The G7 will pledge billions in a new lifeline for the Ukrainian economy | WSAU News/Talk 550AM 99.9FM
By David Lawder and Leika Kihara
KOENIGSWINTER, Germany (Reuters) – Financial leaders from the Group of Seven are expected to unveil billions of dollars in new aid to Ukraine on Friday and pledge enough money to keep the country’s devastated economy afloat as long as it struggles. against the Russian invasion.
Finance ministers and central bank governors from the United States, Japan, Canada, Britain, Germany, France and Italy – the G7 democracies – are also discussing the next steps. sanctions steps to pressure Russia to end the war launched on February 24.
In a draft statement from the group to be released later Friday, G7 officials cited a figure of $18.4 billion in budget support for Ukraine this year, including $9.2 billion in pledges. recent.
“The message was, ‘We support Ukraine,'” US Treasury Secretary Janet Yellen told reporters Thursday night. “We’re going to gather the resources they need to get through this,” Yellen said.
Friday’s scheduled sessions also include discussions on the potential for debt crises amid rising food and energy price pressures, progress on global corporate tax reform , efforts to fund a transition to renewable energy and the current state of the COVID-19 pandemic.
RUSSIAN ENERGY EDGES
During the sessions, G7 officials also discussed proposals to cut Russia’s revenue from energy exports, including a phased embargo proposed by the European Union, forming a cartel of buyers to cap price of Russian crude and imposing import duties on Russian oil.
The latter was launched by US officials as a way to limit Moscow’s oil profits while keeping supplies of Russian crude on the market to avoid price spikes.
“Nothing is really crystallized like an obvious strategy,” Yellen said of those discussions.
Another G7 official said price caps and tariffs were problematic because producers have little incentive to comply and consumers could end up bearing the brunt of additional costs.
In the draft communiqué, the G7 on Wednesday welcomed the European Commission’s proposal to lend 9 billion euros ($9.52 billion) to Ukraine. He also noted that the European Bank for Reconstruction and Development and the International Finance Corporation were planning support worth $3.4 billion, but it was unclear if this was part of the $18.4 billion. dollars or a separate commitment.
Yellen said a $40 billion U.S. aid to Ukraine bill, passed overwhelmingly by the U.S. Senate on Thursday, included about $7.5 billion in new economic aid.
Ukraine estimates that it needs around $5 billion a month to keep civil servants’ salaries paid and the administration running despite the daily destruction wrought by Russia.
The war has been a game-changer for Western powers, forcing them to rethink their decades-old relationship with Russia not only in terms of security, but also energy, food and global supply alliances, from microchips to rare earth.
Taming the Beast of Inflation
More broadly, G7 policymakers are wrestling with the question of how to contain inflation and increase sanctions pressure on Russia without causing a recession.
More and more officials have come up with the term “stagflation” – the dreaded 1970s combination of persistent price increases coupled with economic stagnation.
“G7 central banks are closely monitoring the impact of price pressures on inflation expectations and will continue to appropriately calibrate the pace of monetary policy tightening in a data-dependent and clearly communicated manner,” indicates the project.
They will ensure “that inflation expectations remain well anchored, while ensuring that the recovery is preserved and the negative spillovers between countries limited”, he said.
Most Ukraine aid efforts have been aimed at funding Kyiv’s immediate cash flow needs, but G7 officials have called for support for long-term reconstruction and recovery, according to the project.
Economists’ estimates of the cost of rebuilding Ukraine vary widely between €500 billion and €2 trillion, depending on assumptions about the duration of the conflict and the scale of the destruction.
($1 = 0.9452 euros)
(Additional reporting by Chirstian Kraemer, Leigh Thomas, Francesco Canepa and Jan Strupczewski; Editing by Tomasz Janowski)