Mounting costs driven by the war in Ukraine are squeezing budgets in the European Union’s eastern wing, prompting cutbacks on economic aid for refugees and government efforts to encourage those able to get jobs.
(Bloomberg) — Mounting costs driven by the war in Ukraine are squeezing budgets in the European Union’s eastern wing, prompting cutbacks on economic aid for refugees and government efforts to encourage those able to get jobs.
Since Moscow invaded its neighbor last year, EU members have poured billions more than planned into everything from ramping up defense spending and sending weapons to Kyiv to subsidizing utility bills following a spike in energy prices.
Cash has also gone to supporting what the United Nations calls Europe’s biggest refugee crisis since World War II, with Ukraine’s neighbors welcoming millions of mostly women and children with an outpouring of relief.
But it’s also straining government coffers. Following a pledge to cut its budget deficit to 4.4% of economic output this year, Romania stopped making payments to house refugees four months ago, citing a cash crunch after spending about 500 million euros ($550 million).
On Wednesday, the government in Bucharest approved a plan to officially cut its payouts by almost half to the 99,000 displaced Ukrainians now living in Romania.
“Romania has already spent hundreds of millions of euros for refugees since the first day of war and we’ll continue to do this,” government spokesman Dan Carbunaru said. “We have a limited budgetary space and we’re making all the efforts to ensure we support all the citizens, Romanians and foreigners.”
Exacerbated by soaring food and energy costs, the extra financial burden has squeezed the EU countries neighboring Ukraine, where living standards have yet to catch up with the bloc’s average almost two decades after they joined. It has also sparked a borrowing spree, with Romania and Poland selling a combined $14 billion in bonds this year, despite surging debt yields.
Registering almost 1.6 million refugees in its borders, Poland phased out a housing subsidy of 40 zloty ($10) per person a day for able-bodied Ukrainians who can work. It’s maintaining other payments, including a monthly 500-zloty per child subsidy and free schooling and health care, but it scrapped free public transportation.
The Czech Republic has paid about 23 billion koruna ($1.1 billion) for the roughly half-a-million refugees it’s hosting. It’s also about to shift from paying landlords to paying the refugees themselves for accommodation and is planning to reduce that at the end of the year for people who are able to work.
“In Poland and the Czech Republic, we have seen enormous governmental and non-governmental efforts to absorb and integrate a very high number of refugees, which will inevitably put pressure on the social system,” said Iulia Joja, the director of the Black Sea program for the Washington-based Middle East Institute think tank.
Slovakia’s housing allowances of €24 ($26) per day for adults and €12 per child expires at the end of May, with the Finance Ministry saying “the financial reserve for Ukraine doesn’t provide space necessary to cover this expenditure until the end of the year.”
Not all countries are cutting back. Germany, which has registered more than 900,000 refugees, has made no cuts.
Still, the reductions are starting to take a toll. With state-aid ending in Romania, many people will be hard pressed to pay for rents that reach about €400-€500 per month in Bucharest.
“We’re clearly becoming a burden,” said Rosana Tanislava, a 55-year-old Ukrainian waiting in line at a Red Cross station in Bucharest for a box of food supplies. “So it’s just a matter of time until all this aid will end, and we don’t know what we’ll do next.”
–With assistance from Daniel Hornak, Konrad Krasuski, Peter Laca and Patrick Donahue.
(Updates with more details about aid program in 7th paragraph.)
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