State of the Union: Kyiv wants fighter jets, EU economy gets stronger

This week has seen another furious volley of Russian air attacks on Kyiv.

But, for the first time, the Ukrainians said they were able to shoot down several next-generation hypersonic missiles that Moscow considered unstoppable.

The Russian side dismissed the claims.

But if confirmed, it would be a demonstration of the effectiveness of Ukraine’s newly deployed western air defence systems.

For Kyiv that’s not enough. In a whirlwind tour of major European capitals, President Zelenskyy was trying to forge a “coalition of fighter jets”, as he called it.

The West has so far stopped short of delivering its jets, but some countries are now signaling support.

This comes on the heels of Germany pledging a new package of military aid worth €2.7 billion and the promise of further unwavering support.

Speaking at the summit of the Council of Europe in Reykjavik, Island, Chancellor Olaf Scholz said: “At some point, Russia’s war against Ukraine will end and one thing is certain – it will not end with a victory for Putin’s imperialism, because we will support Ukraine until a just peace is achieved.”

Meanwhile, the European Union seems to have weathered the economic storm triggered by the Russian war against Ukraine.

This week, the EU Commission presented a rather positive outlook: no more recession risk, growth back on track, inflation on the downside and a labour market as strong as ever.

But, but, but: the gap between the haves and the have-nots is getting bigger, as EU Economy Commissioner Paolo Gentiloni pointed out: “The forecasts illustrate remarkable country differences concerning public finance, but also growth and inflation. It is important to monitor this divergence to avoid that they become entrenched.”

Take consumer prices: in Eastern Europe, the inflation rate is more than twice as high as in the euro area.

Covering Eastern Europe, or emerging Europe, as it is called, is the European Bank for Reconstruction and Development. In its latest outlook, published this week, the EBRD sounded much more subdued than the EU Commission, as Beata Javorcik, the bank’s chief economist explained in an interview with Euronews.

Euronews: So, the EBRD’s latest outlook is called “Getting by” which is actually an understatement given that you’re trimming your growth forecast for 2023. Fill us in here, what are the main reasons?

Javorcik: Well, on average, households are just getting by, but the situation is very different in different subregions where we operate. So at one end of the spectrum in Central Europe and the Baltics, we are going to face a very difficult year as there will be next to no growth. On the other hand, Central Asia is going to see strong performance as it is benefiting from an influx of capital and labour from Russia. This region has also turned itself into an intermediary for exports from Europe going into the Russian market.

Euronews: High inflation is still a huge worry for consumers, especially households are feeling the pinch. Do people have financial buffers to weather the storm, what are your findings?

Javorcik: Our household surveys that we have just completed are showing that households have depleted their savings because of the sequence of two crises, the pandemic very closely followed by the war. And most households are just making ends meet. And if a household were to lose its main source of income for a majority of families, that would mean that they would be able to cover their basic expenses for no more than a month.

Euronews: For Ukraine, you’re forecasting modest growth for this year and next – that sounds surprisingly robust for a country at war… your thoughts?

Javorcik: Well, let me put that into perspective. Last year, the economy of Ukraine shrank by almost a third. So essentially what we are forecasting now is status quo continuing. And it’s very hard to see where growth could come from. 8 million people are abroad. 6 million people are displaced internally. Many people are involved in the war effort. And the investment is pretty much covering just the emergency needs.

Euronews: I hope it’s not all gloom and doom – any optimistic developments you can tell us about?

Javorcik: Well, the two optimistic developments. One is the reshaping of global value chains. As many German companies are looking for new suppliers to improve the resilience of their supply chains. They are looking to Central Europe, to Eastern Europe, to the broadly defined European neighbourhood. And second, emerging Europe has become much more enthusiastic about the green transition because now it is viewed through the prism of energy security. And that’s going to be good for the planet and all of us.