Ukraine Delays Government Vote as Russia Warns of Default

[Purveyor]

By Daryna Krasnolutska, Kateryna Choursina and Ilya Arkhipov Feb 25, 2014 11:48 AM ET

Ukraine delayed selecting a national unity government as Russia warned of a possible default days after President Viktor Yanukovych was ousted.

Acting President Oleksandr Turchynov pushed back a parliamentary vote to Feb. 27 from today as he attempts to win agreement with protest leaders who orchestrated the revolt. He indicated yesterday that a new administration should be formed quickly to secure as much as $35 billion in financial aid.

“Ukraine’s economy needs rescue and that adds pressure on the revolutionary political forces to create a truly national unity government,” said Lilit Gevorgyan, senior economist at IHS Global Insight in London, said by e-mail. “The large bailout plan that Ukraine currently seeks won’t be handed out by international donors to a weak and non-inclusive government.”

With Yanukovych on the run after weeks of anti-government protests turned deadly, Ukraine’s new leaders are grasping for a financial lifeline as Russia weighs the fate of a $15 billion bailout it granted in December. Russia’s deputy finance minister said there’s a high chance Ukraine will default. The U.S. and the European Union have pledged aid to the new administration.

more...

http://www.bloomberg.com/news/2014-02-25/ukraine-delays-vote-on-picking-new-government-to-feb-27.html

[dipsydoodle]

1. The large bailout plan that Ukraine currently seeks won’t be handed out by international donors....

Period - without conditions that wouldn't completely screw their population including devaluation of their currency.

They were down graded to CCC last week - likely to default on current debt.

Given the source of the Russian funds Russia would be stupid to give them any more than the $3 million in place of the $15 billion toatl agreed with Ukraine's errant President especially given that the opposition have already demonstrated they do not keep to agreements.

Ukraine fell foul of the terms of previous IMF loan agreement to the extent that the IMF overhauled its rules for all - loan agreements fold if terms are not adhered to.

The grass isn't always on the other side......................

[Pretzel_Warrior]

2. I am sure the economic power of the #1, #4, #5, and #6 economies

of the world can find a way to forestall default by Ukraine and set them on a path of stability as they seek to remove themselves from the cold gray clutches of Putin and Russia.

The amount of change the prior president instituted so quickly to meet the wishes of the Kremlin in such a short time (since 2010 election) is scary.

[dipsydoodle]

3. Broadly speaking only if they are prepared to write it off i.e. give it away.

You should easily find elsewhere that the aggregate long term amount Ukraine is likely to need is c. $220 billion - pretty much equal to the cost of entire bailout of Greece. Such a sum would lead to Ukraine being effectively owned by the west as loans would all be secured against state assets - that's the way it done now.

It does not follow that the populations of the countries you alluded to would be wholly appreciative of coughing up £220 billion.

One reason that the last IMF loans were terminated was that Ukraine refused to increase the prices paid for gas by their consumers. Refusal to do so , despite that being a term of the agreement , helped remove Ukraine's ability to repay the debt. I'm not saying Ukraine should necessarily have agreed that term in the place but the fact is they did.

Give it time and their population may find that "being the cold gray clutches of Russia" wasn't so bad after all - at least Russia didn't own them.

[Pretzel_Warrior]

4. hahaha. you are describing the macroeconic equivalent of charging up the credit card every time

and then trying to run from the bill collectors. Countries like Greece and Ukraine don't have an IMF problem--they have a fiscal policy problem. It is easy to give away the goodies to gain popular support, but eventually it catches up to you unless you've got something reasonable on the other side of the ledger to pay the expenses each month.

[dipsydoodle]

5. "on the other side of the ledger to pay the expenses each month"

They lack foreign reserves and their own currency is tubing.

Greece's inability to pay was attributed to an almost non existent tax collection system and spending the funds which should have been set aside to service their debt on an over inflated public sector.

[Pretzel_Warrior]

6. and why no reserves? They have been funneling it straight into the hands of corrupt

oligarchs. That has got to stop. They are not a fully functioning nation and economy. If they want to become more vibrant, successful country not held down by the Kremlin, they'll need to adopt reforms.

[dipsydoodle]

7. I wish them well

but I have doubt that I will make much use of advance search in 2015 to demonstrate who thought what here at the time.