ROME, 11 July 2025 — Germany has announced a new €40.5 million grant to support Ukraine’s small and medium-sized enterprises (SMEs), marking a critical injection of capital into the country’s war-fractured economy. The deal, finalized on July 11 during the closing sessions of the Ukraine Recovery Conference in Rome, represents one of Berlin’s most focused efforts to aid economic recovery outside the battlefield, directly targeting the private sector’s resilience.
According to a statement released by Ukraine’s Finance Ministry on July 11, 2025, the grant will be administered through Germany’s state development bank, KfW (Kreditanstalt für Wiederaufbau), and channeled into the Entrepreneurship Development Fund (EDF), a key domestic initiative tasked with expanding access to credit for small and medium-sized businesses. This financial commitment underscores Germany’s steadfast support, not just for Ukraine’s military resilience but crucially for its long-term socioeconomic survival.
“This package is about keeping the real economy alive in the hardest-hit regions,” Ukraine’s Finance Minister Serhiy Marchenko said in a statement. “Without robust small businesses, there can be no sustainable recovery.” The funding is expected to directly benefit entrepreneurs operating in war-affected and recently liberated territories, offering loans averaging €250,000 on highly favourable terms via Ukrainian partner banks. KfW has a long history of supporting Ukraine’s development, having committed over €1.5 billion since 2014 across various sectors, including energy, infrastructure, and financial sector development, as detailed on the KfW official website.
Supporting Entrepreneurs on the Frontlines of Recovery
The grant arrives amid an urgent need to revive Ukraine’s private sector, particularly its SMEs, which formed the backbone of the pre-war economy. Before the full-scale invasion, SMEs accounted for over 60% of employment and approximately 50% of Ukraine’s GDP, according to the OECD’s 2023 report on Ukrainian SMEs. Many such enterprises have either suspended operations, relocated, or lost critical assets and infrastructure due to Russia’s continued bombardment of key urban and industrial zones.
The EDF will strategically use the German funds to:
- Inject long-term liquidity into local Ukrainian banks, strengthening their capacity to lend.
- Ensure SMEs can access affordable loans despite the heightened credit risk environment of a wartime economy.
- Prioritize businesses operating in de-occupied regions, fostering reconstruction and job creation where it is most needed.
- Reduce administrative burdens for entrepreneurs, streamlining access to vital financial support.
The announcement is particularly timely. The Ukrainian government has faced mounting pressure to expand support to its domestic business sector, which remains vital to national resilience but continues to be underfunded relative to essential defense expenditures. In this regard, Germany’s backing could set the stage for additional bilateral economic instruments and further EU-level coordination. For a wider look at how economic tools are supplementing military aid and impacting national budgets, see our report on how US defense stockpiles are being redirected to Ukraine.
A New Phase in Germany’s Ukraine Policy
This funding is only the latest in a series of moves by Chancellor Friedrich Merz’s government to play a bolder and more comprehensive role in European stabilization efforts. During a joint press conference with President Volodymyr Zelenskyy on July 10, Merz also indicated Germany’s readiness to acquire two additional Patriot air defense systems for Ukraine, highlighting a dual-track approach that combines critical military protection with vital economic lifelines. This follows earlier commitments by Germany, including a €3 billion military aid package for Ukraine in May 2025, demonstrating Germany’s increased military aid to Ukraine under Merz.
In a statement released by the Chancellery on July 10, Merz reaffirmed Berlin’s resolute stance on frozen Russian assets, declaring they “should not be released until Moscow pays at least €500 billion in reparations.” This aligns with Germany’s persistent calls for a robust legal mechanism to redirect sanctioned Russian assets into Ukraine’s reconstruction efforts, a complex legal and political challenge currently under discussion within the G7 and EU. Germany’s strategic shift is also evident in its broader commitment to European security, as covered in Germany’s expanded role in EU defense under Merz.
Strategic Momentum at the Rome Recovery Summit
Germany’s commitment joins other significant pledges and initiatives announced at the Ukraine Recovery Conference in Rome, a crucial forum bringing together international partners, financial institutions, and Ukrainian leadership. The conference aimed to mobilize international support for Ukraine’s recovery and reconstruction, following previous successful gatherings in London (2023) and Berlin (2024), and reflecting the long-term commitment to Ukraine’s future.
Other key pledges and proposals from the Rome summit included:
- Netherlands: A commitment of $350 million earmarked for long-term Ukrainian reconstruction through 2026, building on their existing substantial support.
- World Bank Group: A $200 million allocation for project readiness and infrastructure design in Ukraine, aimed at accelerating the pipeline of viable reconstruction projects. The World Bank has been a key financial partner for Ukraine, providing over $42 billion in emergency financing since February 2022, as reported on the World Bank’s Ukraine support page.
- EU Institutions: Discussions and proposals to integrate Ukraine into cross-border SME innovation programs, leveraging existing EU frameworks like the Single Market Programme to foster economic integration and recovery.
These initiatives illustrate an emerging consensus across European capitals: Ukraine’s recovery cannot wait until the war ends. As noted in our ongoing analysis of Ukraine’s economic recovery brief, bridging the wartime economy with postwar growth is essential to national stability and democratic endurance. This comprehensive approach aligns with the EU’s broader strategy to ensure Ukraine’s stability and eventual integration into the bloc, a central pillar of EU Politics.
Balancing War Realities With Economic Survival
Despite these significant developments, substantial challenges remain for Ukrainian entrepreneurs. They continue to face:
- Damaged or inaccessible infrastructure, including critical energy facilities targeted by Russian attacks.
- Ongoing energy instability, leading to power outages and disruptions for businesses.
- Skilled labor shortages due to displacement, conscription, and migration.
- Difficulties securing new investment without robust credit guarantees and a stable legal environment.
However, initiatives like the EDF, significantly strengthened by KfW’s backing, could provide critical stabilization for these vulnerable businesses. The program’s decentralized approach, working through established Ukrainian partner banks, will allow for localised decision-making and improved responsiveness to specific regional needs. “It’s not just about grants or charity—it’s about empowering those rebuilding Ukraine from the ground up,” said an EDF spokesperson, emphasizing the agency and resilience of Ukrainian businesses.
Additional resources from the European Investment Bank (EIB) and potential EU-wide guarantees may follow, according to sources familiar with the European Commission’s post-summit briefings in Rome. The EIB has already provided significant financing under the EU’s Ukraine Facility, including a €2 billion guarantee from the European Commission to support Ukraine’s reconstruction and resilience. These combined efforts demonstrate a robust commitment from the international community to safeguard Ukraine’s economic future. For more on the EU’s extensive efforts to mobilize capital for Ukrainian reconstruction, refer to our ongoing coverage in the EU Economy section, including updates on EU joint ammunition procurement which also has economic and industrial implications.