Hmm, I wonder, is the 23 billion owed to UK/USA influencing decisions of these countries in any way? This seems to be awfully huge sum compared to normally frugal lending from these countries to developing countries and usual times when they start to ask to have their money back.Ukraine vote gives government power to suspend foreign debt payments
Parliament hands ministers powers to defend war-torn nation against ‘unscrupulous’ creditors
Ukraine’s parliament on Tuesday handed ministers the power to suspend foreign debt payments to defend against “unscrupulous” creditors.
The vote was the latest episode in an escalating row over a $25bn (£16bn) rescue package with the International Monetary Fund and European Union.
“In case of attacks on Ukraine by unscrupulous creditors, this moratorium will protect state assets and the state sector,” the prime minister Arseniy Yatsenyuk said.
Finance minister Natalie Jaresko said the overwhelming vote in the Rada, allowing the government to suspend payments to Ukraine’s international sovereign debt-holders, was “an important protection for citizens who are already shouldering a heavy burden due to the war in the east”.
The new law was passed only days before EU finance ministers are due to meet in the Latvian capital Riga to discuss how to stabilise Ukraine’s finances in the wake of the uprising centred on Donetsk and a dispute with Russia, which Ukraine claims supports rebel fighters.
Jaresko has argued for months that the economic situation inside Ukraine has worsened in recent months following the collapse in oil prices and imposition of sanctions on Russia, which remains its largest trading partner.
German chancellor Angela Merkel is keen to resolve the debt crisis to shore up her own economy, which was heavily connected to Russia and Ukraine.
The IMF has led talks over how to bridge a $15bn funding gap that Jaresko says Ukraine is unable to bridge without further funds.
It has pledged about $17.5bn with a top-up from the EU and other lenders, including the World Bank, taking the total to $25bn.
Ukraine must also finance about $23bn (£15bn) of private sector debt, , almost all of which is owed to US and UK financial institutions, apart from $3bn which is part of a Russian bond and another $1bn held by Russian banks.
Jaresko wants the debt pile to be cut, and the maturity on loans to be extended to reduce funding costs. She said private sector creditors should also reduce the interest rate on Ukrainian sovereign bonds.
She said: “Our government expects our international commercial creditors to negotiate respecting the principles of transparency, responsiveness and good faith.
“Today’s vote demonstrates the seriousness of our difficult financial position and the need to rapidly conclude a debt operation … I remain confident that such a solution can be found.
“Given our economic challenges and situation, our current debt levels are unsustainable and any deal with our international commercial creditors must include maturity extensions, coupon reductions and principal reductions. There is no alternative.”
EU negotiators are reluctant to approve a radical overhaul of Ukraine’s debts when the total outstanding only amounts to 71% of GDP. Germany and the UK currently manage debt piles of about 80% of GDP.
However, civil war in the east of the country, which is adding more than $5m a day to the defence bill alone, has sent the currency tumbling by more than 70% and sparked an inflation rate of more than 60%.
Jaresko said the country was also coping with steeply rising gas prices and demands from private sector debt-holders for full repayment of loans bought speculatively over the past two years.
IHS Global Insight analyst Jan Randolph said the Ukrainians were attempting to fast-forward the usual debt negotiations with demands for a writedown on its debts, but the usual rules might not apply to a country facing a war in its eastern half.
“The public debt has gone up to 71%, which is not a level you would consider a crisis when the Germans and the UK have higher public debts. But Ukraine is not in a usual situation,” he said.
“A major problem is that Russia has gone into recession and when that happened, Ukrainian nationals were expelled, gas prices were increased, the costs of conflict escalated and the situation worsened.”
The debt of state-owned Ukreximbank, Oschadbank and Ukraine railways, which is also being restructured, would not be subject to the moratorium, the official parliament’s statement said ahead of the vote.
Also, $5m a day? What it's spent on? Their infamous bounty head-hunting program? Certainly not on arms, they have massive stockpile of these from Soviet arsenals, unless they decided to go on shopping spree in USA and I missed that.
But never mind, it gets better. EU, despite Ukraine having debt level far below UK or Germany, just decided to pump 2 bln of free Euro there during summit mentioned above:
I like the honesty from Georgians in the end. Why it should be less easy for Russia to make deals with these six countries unless we're talking about full geopolitical annexation of them? Surely, if EU wanted to promote such unimportant things like human rights, democracy and western values, instead of building wet dream of idiot Russophobic right wingers, Iron Courtain 2.0, you'd talk about cooperation of both sides. Sadly, divisions won't work, as Belarus and Armenia refusal shown, Russia is far too important partner for these.EU summit pledges €1.8bn to Ukraine but Russia remains elephant in room
European leaders in Riga accused of expecting Eastern Partnership countries to bring in reforms for little in return while Kremlin offers ‘cash with fewer strings’
European leaders pledged Ukraine €1.8bn (£1.3bn) and the vague prospect of visa-free travel at an EU summit in Riga where the Kremlin’s newly assertive policy in eastern Europe was the elephant in the room.
While David Cameron was in the Latvian capital to discuss Britain’s demands ahead of a referendum on EU membership, the main topic of the broader summit was the Eastern Partnership, a programme set up in 2009 to bring six post-Soviet countries into Europe’s orbit and prise them away from Russia.
A vaguely worded statement affirmed the “high importance” of the partnership, but in reality the Riga summit showed just how different the six countries are. Eventual EU membership has never been an overt part of the partnership, and in the intervening years since it was launched, Azerbaijan has cooled on EU integration while Belarus and Armenia have signed up to Vladimir Putin’s rival Eurasian union project.
The Latvian foreign minister, Edgars Rinkevics, said: “This summit takes place in a completely different environment to previous ones.”
There had been wrangling over the final text of the summit statement, with Belarus and Armenia not willing to sign up to a statement condemning the “annexation” of Crimea by Russia, and some European nations uneasy about liberalised visa regimes for Georgia and Ukraine.
Three of the six nations – Moldova, Georgia and Ukraine – are still signed up to the European integration project. Most notable is the new pro-western Ukrainian administration of President Petro Poroshenko, who came to power after his predecessor Viktor Yanukovych was ousted following protests sparked by his refusal to sign an EU free trade agreement.
“During these 18 months, the Ukrainian people … made a revolution of dignity, and paid a very high price for their European choice,” said Poroshenko after the talks.
EU and Ukrainian officials signed the €1.8bn loan agreement to help with the ailing Ukrainian economy, which requires Ukraine to make a number of structural and anti-corruption reforms. But there were only the most carefully couched promises on visa liberalisation for Ukraine and Georgia, a key carrot for the two countries, and no mention at all of any future membership prospects.
“Georgia and Ukraine might enjoy a visa-free regime next year,” said the Latvian prime minister, Laimdota Straujuma, but it would depend on them “actively working to meet all the commitments to receive a positive opinion”.
One EU official said the problem was that the alliance demands “the expectation of serious reforms, but little concrete in response”, while Russia offers “cash with no strings attached when it comes to domestic policy, only foreign policy”.
Giga Bokeria, an official from Georgia’s opposition United National Movement, said: “I think the decision not to allow a roadmap for Ukraine, Georgia and Moldova to become EU members at some point, even far in the future, is a fundamental geopolitical mistake. This would stimulate internal reforms and make it less easy for Russia to make counter-offers.”
Man, Greeks really should beg Putin for invasion. The above law would never fly in Athens.
