FINANCIAL STRATEGIES FOR POST-WAR RECOVERY IN UKRAINE AND EUROPE

Post-conflict reconstruction is a fiscal and financial policy challenge: governments must mobilize large resources for recovery while preserving fiscal sustainability, external balance, and financial stability. This article investigates the determinants of reconstruction strategies and their outcomes, focusing on how actors’ strategic priorities align with the economic and financial instruments they deploy. The purpose is to specify the conditions under which reconstruction is effective and to identify the risks posed by ill-suited strategies. Building on comparative evidence from major post-war settlements, the study distinguishes two ideal-type configurations: (i) a control/extraction template that relies on reparations-style claims, compensation mechanisms, and restrictive trade and settlement arrangements, and (ii) an integration/investment template that relies on coordinated multi-year financing, trade normalization, risk-sharing instruments, and institution-building that supports credit intermediation and private capital formation. Principal results indicate that two drivers are pivotal in shaping strategy choice and performance: the magnitude of wartime damage and rivalry among principal actors. Outcomes, however, hinge on the depth of institutional design underpinning the financing architecture — credible economic rationale, enforceable commitments, and coordination capacity over a long horizon. A causal-dynamic framework is proposed to map shifts between templates under these drivers and to derive reconstruction scenarios for Europe and Ukraine following the Russian–Ukrainian war. The main conclusion is that a drift toward a weakly institutionalized, control-oriented configuration raises debt vulnerabilities and instability risks, whereas an institutionally robust, integration-oriented program with predictable funding and effective risk-sharing is more likely to sustain recovery, investment, and durable peace.