At Any Rate
Global Rates, EM & Economics: Q&A on European defence spending and Ukraine
Feb 20, 2025
Ravi Balakrishnan, Chief European Economist at J.P. Morgan, joins Nicolaie Alexandru-Chidesciuc, Head of EM Economics, and Aditya Chordia, European Rate Strategy expert, to discuss pressing issues in European defense spending and Ukrainian reconstruction. They dive into the staggering funding needs estimated between $350 to $500 billion. The trio explores complex strategies for bolstering EU military budgets amid geopolitical tensions and the implications for sovereign debt and markets, all while contemplating the role of frozen Russian assets and inflation.
31:14
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Quick takeaways
- Ukraine's reconstruction costs may reach $500 billion over the next decade, contingent on achieving a sustainable peace agreement.
- EU defense spending is projected to increase to 3% of GDP, though national budget constraints present significant challenges for member states.
Deep dives
Financial Implications of Ukraine's Reconstruction
The estimated costs for reconstructing Ukraine following recent conflicts could escalate to between $350 billion and $500 billion over the next decade. The majority of these expenses are concentrated in frontline regions and government-controlled areas that have been affected by military actions. Reconstruction efforts are tied to the establishment of a sustainable peace deal, with the earliest anticipated start being in the third quarter of 2025. This timeline suggests that significant financial mobilization for reconstruction may not commence until after a formal ceasefire is achieved.
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