Economic impact of Russia's war on Ukraine: European Council response

Briefing 23-02-2024

Thursday, 24 February 2022 was a turning point in European history. Overnight, Russia launched a brutal war of aggression on Ukraine, an independent European nation. Two years after the start of the war, its negative effects have been far-reaching. In addition to the harrowing human cost of the war, the economic impact has been devastating in Ukraine itself, but also substantial for the European Union and the world more widely. In the EU, the economic recovery following the COVID-19 pandemic has been slower than expected because of the war in Ukraine. The European Commission's 2021 Autumn Forecast predicted 4.3 % growth in gross domestic product (GDP) for the EU for 2022, and 2.5 % for 2023, but growth finally registered at 3.5 % for 2022 and an estimated 0.5 % for 2023. The EU also experienced a severe energy and a cost-of-living crisis in 2022, with ripple effects that are still being felt today. The increasing price of energy resulted in exceptionally high inflation figures in autumn 2022, especially in October 2022. This created difficult framework conditions for both EU citizens and companies. Furthermore, to bring inflation down to the 2 % target level, the European Central Bank began to raise its interest rates, with considerable impact, particularly on citizens and companies with large variable-rate loans. This briefing looks at the economic impact Russia's war of aggression on Ukraine has had on the European Union over the last 24 months, and analyses how the European Council has responded to limit the negative economic effects of the war. EU leaders followed the developing situation closely and reacted immediately to the Russian attack in February 2022. In addition to sanctions prepared in coordination with EU allies, the EU leaders also tasked the European Commission to prepare contingency measures. At an informal meeting in Versailles, EU leaders adopted a declaration in which they stressed the need to strengthen the EU economic base and the single market. They also took steps towards encouraging open strategic autonomy, aimed at allowing the EU to stand on its own two feet in the new and rapidly changing geopolitical situation. Since then, Russia's war of aggression in Ukraine and its impact have been rolling agenda items at European Council meetings. Furthermore, the EU and its Member States have supported Ukraine and Ukrainians with almost €88 billion (figures from January 2024), including financial, economic, diplomatic, humanitarian and military aid. At its December 2023 meeting, the European Council decided to open accession talks with Ukraine.