Ukraine’s IMF Deal Means Greece-Like Depression

[unhappycamper]

http://www.commondreams.org/view/2014/03/28



A Greek riot policeman stands in front of graffiti written on the wall of a bank during violent demonstrations over austerity measures in Athens, May 5, 2010.

Ukraine’s IMF Deal Means Greece-Like Depression
by Jack Rasmus
Published on Friday, March 28, 2014 by Common Dreams

On Thursday, the IMF released the broad outlines of its terms and conditions for loans and other measures for the Ukrainian economy. What those terms and conditions mean is less a rescue of the Ukrainian economy than the onset of a Greece-like economic depression for the Ukrainian populace.

Ukraine’s economy had clearly entered a recession, its third since 2008, sometime in the latter half of 2013. Some recent estimates of the likely contraction of the economy in 2014-15 have ranged from 5%-15% in GDP decline.

The ‘IMF Standby Agreement with Ukraine’ text released March 27, acknowledges the current severe economic instability of the Ukrainian economy. What it fails to acknowledge, however, is how the IMF package will further adversely impact that economy.

The IMF deal calls for $14-$18 billion in IMF financial support provided over the next two years, 2014-15. Another potential $9 billion reportedly will come from other countries, although in yet unspecified form. The European Bank for Reconstruction & Development apparently will provide $2 billion of that $9 billion. Presumably the US aid package of around $1-$2 billion now currently working its way through the US Congress represents another element of the $9 billion. The remaining $5 of the $9 billion non-IMF funding is yet unidentified.

[dipsydoodle]

1. US support is in the form of "loan guarantees"

which implies that loans by others will be underwritten by the US as opposed to using US own funds.

[djean111]

2. You mean the Crimeans weren't honored at the thought of eating IMF peas? If they could get them?

[polly7]

3. Kick.

"The $27 billion taken out reflects a household consumer spending ‘multiplier effect’ that is much larger than the $21 billion net domestic Ukraine injection by the IMF. If one assumes a conservative 1.5 multiplier effect, the amount taken out of the Ukrainian economy is more like $40 billion over the next two years—a massive sum given that the Ukraine’s GDP in 2012 was no more than $175 and was flat to stagnant in 2013. Of course, the $40 billion ‘out’ is adjusted by the $21 billion ‘in’ and its multiplier effect. But while the $40 billion ‘out’ will definitely occur, there is no guarantee the full $21 billion IMF injection “in” will actually happen in turn.

Some of that $21 billion will no doubt be ‘put aside’ by the Ukrainian central bank to replenish its foreign currency reserves, today at around only $10 billion or less. Some of it will be used to assist Ukrainian businesses to purchase European imports of intermediate goods, projected to rise in cost significantly as Ukraine’s currency continues to decline. And some of it will go to loans from the NBU to Ukrainian businesses that will hoard the cash and not use it to expand production. All this means that probably no more than half the $21 billion IMF net injection will actually affect the real Ukrainian economy. Given these ‘leakages’, the multiplier effects of the IMF injections will no doubt prove to be negative. It is not unreasonable to assume no more than a net $10 billion of the IMF’s $21 billion will get into the Ukraine’s real economy as a stimulus.

That leaves no more than a $10 billion net stimulus over the next two years, offset by a ‘multiplier’ of $40 billion reduction in the real economy over the next two years. A net reduction in Ukraine’s GDP of $30 billion in the next two years, or about $15 billion a year, represents a cumulative decline in GDP of at least 18%. And that’s a Greece-like Depression.

By absorbing the Ukrainian economy into the Eurozone, the latter is in effect taking under its economic wing yet another ‘Greece’ and ‘Spain’. And as in the case of those latter economies, those who will pay will not be the bankers and multinational businessmen, but the Ukrainian people. But that is the essential and repeated history and legacy of IMF deals globally for the last three decades."

[WhiteShoesATL]

4. yep

part of the West's IMF loan was to cut a decades old heating and electricity subsidy that bolstered most of the Ukraine's middle class. When they yank this much of their disposable income (which they have little of) will be gone. I do not understand why they served up the Ukraine such a loan. It is borderline financial tribute reminiscent of the Medieval days.

People also do not take into account the continued disaster that is Chernobyl. So many births are abnormal and the health of the average citizen as well as their life span which, is cut by half (regardless of vodka & ciggs).

[bemildred]

5. It means civil war, partition, and more revolutions, at best.

The people of Ukraine, you will note, whatever side they are on, are well armed and active.

[bemildred]

6. Ukraine says fires warning shots at Russian helicopters

May 24 (Reuters) - A Ukrainian anti-aircraft battery fired warning shots to prevent an incursion on Saturday by Russian helicopter gunships from the Crimea peninsula, the Ukrainian defence ministry said.

Two Mi-35 aircraft approached the boundary between mainland Ukraine and Crimea, occupied and annexed by Russia two months ago, at 12:55 p.m. (0955 GMT), it said in a statement.

Troops stationed on Kutara Point "fired warning shots from an anti-aircraft system, forcing the provocateurs to turn back".

The incident happened on the eve of a Ukrainian presidential election that the Kiev authorities hope will strengthen their position against Moscow, despite difficulties holding the ballot in eastern areas controlled by pro-Russian separatist rebels.

http://www.reuters.com/article/2014/05/24/ukraine-crisis-helicopters-idUSL6N0OA0PH20140524?rpc=401&feedType=RSS&feedName=rbssIndustryMaterialsUtilitiesNews&rpc=401

[bemildred]

7. Putin to Canada: Let’s talk Arctic; butt out of Ukraine

ST. PETERSBURG, RUSSIA—Russian President Vladimir Putin says he can understand Canada’s concerns about Arctic sovereignty, but the Canadian stance on Russian involvement in Ukraine is far harder to accept.

Putin took questions from senior representatives of international wire services, including The Canadian Press, at a meeting in St. Petersburg on Saturday.

He says there is room for compromise in discussions about who owns what in the Arctic, and he points to Russian talks with Scandinavian countries as a model.

But when it comes to Canada chastising Russia’s involvement in Ukraine, Putin is far less conciliatory.

http://www.thestar.com/news/canada/2014/05/24/putin_to_canada_lets_talk_arctic_butt_out_of_ukraine.html

[bemildred]

8. As Ukrainians vote, legacy of Odessa fire that killed 48 has port city on edge

ODESSA, Ukraine — As voters go to the polls Sunday to choose their first president after a street revolution ousted Viktor Yanukovych in February, Ukraine is on a knife’s edge. It is sure to grow closer to Europe, the aim of the uprising, but it also could come apart in a civil war that would invite a Russian intervention.

Armed pro-Russian separatists have grabbed the headlines in the past six weeks as they ambushed security forces and seized city halls and police stations in eastern Ukraine. But in the tug-of-war between Russia and the West, this port city in southern Ukraine, Odessa is, perhaps, the biggest prize.

Odessa, a cosmopolitan port city, with its tree-lined cobblestone streets and laid back atmosphere, its statues of the Russian czarina Catherine the Great, who founded it, and the writers and poets who were born or spent time here, seems an unlikely venue for a battle over Ukraine’s future.

But three weeks ago, pro-Russian militants demanding closer ties to Moscow provoked a street battle that ended in the deaths of 48 civilians, many of them pro-Russians burned to death or asphyxiated in a fire at the Trade Union building that had been their headquarters. It was the worst violence between civilians since clashes began, and was abetted by police who appeared to side with the pro-Russians and did not intervene.

http://www.mcclatchydc.com/2014/05/24/228350/as-ukrainians-vote-legacy-of-odessa.html

[bemildred]

9. Ukraine 'open to dialogue' with separatists: president

Kiev will consider halting military operations against pro-Russian separatist groups if they lay down arms, Ukraine's acting President Alexander Turchynov told the parliament Friday.

"We are open to cooperation and dialogue. We continue our work on some constitutional amendments to grant more authority to the regions," Turchynov said.

The region of Donetsk declared independence from Ukraine after pro-Russian separatists organized a "self-rule" referendum on May 11. The Ukrainian government and Western nations have refused to recognize the referendum results.

During Friday's session, the parliament was unable to reach an agreement over terminating military operations. Lawmakers from the Party of Regions left the assembly in protest.

http://www.aa.com.tr/en/rss/334153--ukraine-open-to-dialogue-with-separatists-president

[bemildred]

10. Ukrainian rebels opt for new state

A day before Ukraine was to elect a new President the rebellious Russian-speaking regions ramped up their rebellion against Kiev, deciding to form a new independent state.

The formation of Novorossiya, or New Russia, as the eastern part of Ukraine was called in the 19th century, was announced at a meeting of pro-independence activists from Ukraine’s eight southeast provinces in Donetsk.

Novorossiya will initially be made up of the “People’s Republics” of Donetsk and Luhansk, which declared their independence earlier this month. It is planned that six more regions — Nikoyayev, Odessa, Dnepropetrovsk, Kharkiv, Zaporozhie and Kherson, will join the new state after holding referendums on independence, similar to those held in Donetsk and Luhansk held in May.

“We see only one road ahead for us, independence and breakup with Ukraine,” said Pavel Gubarev, leader of the Donetsk People’s Republic. However, the meeting was split on the issue of independence from Ukraine.

http://www.thehindu.com/news/international/world/ukrainian-rebels-opt-for-new-state/article6044662.ece

[bemildred]

11. Insurgents 'to stop voting in Ukraine'

Pro-Russian insurgents are likely to prevent voting tomorrow in half or more of the election districts in the embattled east, Ukrainian officials said.

Deputy interior minister Serhiy Yarovyi said that police are ready to ensure order and security at polling stations in just nine of the 34 districts in the east.

Earlier, Volodymyr Hrinyak, chief of the public security department at the Ukrainian Interior Ministry, said 17 out of 34 district election commissions in the Donetsk and Luhansk regions are not operating because their offices have either been seized or blocked by armed men.

Mr Hrinyak's update was reported by the Interfax news agency.

http://www.breakingnews.ie/world/insurgents-to-stop-voting-in-ukraine-631530.html