The war in Ukraine has necessitated a substantial increase in military expenditure across Eastern Europe.
Poland and the Baltic States are at the forefront of this movement, recognising the urgent need to bolster their defence capabilities.
Poland has commendably raised its defence budget to 2.5% of GDP and expanded its military alliances by participating in NATO-led international military exercises and strengthening bilateral agreements with the USA.
By 2022, Poland had already invested about $6 billion in modernising its military equipment and infrastructure.
Estonia, Latvia, and Lithuania have also significantly boosted their defence budgets, actively investing in modernising their armed forces and increasing military personnel in response to the Russian threat.
Investments in military infrastructure clearly demonstrate the seriousness with which European countries are protecting their borders.
Strong economic projects and strengthened defence go hand in hand. The Baltic States understand that maintaining sovereignty depends on their ability to defend their interests.
Romania and Bulgaria have also strengthened their defence spending, reaching 2% of GDP, and the Czech Republic is following suit by rearming.
Changes in Domestic Policy and Identity
The war in Ukraine has not only led to increased military spending but has also deepened regional integration and influenced the interaction of Eastern European countries with NATO and the EU.
The Three Seas Initiative, which unites countries from the Baltic to the Black and Adriatic Seas, has become pivotal in strengthening regional energy security and diversifying energy sources.
Within this initiative, Poland and Lithuania are actively developing projects to build new gas pipelines and LNG terminals.
The Czech Republic is investing heavily in its energy infrastructure, including the modernisation of gas pipelines and improving energy efficiency, to reduce dependence on Russian energy resources.
These efforts are crucial for ensuring energy independence and security in the region.
Challenges for Internal Stability
The influx of refugees and internally displaced persons from Ukraine has posed significant challenges for social and political stability in host countries.
Germany, which has accepted over a million Ukrainian refugees, is grappling with substantial challenges in integrating them and meeting their basic needs, leading to increased tension among the local population and higher social assistance costs.
Authorities have had to ramp up funding to support refugees, including housing, medical care, and education.
Similar challenges are evident in the Baltic States, Poland, and France.
This crisis has underscored the importance of creating sustainable and effective mechanisms for integrating refugees, which will help reduce tension and ensure social harmony.
These challenges require not only financial resources but also a comprehensive approach that includes education, medical care, and social support for the successful adaptation of displaced persons to a new life. There is much work to be done for everyone.
Europe is experiencing a period of significant changes. It is crucial for country leaders to strive for stability, balancing the needs of their citizens with those seeking refuge from the war.
This is especially relevant at a time when Hungary chairs the Council of the European Union, and in France, far-right forces may strengthen their positions. Such political changes can affect the approach to migration policy and refugee integration.
Therefore, it is necessary for politicians to maintain a balance between protecting national interests and humanitarian obligations, ensuring effective support and integration for those in need.
The Need for Economic Reforms in Ukraine
The challenges of integrating refugees in host countries highlight a broader need for stability and comprehensive planning, which is also critical for Ukraine’s post-war recovery.
Just as Europe must balance the integration of displaced persons with maintaining social harmony, Ukraine must navigate its reconstruction with a focus on deep systemic changes to build a resilient and prosperous future, fostering the hope that refugees will eventually return home.
The Council on Foreign Relations estimates that nearly $486 billion will be needed to rebuild Ukraine over the next decade, with $15 billion required in 2024 alone for immediate recovery needs.
Post-war reconstruction is a complex task necessitating significant investments and deep systemic changes in the country. Emphasis should be placed on structural reforms, fighting corruption, and digitalisation.
Tax System Reform: Reforming the tax system is a priority. Its flexibility and transparency will stimulate private investments. Introducing tax incentives for companies that invest in strategically important sectors such as IT, green technologies, and agribusiness can significantly boost international investor interest.
Licensing: Simplifying the process of obtaining licences and permits is another crucial aspect, reducing barriers to doing business. At the same time, the fight against corruption should be a priority. It is necessary to create new effective or reboot the existing anti-corruption bodies and ensure their effective work. Judicial reform is also vital, as Ukrainian courts are known for their astounding decisions.
Digitisation: Modernising the economy requires digital transformation of public services to make processes more efficient and transparent. Implementing electronic document management and expanding public services available online will significantly ease the interaction of entrepreneurs with the state. Developing internet infrastructure to ensure broadband access in all regions of the country is essential for the growth of online services.
Infrastructure Financing: Investments in physical infrastructure, especially in housing, transport, industry, agriculture, and energy, are critical. Developing necessary and affordable infrastructure will aid the return of internally displaced persons and refugees, stabilising the situation in the country.
Comprehensive recovery requires not only international support and solidarity but also a clear vision and strategy from the Ukrainian government, turning post-war challenges into opportunities to create a stronger and more stable state.
This is a pivotal moment for Eastern Europe, and we must seize it to build a future defined by resilience and prosperity.
