Ukraine’s accession could cost €136 billion to the EU budget, new report estimates

This would represent 0.10% and 0.13% of the EU’s gross domestic product (GDP).

The projection uses the existing rules and design of the 2021-2027 budget to extract a projection of how much money the war-torn nation would be entitled to after obtaining the coveted membership. Ukraine was first declared a candidate in June 2022 and was given the go-ahead for accession negotiations in December 2023.

The findings exclude the enormous costs of reconstruction, estimated to be at least €450 billion over the next decade, and assume Ukraine would eventually regain all the territories in the East that Russian troops have occupied.

Bruegel forecasts Kyiv would be entitled to:

• €85 billion from the Common Agricultural Policy, the bloc’s massive envelope of subsidies for farmers. As the programme is rolled out according to hectares (farmed land), Ukraine, with its mighty agricultural sector, would become the biggest recipient.
• €32 billion from the Cohesion Policy, which finances development projects. The allocation of cohesion funds is capped at 2.3% of a member state’s GDP. Without this cap, Ukraine would be entitled to about €190 billion, six times more.
• €7 billion from other programmes.

In total, Ukraine would receive roughly €136 billion (at current prices) over a seven-year budgetary period. This is much lower than the €186 billion that the Financial Times reported in October based on a leaked study drafted by the EU Council.

However, if the country fails to win back the occupied East and suffers a permanent reduction of its territory, population and economic resources, Bruegel estimates the allocation would fall to €110 billion.

Ukraine’s membership would “hardly change” the ratio between net payers and net beneficiaries of the EU budget but would nevertheless trigger a tangible reshuffling of budget allocations. Even if the country were to engineer a robust recovery after the war, it would remain considerably poorer than the poorest EU state, Bulgaria, and probably than those in the Western Balkans. 

As a result, the EU’s GDP per capita would shrink, prompting changes in how much cohesion funds are distributed to each eligible region, said Zsolt Darvas, a senior fellow at Bruegel and one of the authors of the report. Additionally, the wealth gap could stimulate an exodus of between three and six million Ukrainians to other European nations in search of higher salaries and labour security.

“If the average goes down, then it means that some EU regions which are currently in the lowest category might move up to the transitional regions and some transitional regions might move up to more developed regions,” Darvas told Euronews.

“We also find that current EU countries would obtain about €24 billion less from cohesion funding, simply because of the mechanical impact of Ukraine.”

Darvas noted the budget increase would be “relatively modest” and therefore “doable” but insisted the projections were strictly “hypothetical” as the bloc is expected to rethink its internal rules and decision-making before enlarging further to the East.

A hidden risk

Besides looking into the financial implications of Ukraine’s membership, the report also put forward a range of policy suggestions to ensure a soft landing.

For example, Bruegel recommends the bloc offer a phased-in enlargement process that would allow Ukraine to progressively enjoy EU benefits, like abolishing roaming charges and enabling payments in euros. This would, in turn, incentivise Kyiv to commit to major reforms necessary to unlock all 35 chapters of the accession negotiations.

But, Bruegel warns, the transition hides a bigger risk: Ukraine, once inside the bloc, could at one point fall into democratic backsliding, as was the case with Hungary and Poland.

Officials in Brussels have spent immeasurable energy trying to contain the rule-of-law decline in these two member states, going as far as freezing EU funds. The time-consuming standoff also inspired changes to the enlargement framework, making the chapter on fundamental rights the first and last to be closed and adding a reversibility principle to halt talks if a candidate reverses its progress.

Darvas acknowledges Ukraine’s starting point is “very, very weak” as the country faces poor quality of governance, high levels of corruption and the entrenched influence of oligarchs. The ongoing martial law has altered the balance of power among institutions and it’s still unclear when will it end and what effects it will have in the aftermath.

“The crucial issue is what happens to the rule of law and democracy in Ukraine,” Darvas said. “This is a difficult task but it primarily depends on Ukraine.”

Mindful of a possible U-turn in Kyiv, the report suggests the EU should innovate and design new legal provisions that can guarantee respect for fundamental rights before and after the accession. These out-of-the-box tools could be included in the accession treaty that Ukraine would sign with the bloc and be ratified by all national parliaments.

In this treaty “there should be a clause that if the country doesn’t meet certain benchmark indicators while being a member of the European Union, then its voting rights can be suspended in a much faster way than it’s currently possible in the EU,” Darvas said, referring to the Article 7 procedure, which has only been activated against Hungary and Poland but never taken to its most radical stages.

“Also, access to EU funds could be suspended in a much faster way. So, I think there is a legal option to protect the EU better from the rule of law and corruption backsliding.”