In a region of the world where the majority of individuals are exiting their investments, George Soros has said he is prepared to pump $1 billion into the high-risk economy of Ukraine. Soros told Der Standard, an Austrian newspaper, that he believes there are concrete investment ideas specifically in agriculture and infrastructure in the country. But most importantly, the Hungarian-born Soros stressed that it is necessary to defend Ukraine because its principles align with those on which the European Union is based.
“Ukraine is defending Europe’s borders,” Soros said. “But above all, the country is fighting for European values such as the rule of law and freedom. That is too often forgotten.”
Back in January of this year, Soros noted that the focus of rebuilding Eastern Europe should be centered on helping Ukraine rather than supporting Russian sanctions. He called for the International Monetary Fund to invest $50 billion in the country to provide assistance to the government so it can implement financial reforms.
Since Russia took control of Crimea more than a year ago, Soros has been very open about his support for Ukraine and how it needs an economic bailout similar to the Marshall Plan, which gave $13 billion in economic support to Europe after World War II. So far, the IMF has only contributed approximately $17.5 billion to the Ukraine, which is a fraction of what Soros claimed the country needs to shift the economy in a positive direction. Ukraine’s GDP over the past year declined by 7% and its currency, the hryvnia, lost almost 60% of its value against the dollar.
Soros mentioned in a recent MarketWatch article that Europe is taking actions that are saving Greece at the expense of Ukraine. From a policy perspective, Soros noted that reforms within Ukraine are becoming more concrete. However, the IMF’s Extended Fund Facility has provided insufficient funds to promote continued internal progress. He thinks that the EU is not taking the threat of Vladimir Putin seriously. Instead of viewing him as an aggressor, Europe is appeasing Putin and allowing him to hold Ukraine in a pattern that destabilizes the country and leaves him in full possession. The head of the European Commission Jean-Claude Juncker has even specifically mentioned that there is only a small margin of financing flexibility over the course of the year to help Ukraine.
“If we fully use our margin for Ukraine, we will have nothing to address other needs that may arise over the next two years,” said Juncker.
Currently, Ukraine’s banks are experiencing high interest rates and are under the weight of bad loans. Pension cuts and gas price hikes are also part of the IMF-mandated austerity package. Soros has thus encouraged Western leaders to take matters into their own hands by pledging $1 billion to Ukraine if they do so. He believes that the West should do “whatever it takes” to rescue Ukraine and promote democracy within the region.
“The West can help Ukraine by increasing attractiveness for investors. A political risk insurance is necessary. This could take the form of mezzanine financing at EU interest rates—very close to zero,” Soros said.