[Ohio UZO News] Ukraine: Economist; CSM; KP

[Deychak, Orest]

And what's a common theme in all of these articles?


 


http://www.economist.com/world/europe/PrinterFriendly.cfm?story_id=13145
865


 


The Economist

Default options 

Feb 19th 2009 | MOSCOW 
>From The Economist print edition


Leaders bicker as the economy sinks

AP

 

	

THE D-word is stalking Ukraine. As its political leaders bicker,
investors are having nightmares about its defaulting on its sovereign
debt. Yulia Tymoshenko, the prime minister, has sought to calm rising
investor panic, suggesting that nothing in the government's finances
warrants "pronouncing the word default". For now, most experts agree.
Even though the markets are charging exorbitant annual rates (32%) for
Ukrainian dollar debt (see chart), the coffers seem sturdy enough.
Sovereign debt accounts for only about one-fifth of total external
borrowing of around $105 billion. The government can handle that, at
least this year. But an inevitable series of corporate and banking
defaults are likely to hasten the economy's decline. 

By now Ukraine should have received the second tranche of a loan from
the IMF worth $1.8 billion. But the IMF says Ukraine is not sticking to
the conditions of the loan-worth a chunky $16.4 billion in total-and
wants greater fiscal discipline. Uncertainty about whether the rest of
the loan will be disbursed is causing jitters. But as tension mounts,
the president and prime minister are at one another's throats. President
Viktor Yushchenko recently, for the umpteenth time, accused Ms
Tymoshenko of "betraying national interests", by talking to the Kremlin
about a $5 billion loan. Playing the anti-Russian card is one of his
favourite ways of wooing public opinion in western Ukraine, where there
is little love of Russia or its language. 

	
	
	

Ms Tymoshenko is resisting IMF pressure to balance this year's budget,
forecast to show a deficit of 3% of GDP. Cutting the deficit would force
her to scrap some of the social promises she had made to voters. Mr
Yushchenko and Ms Tymoshenko are expected to contest a presidential
election in the coming year, and both are playing politics while the
sickly economy gets sicklier. Dependent on steel, fertiliser and
chemical exports, Ukraine has been hit hard by the global slump in
commodity prices. Officials say that industrial output crashed by a
jaw-dropping 34% in January year-on-year. Valery Litvitsky, an adviser
to Ukraine's central bank, estimates the economy contracted by as much
as 20% in January alone, as a dispute with Russia over gas prices
reduced supply and forced the country's heavy industry to go slow. 

The number of Ukrainian banks going bust is meanwhile growing; many
Ukrainian workers are on unpaid and indefinite leave; and the currency,
the hryvnia, has shed over a third of its value since the autumn. That
has made life tough for consumers, many of whom have borrowed in dollars
to buy houses and cars. 

To make matters worse, Ukraine is now without its experienced finance
minister, Viktor Pynzenyk, who has resigned complaining he had become "a
hostage to politics". Opposing the deficit, he refused to approve the
budget, and suggested that the government's overall economic plan was
unrealistic. The government is still forecasting that the economy will
grow slightly this year, by 0.4%, compared with 2.1% last year. But
economists say it will probably contract by around 5% or even 6%. 

Ms Tymoshenko is trying to borrow money wherever she can. Her government
has sent begging letters to America, the EU, China and Japan, as well as
Russia. And she is trying to muster a show of unity for the IMF. She
wants Mr Yushchenko to join her in signing a declaration expressing
readiness to co-operate with it. To escape this crisis, Ukraine does
indeed need the squabbling duo to set aside their rivalry: and not just
for show


 


Christian Science Monitor


 


www.csmonitor.com


 


Ukraine's leaders bicker as economy burns


Not long ago, they were Orange Revolution allies. Now, Tymoshenko and
Yushchenko despise each other.

By Fred Weir| Correspondent of The Christian Science Monitor 

from the February 18, 2009 edition

 

Kiev, Ukraine - Rearranging the deck chairs on the Titanic.

That's how many Ukrainian observers describe the very public, escalating
power struggle between liberal president Viktor Yushchenko and his
erstwhile ally in the Orange Revolution, the fiery populist prime
minister, Yulia Tymoshenko.

To many observers, Ms. Tymoshenko and Mr. Yushchenko are already
fighting presidential elections that are nearly a year away and are
using their official positions mainly to undermine any decisions taken
by the other. In recent weeks, both have issued statements blaming the
other for the country's galloping financial crisis, which has seen the
hryvna plunge in value by nearly 60 percent, Kiev's main stock market
fall by 75 percent, and most banks cease lending or even returning
depositors' cash.

Dirty political laundry on national TV

In an internal memo leaked to the Ukrainian media late last month,
Ukraine's finance minister, Viktor Pynzenyk, warned that the economy is
on the verge of collapse: "We have entered an extremely serious and deep
crisis. Ukraine's [economic] situation is the worst in the world."

Following the memo's publication, Yushchenko took to the airwaves to
blame it all on the "populism" of Tymoshenko, whose 2009 budget incurs a
huge deficit to pay public sector wages, pensions, and other social
obligations. As a result of her "irresponsibility," Yushchenko charged,
"salaries, pensions, and stipends will no longer be paid.... all this
can bring about a social catastrophe."

Tymoshenko appeared on TV the next day to accuse the president of
spreading "falsehood, panic, and hysteria. Everyone can see that the
president is not the kind of leader they need when Ukraine is reeling
under the blows of the global economic crisis."

Surveys show that nearly 85 percent of Ukrainians believe there is no
government order in the country.

"It's a good thing when they compete in elections, but when they
continue competing afterwards, it's disastrous," explains Vira Nanivska,
president of the National Academy of Public Administration in Kiev. "It
becomes impossible for needed decisions to be taken."

A revolution's bitter aftertaste

In 2004's Orange Revolution, Tymoshenko and Yushchenko worked together
to defeat pro-Moscow leader Viktor Yanukovych. During weeks of protests
in Kiev's freezing main square it was usually Tymoshenko, a passionate
orator, who would warm up the crowds before turning the stage over to
the more measured and cerebral Yushchenko.

Following Yushchenko's election as president, the two quickly had a
falling out. Within a year, Yushchenko dismissed her from the prime
minister's job. Tymoshenko has since clawed her way back to power in
parliamentary elections and now leads a fragile majority parliamentary
coalition.

"There was a binary charisma between them that won the Orange
Revolution, but which has now acquired an equally compelling explosive
force," says Dmytro Vydrin, a member of Yushchenko's National
Constitutional Council.

Political rumbles remain from gas dispute

Last month, Tymoshenko traveled to Moscow to sign a deal with Russian
Prime Minister Vladimir Putin ending a two week pipeline dispute that
had cut energy supplies to 18 European countries. But she was forced to
agree to a near doubling of the price for gas. Yushchenko subsequently
denounced the accord as a betrayal of Ukraine's national interests, and
vowed to overturn it - a threat he later retracted under pressure from
nervous Europeans.

Last week, Tymoshenko's parliamentary coalition voted to dismiss the
governor of Ukraine's National Bank, a Yushchenko appointee whose job is
to save the country's teetering banking system, even though there is no
potential replacement on the horizon.

Tymoshenko, who earned a fortune peddling Russian gas to the Ukrainian
market in the 1990s, is accused by Yushchenko's backers of selling out
to Moscow in exchange for the Kremlin's political support in winning the
presidency. Such heated rhetoric is not unusual in Kiev's current
atmosphere, say experts, including Viktor Nebozhenko, director of
Ukrainian Barometer, an independent think tank, and a former adviser to
the prime minister. "Yushchenko is pursuing a scorched earth campaign to
stop Tymoshenko, and even seems willing to take her down with him."

The prime minister has hurled similar invective, describing Yushchenko
as a "state criminal," Mr. Nebozhenko says. "The competition between the
two of them is highly personal, and deeply dangerous for the country."

A divided Ukraine heads to the polls

Few experts believe allegations that Tymoshenko is in Mr. Putin's
pocket, but some say she may be angling for the Kremlin's support in the
electoral battle to come. The logic lies in Ukraine's deep cultural
split, in which the country's heavily Russified and pro-Moscow east and
is pitted against its nationalistic and Europe-leaning west. The
majority of eastern voters back the Russia-friendly Party of Regions,
which led the pack with 22 percent support in a mid-December survey
conducted by the independent Democratic Initiatives Foundation in Kiev.
Tymoshenko follows with 14 percent, while Yushchenko has fallen into the
realm of statistical error, with just 2.2 percent, according to the
poll.

The trick for Tymoshenko, who has rolled up most of Yushchenko's
"Orange" support, is to win votes in pro-Moscow eastern Ukraine, and for
that she needs a nod from the Kremlin, says Vadim Karasyov, director of
the independent Global Strategies Institute in Kiev. "The Kremlin wants
to remove Yushchenko because he embodies the pro-Western and pro-NATO
membership course for Ukraine," he says. "Tymoshenko has shown
flexibility on the big geopolitical issues and, unlike Yanukovych, she
can win votes all across Ukraine."

Sign of democracy or seeds of dictatorship?

Some observers worry that things might come to a head long before the
presidential polls at the end of the year. "The Ukrainian state is in
danger of losing control over the situation," says Andrei Yermolayev,
director of the independent Sofia Center for Social and Political
Studies in Kiev. "The gloves have come off, and each side is fighting
for a monopoly of power. One possible outcome of this struggle is the
emergence of an authoritarian regime in Kiev."

Other experts believe that after nearly two decades of independence from
the USSR, democracy has become firmly entrenched as a means for
Ukrainians to settle differences.

"If the economic situation gets really bad, the authorities will let
steam out through new parliamentary elections," says Mr. Vydrin.
"Because we are a democracy, we have this option to let the population
channel their anger in peaceful and creative ways."

 

Kyiv Post

Editorial

Ukraine bashing

February 18, 2009

 

The country is waist-deep in economic woes, but some of the risks are
grossly exaggerated

It has become fashionable in the wake of the global economic crisis to
portray Ukraine as the next Iceland, slipping into financial default, or
as a failed state. 

While the country is waist-deep in economic woes, some of the risks are
grossly exaggerated due to the mudslinging between President Victor
Yushchenko and Prime Minister Yulia Tymoshenko. Some experts wonder if
Yushchenko is deliberately trying to make a bad situation worse in order
to undermine his rival. A responsible president does not ring alarm
bells that his country may be on the verge of default, especially when
the hard evidence suggests otherwise.

If you ignore the noise and focus on the numbers, Ukraine's debt
relative to gross domestic product is far below the 60 percent range
that many countries endure. Experts say Ukraine's government and
government-guaranteed debt at the end of 2008 amounted to $24 billion,
or 19.5 percent of gross domestic product. Despite negative dynamics for
the last few months, $28.8 billion in current central bank reserves is
sufficient in a worst-case scenario.

Many fear Ukraine's bank sector could collapse, dragging the state down
with it. According to one estimate, the total amount of banking and
corporate debt due this year is up to $40 billion. There will be some
defaults, but as central bank officials revealed this month, debt
obligations by the largest banks (the lion's share of the market) seem
manageable. A handful of top domestic banks will need government
bailouts. The majority will be recapitalized by their European parents,
who are themselves largely to blame for lending Ukraine too much in
recent years. Moreover, the European Bank for Reconstruction and
Development this week pledged 500 million euros to recapitalize troubled
Ukrainian banks. 

Another concern is whether Ukraine has enough to pay pensions and
unemployment benefits. Facing the threat of civil unrest, Tymoshenko
appealed to the world's richest countries for $5 billion in emergency
loans. Russia has expressed interest, fueling speculation by Yushchenko
that his rival had sold out national interests. Close examination of any
Russian loan is needed, as well as ways to cut the bureaucracy-laden
budget. Any loans should be directed at infrastructure and energy
efficiency, investments that will pay off in the long run.

The challenges facing Ukraine are deep, but there's no need to hit the
panic button. From available evidence, international credit rating
agencies are wrongly portraying Ukraine as on the brink of collapse.

The words of one Ukrainian banker offers hope: "Where were these rating
agencies last year? Why didn't they predict the downfall of Lehman
Brothers and other banks out in the West? Their banks are collapsing.
But we are still standing, despite all the challenges, while their banks
are going down one by one."

 

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