How the Ukraine Facility Can Strengthen Ukraine’s Democracy

In a historic decision, the European Council agreed on 1 February to set up the Ukraine Facility, a new financial tool to support Ukraine’s reconstruction and integration into the EU. After the European Council decided in December 2023 to open accession negotiations with Ukraine, this facility paves the way for a sustained support mechanism for the country. The decision had previously been stalled because of Hungarian Prime Minister Viktor Orbán’s persistent use of his veto to block any new financing tool, putting in jeopardy European support for Ukraine.

Initially, it was envisaged that the European Parliament would have a key role in oversight of the initiative. But in a compromise with Orbán in exchange for the withdrawal of his veto, EU leaders agreed to have the Council play this role – specifically, by approving the Ukraine reform plan that will accompany the facility as well as by means of a yearly debate on the mechanism. If more countries start to see things in the same way as the Hungarian government, these new developments could give space for Orbán and like-minded allies to periodically blackmail the EU over support to Ukraine through a blocking minority in the council.

Structured in three pillars, the €50 billion facility foresees substantial financial support linked to accession reforms, an investment framework to attract public and private capital, and technical assistance. Support for civil society and local authorities is embedded in all three pillars. On 10 January, the council made major improvements with regard to the inclusion of civic actors and local authorities, granting them a greater role – on paper, at least – in contributing to the facility’s implementation.

Incorporating civil society perspectives into the reform plan

The Ukraine Facility will introduce the Ukraine Plan, a conditionality mechanism that will link the disbursement of grants and loans to progress on EU accession reforms. Conditionality needs to come with the establishment of accountability mechanisms for the Ukrainian authorities to deliver on the reforms, with clear benchmarks oriented towards democratic consolidation. Oversight by civic groups is an important way of keeping the government accountable and ensuring transparency of public and EU funding at the local and national levels, including by assisting Ukraine’s parliament in monitoring the reform process. Specific funding should be dedicated to financing civil society organisations (CSOs) so that they can do so.

The EU should make sure that the reform plan is truly the result of wide and inclusive consultations in the country, as expressed in the facility’s text. A study published in June 2023 found that government authorities engaged with only 30% of the CSOs surveyed in recovery efforts. Civil society is still absent from the steering committee of the EU-hosted donor coordination platform for multilateral cooperation on reconstruction.

While this shortcoming has mostly been tackled thanks to input from the European Parliament, more clarity on the mechanisms and the timeline for consultations is needed to guarantee meaningful and inclusive contributions from civic groups. Specific attention should be paid to bridging the engagement gap between civic actors, their local authority counterparts, and national policy processes, on the basis of effective implementation of the decentralisation reform.

Balancing investments: accountability and local alignment

Part of the second pillar of the Ukraine Facility, the investment framework seeks to attract the public and private capital necessary for reconstruction “in the form of financial instruments, budgetary guarantees and blending operations”. As blended finance can fall prey to corruption, the European Commission, recognising this risk, will be mandated to ensure the “fair use of available resources” to oversee proceedings. This is welcome, as it can enhance the impact and sustainability of economic development programmes and their local buy-in. CSOs can support this effort by engaging with citizens and communities in Ukraine’s reconstruction process, by identifying social needs through participatory evaluations and social audits, or by using innovative mechanisms for citizen participation at the local level, such as citizens’ assemblies and online consultation tools.

The EU must therefore support spaces for dialogue among local stakeholders and mobilise its investment portfolio to incentivise the allocation of resources for a consensus-based recovery. Systematic efforts for the localisation of aid in line with the facility’s text on effective reconstruction imply that citizens and local authorities should have a say in reconstruction decisions that affect their communities, for example by establishing cooperation mechanisms between local authorities, CSOs, and the steering board of the investment framework.

Prioritising the fundamentals

The Ukraine Facility brings together assistance programmes for national and local authorities as well as civil society support to pave the way for Ukraine’s EU membership. The country’s democratic institutions, which have been under stress since the beginning of Russia’s aggression, would greatly benefit from this kind of support. Ukraine has proven itself capable in this regard with its swift response to the EU’s accession questionnaire, but legislative harmonisation will need further strengthening to meet the EU’s Copenhagen Criteria for membership. The union’s “fundamentals first” enlargement methodology should not be challenged by the tremendous financing needs and high geopolitical stakes of accession.

Drawing lessons from the Western Balkan candidate countries and their democratic-deficit problems, technical assistance should mobilise the expertise of Ukraine’s civil society and local authorities in the reform process, with a focus on promoting healthy democracy through electoral support, justice reform, parliamentary strengthening, media integrity, and decentralisation. The EU’s technical support agenda needs to be co-created with Ukrainian civil society and officials to strengthen policy effectiveness. Ukrainian CSOs have strong expertise in sectoral reforms that strengthen the fundamentals, and these organisations should be in the driving seat when developing legislation or bringing it into line with the body of EU law known as the acquis.

In addition, while the facility’s text makes multiple references to gender equality and alignment with the EU’s Gender Action Plans, a gender-responsive budgeting framework should be introduced to ensure that funds will actively contribute to gender equality. Reconstruction and accession funds provide an unprecedented opportunity to improve women’s rights, which have been undermined by the war.

Conclusion

The Ukraine Facility still lacks a defined process to steer civil society participation and clear instructions on how the facility will access earmarked funds – a significant blind spot considering the sums it is supposed to channel. In addition, the text remains evasive with regard to the “appropriate extent” to which civil society and local authorities will be involved in evaluating the funding streams.

The new text confirms Ukraine’s upcoming participation in various EU funding programmes, such as Horizon and Erasmus. But it should also allow Ukraine to join the EU’s Citizens, Equality, Rights, and Values programme to encourage further cooperation between Ukrainian and other European CSOs on reforms and other accession issues. The programme recently opened to Bosnia and Herzegovina, Kosovo, and Serbia. Ukraine’s reconstruction through the prism of EU accession is a historic opportunity for democracy that must not be missed.

The authors thank partners from Ukraine and Tinatin Tsertsvadze, a fellow at the European Democracy Hub, for their feedback on a draft of this commentary.

Authors