G7 pledge billions in emergency aid to Ukraine

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At the end of their two-day deliberations on the Petersberg near Bonn, there is an aid package worth billions for Ukraine. And the promise to do everything to stop the rampant inflation.

Press conference at the end of the G7 -Finance Ministers Meeting: Christian Lindner

The finance ministers of the seven most important industrialized countries (G7) wanted to get 15 billion dollars together as uncomplicated emergency aid for Ukraine. Kyiv urgently needs the money so that the state can remain liquid and carry out its tasks. 15 billion, which should last for three months, paid out as a subsidy (and not as a loan) for the finance minister's budget, who was also involved on the first day of the consultations at Petersberg near Bonn.

In the end of the two-day meeting at the historic site, the closing statement even included a pledge of $19.8 billion – with $9.5 billion being new funds raised during the meeting, with the rest coming from other sources, such as the International Monetary Fund (IMF). ) and the World Bank. 

Right from the start, the Americans had put pressure on them to comply with Kiev's request – and had themselves made an advance payment of 7.5 billion dollars. Then, on the afternoon of the first day, the host of the meeting, German Finance Minister Christian Lindner (FDP), announced that he would contribute a billion to the  package to participate. “The financial situation of the Ukraine must be such that its defense readiness is not endangered,” said Lindner at the final press conference.

Fight against the high prices

A second, very important topic of the meeting in the former guest house of the federal government in the Siebengebirge above the Rhine was the worldwide rising inflation. According to IMF head Kristalina Georgieva, it is becoming increasingly difficult for central banks to “get inflation under control without triggering a recession”. Because that is the dilemma in which the monetary watchdogs are stuck: if they turn the interest rate screw too hard, they choke off the recovery of the economies, which are still suffering greatly from the consequences of the pandemic. If they do too little against currency devaluation, the consequences can be just as dramatic.

Finance Minister Lindner (left) and Bundesbank boss Nagel at the final press conference in Königswinter

The German finance minister also described the high inflation – in Germany it is the highest it has been in decades – as one of the greatest risks for the global economy. The aim must be to overcome them in the short term and return to inflation rates “close to two percent”. According to Lindner, the G7 are determined to stop inflation with “consistent measures and to strengthen the forces of growth”. But that would not mean launching new spending programs. On the contrary: you have to get out of the stimulus packages that were justified during the pandemic. “We have to tighten the reins of monetary policy,” said Lindner in the direction of Bundesbank boss Joachim Nagel (see picture), who was sitting next to him. He agreed and sees the time for an interest rate turnaround by the European Central Bank. Nagel, who is also a member of the ECB Council, expects the first interest rate hike in July, and others are likely to follow this year. 

Next summit station: Schloss Elmau

The final document contains many other topics that were discussed during these two days. This is the usual commitment to open markets, but also the statement to make the energy and agricultural markets “more resilient” – which is of course no more than a platitude, because state market interventions are a controversial instrument, just like the current discussion about so-called tank discounts shows again. The high level of debt in many developing countries is also mentioned in the final document. They want to “act before crises arise,” said Lindner, referring to the relevant initiatives of the G20 group, in which all G7 countries are represented.

The G7 also reaffirm their goal of Mobilize $100 billion a year to support developing countries most affected by climate change. A project that has been a topic at climate conferences as well as at G7 and G20 meetings for many years. The next opportunity to talk about it will probably be the G7 summit of heads of state and government, which takes place at the end of June at Schloss Elmau in Bavaria.