Ukraine & Europe: What Should Be Done? by George Soros, The New York Review Of Books
Because of the structural defects of the euro, the European authorities have had to become masters of the art of muddling through one crisis after another. This practice is popularly known as kicking the can down the road although it would be more accurate to describe it as kicking the can uphill so that it keeps coming back. But Europe now faces at least five crises at the same time: four internal ones—the euro, Greece, migration, and the British referendum on whether to remain in the EU—and an external one, Russian aggression against Ukraine. The various crises tend to reinforce one another. Both the public and the authorities are overwhelmed. What can be done to arrest and reverse the process of disintegration?
Obviously five crises cannot all be solved at the same time. There is a need to give preferential treatment to some of them without neglecting any. I have been strenuously arguing that Ukraine should be given top priority. The internal crises tend to divide the European Union into debtor and creditor countries, the UK and the Continent, as well as “arrival” and “destination” countries. By contrast, an external threat like the Russian aggression against Ukraine ought to unite the European Union.
There is a new Ukraine that is determined to become the opposite of the old Ukraine. The old Ukraine had much in common with the old Greece that proved so difficult to reform: an economy that was dominated by oligarchs and a political class that exploited its position for private gain instead of serving the public. The new Ukraine, by contrast, is inspired by the spirit of the Maidan revolution in February 2014 and seeks to radically reform the country. By treating Ukraine like a second-class Greece that is not even a member of the European Union, Europe is in danger of turning the new Ukraine back into the old Ukraine. That would be a fatal mistake because the new Ukraine is one of the most valuable assets that Europe has, both for resisting Russian aggression and for recapturing the spirit of solidarity that characterized the European Union in its early days.
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I feel I am in a strong position to make this argument because I have an intimate knowledge of the new Ukraine through both my Ukrainian foundation and my own involvement in the country. At the beginning of this year, I developed what I called “a winning strategy for Ukraine” and circulated it among the European authorities. I also outlined this strategy in these pages.*
I argued that sanctions against Russia are necessary but not sufficient. President Vladimir Putin has developed a very successful interpretation of the current situation with which to defend himself against the sanctions. He claims that all of Russia’s economic and political difficulties are due to the hostility of the Western powers, who want to deny Russia its rightful place in the world. Russia is the victim of their aggression. Putin’s argument appeals to the patriotism of Russian citizens, and asks them to put up with the hardships—which include financial instability and shortages—that the sanctions cause. The hardships actually reinforce his argument. The only way to prove Putin wrong is by establishing a better balance between sanctions against Russia and support for Ukraine.
My “winning strategy” advocates effective financial assistance to Ukraine, which would combine large-scale budgetary support with affordable political risk insurance, along with other incentives for the private sector. Coupled with the radical economic and political reforms that the new Ukraine is eager to introduce, these measures would turn it into an attractive place for investment. The linchpin of economic reforms is the restructuring of the state gas monopoly, Naftogaz, moving from the current artificially low prices for gas to market-determined prices and providing direct subsidies for gas purchases to needy households.
The political reforms center on establishing an honest, independent, and competent judiciary and media, combating corruption, and making the civil service serve the people instead of exploiting them. These reforms would also appeal to many people in Russia, who would demand similar reforms. That is what Putin is afraid of. That is why he has tried so hard to destabilize the new Ukraine.
If Ukraine’s allies combined the sanctions against Russia with effective assistance for the new Ukraine, no amount of propaganda could obscure the fact that Russia’s economic and political problems are caused by Putin’s policies.
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