference in Lugano back in July. In addition, in October, a meeting was held within the framework of the G7 in Berlin under the patronage of Germany. In Lugano, however, donors were not ready. And the United States and other key countries did not send their representatives at the highest level. The Berlin meeting gave some concrete proposals. The United States, as Ukraine's biggest donor, was not properly represented. And Western leaders were relatively disorganized. G7 leaders agreed last week to create a donor platform for Ukraine, but did not disclose details.

“Europe must lead the recovery. In June, the EU agreed to accept Ukraine as a candidate country for accession.. European leadership can ensure that the country develops its institutions and standards in line with EU requirements. But the EU should not take the lead in collecting and distributing funding,” the author writes, adding that most economists agree with the statement that Ukraine needs debt restructuring and grants, not loans..

Because loans have to be repaid eventually, which raises the risk of a debt crisis.. But EU consensus decision-making means that loans are easier to approve than grants (although Hungary has shown that even loans are not that easy)..

“Almost all funding from EU institutions came in the form of loans, while funding from the US came in the form of grants.. Issuance of loans was also a problem for the EU. As of November, the US has transferred about 60% of the promised funds, while the EU has transferred about 27%. The urgency of the need to show results may lessen as the existential threat subsides and recovery begins,” explains the author..

According to Green, the EU is better off taking the lead in a new independent agency that will be created to oversee the implementation of projects in Ukraine.. It should be something similar to the Economic Cooperation Administration, created to manage the Marshall Plan.. A new dedicated reconstruction agency for Ukraine should be based in Brussels with a strong presence in Kyiv to ensure that all donor interests are represented.

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“According to the proposal of the Center for Economic Policy Research, the new agency should create a multi-donor trust fund. Such a tool is often used by the World Bank to attract various sources of financing.. To raise capital quickly, the agency could set up a facility that can issue bonds against long-term commitments from donors,” suggests Green..

She warns that the success of recovery programs is not guaranteed.. And the experience of Afghanistan and Iraq confirms this.

However, the price of failure will be “very high for Ukraine, Europe and the whole world”.

Failed country in Europe bordering Russia will become a security nightmare. It will create a refugee crisis as millions of Ukrainians will have no reason to return home.. And it will exacerbate skepticism about Western values \u200b\u200band intentions among countries that have refused to take sides in the war.. The fighting continues, but the time has come to plan for the world,” writes Green.