Ukraine has embarked on an ambitious reform path. In the past two years, it has achieved more than ever before; this in spite of the illegal annexation of Crimea and Sevastopol by the Russian Federation and the conflict in the east of the country, as well as the resulting difficult economic situation. The European Union remains steadfast in its support, both as regards Ukraine's sovereignty, territorial integrity and independence, and in its undertaking of the necessary political and economic reforms to consolidate a stable, democratic, united and prosperous country. The Support Group for Ukraine, established by the European Commission in 2014, has supported the reform agenda of the Ukrainian authorities, providing hands-on advice, expertise and financial support, and bringing about tangible, positive results for the Ukrainian people.
• Democratic institutions in Ukraine have been revitalised. Ukraine is committed to the protection and promotion of common fundamental values of democracy, human rights and the rule of law. Civil society has been strengthened and is a vital part of Ukrainian reform efforts.
• The EU and Ukraine as partners: The European Union and Ukraine enjoy strong political and economic bonds, having agreed and signed an Association Agreement, which includes the creation of a Deep and Comprehensive Free Trade Area (DCFTA), on 21 March and 27 June 2014. The provisional application of important parts of the Association Agreement since 1 November 2014 has enhanced bilateral cooperation on human rights, fundamental freedoms and rule of law; political dialogue and reform; movement of persons; cooperation in a number of sectors, notably energy, environment and climate action, transport, financial services, public finances, including anti-fraud, agriculture and rural development, fisheries and maritime policies, consumer protection and civil society. The European Union continues to reinforce its position as Ukraine's first trade partner, and via provisional application of the DCFTA since 1 January 2016, Ukrainian and EU businesses enjoy stable, preferential market access. Ukraine's exports to the EU increased by 5.2% in the period September 2015 – August 2016 compared to the same period in the 2014-2015.
• Ukraine's government has stood up against corruption and strengthened the rule of law: The authorities have established a new set of anti-corruption institutions and adopted new legislation on anti-corruption, on the Public Prosecutor's Office and on public procurement. Deep reform of the judicial system can now start after the adoption of the constitutional amendments on judiciary. A new National Police has also been set up.
• On 20 April 2016, the European Commission proposed to lift visa requirements for the citizens of Ukraine, after making a positive assessment that Ukraine has successfully met all benchmarks under the Visa Liberalisation Action Plan. The proposal is currently under consideration by the Council and the European Parliament.
• A civil service law and strategy on reforming the public administration, in line with European standards, have been put in place.
• Progress has been made in the merger of municipalities and in fiscal decentralisation. Constitutional amendments related to decentralisation have been adopted in first reading, with the second reading pending.
• Transparency has been strengthened: Public access to information has been improved and the Ombudsperson's office has been empowered to oversee this process.
• Energy sector reform has helped to increase market transparency, incentivise energy saving, substantially reduce the fiscal burden of the energy sector and limit Ukraine's dependence on gas imports from Russia. Energy sector reform and liberalisation have also made a significant dent in the level of corruption in Ukraine.
• The agricultural and transport sectors can contribute to a vibrant modern economy; the Support Group for Ukraine is supporting the Ukrainian authorities in setting up reform strategies.
• Ukraine has also been encouraged to participate in the EU's research and development programmes in the hope that these too can make a positive contribution to Ukraine's modernisation.
• Preparations are being made for the privatisation of many of Ukraine's state-owned enterprises. At the same time, there are attempts to improve the business climate also for small and medium-sized enterprises (SMEs). Ukraine has the potential to attract more foreign direct investment if additional efforts are made to address legal and judicial unpredictability and the institutional framework.
• During 2016, the macro-economic situation has stabilised, benefiting from prudent macro-financial policies pursued by the authorities and support by Ukraine's international partners. The restructuring of the banking sector lowered systemic risks to public finances and to the economy in general.
The EU has supported Ukraine throughout its reform process:
• Since 2014, the EU has committed €3.41 billion in macro-financial assistance (MFA) to Ukraine under three programmes. So far, €2.21 billion in loans have been disbursed - €610 million under the first MFA operation, €1 billion under the second programme, and €600 million as part of the most recent and ongoing MFA operation (MFA III). Subject to the effective implementation of policy measures detailed in the Memorandum of Understanding related to MFA III, two further tranches of €600 million each are expected to be made available to Ukraine in 2016 and 2017.
•The EU has provided a major support package in priority reform areas established together with Ukraine and EU Member States, facilitated in particular via the Support Group for Ukraine. The focus for 2015/16 has been on decentralisation (€100 million), economic development (€90 million), anti-corruption (€15 million), public administration reform (€104 million) and the rule of law (€52.5 million). Support related to the conflict through the Instrument contributing to Stability and Peace (IcSP) amounted to €73.7 million since 2014. In 2015 and 2016 the Commission humanitarian aid department allocated a total of €54.8 million which was reinforced by contributions from Member States. Ukraine has benefitted from the so called "more for more" funds, which is allocated based on partner country's progress on reforms.