The political
crisis roiling Ukraine’s post-revolution leaders is coming to a
head after the International Monetary Fund threatened to cut off aid
and another top reformer quit. If efforts to revamp the cabinet fail,
the risk is early elections.
Prime
Minister Arseniy Yatsenyuk is set to report to parliament this week on
government performance, with proposed personnel changes to follow.
While
President Petro Poroshenko has vowed to “reboot” the cabinet and
jump-start reforms, two small coalition parties want the premier to step down
and one has called for a snap ballot. Adding to friction, a senior Ukrainian
prosecutor resigned Monday, accusing his boss of graft. His exit follows that
of the economy minister this month amid similar accusations.
Poroshenko and
his team were brought to power after a popular uprising with a mission to
bring European levels of transparency to the former Soviet republic after
decades of misrule. While much of their two years in office was spent tackling
a recession and a pro-Russian insurgency that’s killed 9,000 people, voters and
Ukraine’s foreign backers are fed up with delays in fighting corruption. The
hryvnia has lost 9 percent this year.
“I don’t think the reshuffle is enough,” Lutz Roehmeyer, director of
fund management at Landesbank Berlin GmbH, said by e-mail.
“Early elections are unfortunately still possible. Foreign investors thought
that this is the one and only chance to reform the country but now it seems
that Ukraine falls back into old political behavior.”
While
investors have taken some comfort from recent efforts by Poroshenko to
bolster coalition unity and reaffirm Ukraine’s commitment to reform, yields on
government debt due 2019 remain almost 2.5 percentage points higher than when
they were issued in November after a $15 billion restructuring. Warrants that pay out
if expansion in gross domestic product exceeds 3 percent starting 2019 have
lost almost a third of their value.
Already
dogged by infighting that delayed passage of the budget and held up
disbursement of Ukraine’s $17.5 billion IMF loan, coalition tensions
spilled over this month when Economy Minister Aivaras Abromavicius quit,
alleging corruption inside the president’s party. IMF chief Christine Lagarde
added to the pressure last week, saying it’s “hard to see” the bailout
continuing without “substantial” reform and anti-graft efforts. Ukraine’s
corruption perceptions ranking at Transparency International barely budged last year.
In
another blow to Ukraine’s anti-graft ambitions, Deputy Prosecutor General
Vitaliy Kasko submitted his resignation Monday, saying in a webcast that
Prosecutor General Viktor Shokin has blocked corruption investigations and
reform. Poroshenko, who appointed Shokin, has resisted calls to oust him
despite a lack of progress to solve the murders of protesters in 2014 and
recover funds allegedly embezzled by former officials.
“The
Prosecutor General’s top officials have completed the job of making it the
office of corruption and covering each other’s backs,” Kasko said. “Any attempt
to change the situation inside the office is halted at once.”
No
one answered calls to the Prosecutor General’s press service seeking
comment.
To
ease the political crisis, Poroshenko’s is proposing a new reform schedule with
the IMF and a cabinet overhaul, retaining reformers such as Finance
Minister Natalie Jaresko. The plan is preferable to early elections as support
for the parties of the president and the prime minister has tumbled:
Yatsenyuk’s People’s Front is polling at less than 1 percent. Backing for the
coalition’s two smallest parties -- Samopomich and ex-Premier Yulia
Tymoshenko’s Batkivschyna -- has risen.
The coalition
controls 261 of parliament’s 450 seats, with Samopomich and Batkivschyna
holding 45, enough to require a new alliance is forged if they back out. Even a
successful end to rankling over a new-look cabinet wouldn’t be sufficient to
douse the idea of a snap ballot, according to Eurasia Group analyst Alex
Brideau.
“A
change might ease some of the tension, but I don’t think it will dispel it
entirely,” he said by phone. “Within a few months, they’ll have to look at
potentially changing the government, while reformatting the coalition. That
doesn’t necessarily mean early elections would happen, but the risk does seem
to have increased.”
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