Belgium, (Brussels Morning Newspaper) European Commissioner for Economic and Monetary Affairs Paolo Gentiloni noted that the war in Ukraine will reshape global alliances and supply chains.
Speaking at the Peterson Institute for International Economics in Washington on Thursday, he pointed out that the war showed the limits of the German approach to change Moscow through economic cooperation, Reuters reports.
Gentiloni reminded that Germany adopted the approach decades ago and stressed that the conflict in Ukraine “will also spell the end of globalisation as we have known it and reshape global alliances.”
“We need to rethink our relations with autocratic regimes and strengthen our ties with like-minded partners,” he stressed.
The war puts additional pressure on global supply chains, Gentiloni noted, which are already strained from two years of restrictions aimed at curbing the spread of coronavirus.
Germany’s approach of tighter economic cooperation with Russia has left the country dependent on Russian coal, gas and oil imports. This makes it more difficult for the EU to impose an embargo on Russian energy, which was proposed to limit Moscow’s ability to finance the war in Ukraine.
Effects on the EU
Gentiloni pointed out that the conflict pushed the EU to increase its military spending sharply, reminding that the bloc is planning large environmental and digitalisation investments.
EU fiscal rules might have to take into account this new expenditure, he noted and added that it will possibly require new joint borrowing.
“We are talking about mobilising hundreds of billions of additional investments each year,” Gentiloni stressed and noted “while most of these investments will need to come from the private sector, financing them will require a more supportive framework of fiscal rules and potentially new tools at the European level.”
Several EU member states including Germany have voiced their opposition to proposed new joint borrowing.
Commenting on the cost of the war in Ukraine for Europe, Gentiloni pointed out that it will depend on duration of the conflict.
He expects that aid to Ukraine, support for refugees and EU economies to deal with soaring energy prices and economic disruptions will increase the EU budget deficit this year by 0.6% of GDP or more.
