An economic or political “catastrophe” in Ukraine could trigger a “domino effect” of economic difficulties within the European Union, Austria’s finance minister warned yesterday, The Financial Times reported.
Josef Pröll, who is also the country’s vice chancellor, urged the EU to support Ukraine because of its strategic importance and its political and economic ties with union members.
“Ukraine is a very important keystone country and we must avoid a domino effect inside the EU, if there is economic and political catastrophe in such a huge neighbouring country. There could be a domino effect in terms of economic difficulties in the EU” Mr Pröll told the FT.
”We don’t see this scenario developing now. But we must prepare and keep an eye on Ukraine,” he added.
Mr Pröll was speaking during a trip to eastern Europe made amid mounting international concern about the financial condition of the region’s more vulnerable states.
Ukraine, which like Latvia and Hungary, has secured an emergency International Monetary Fund package, is seeking up to $5bn in extra loans from sources including Russia, the US, the Middle east, Japan and the EU.
Mr Pröll is visiting Ukraine, Croatia, Romania and Bulgaria before a meeting of EU finance ministers early next month where support for vulnerable eastern european states is due to be discussed.
Mr Pröll said that while the EU’s greatest responsibility was for member states, it also had to support candidate members and Ukraine which had no membership perspective but had close links with the EU.
Mr Pröll said he was not calling for wholesale financial support. The International Monetary Fund had to take the lead in giving financial assistance to those states which needed it, he said. But the EU had a range of financial and non-financial instruments available for member states and non-members, including Ukraine.
Mr Pröll pledged Austrian support for its banks, which are among the region’s biggest lenders. Austrian banks which drew on a ?100bn government support plan could keep operating in eastern Europe “without restriction”.
Asked about French efforts to link assistance to French carmakers to safeguarding French jobs, which has caused alarm in eastern europe’s carmaking nations Mr Pröll said: protectionism is not the right answer.”
“If we look to the last crisis 80 years ago where one country tried to pass its problems to another country and so on, they did not solve their problems. We can only be successful if work together and keep open the economy,” said Mr Pröll.
Mr Pröll added that western europe had a particular responsibility to eastern europe. ”We have made a lot of money in these countries in the last 20 years and now in this crisis we must support them in these difficult times.”
Hryhoriy Nemyria, Ukraine’s deputy prime minister, said Kiev’s bids for extra loans on top of its IMF package were a ”usual and natural” way of complementing IMF aid.
