Looking for Certainty

Economic News

22 Jul 2010
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Four months after the parliamentary elections, President Victor Yushchenko has nominated his formal rival, Victor Yanukovych, for the role of prime minister. The move is expected to end months of political uncertainty.

Over the course of the past week, President Yushchenko again threatened to dissolve parliament, Yulia Tymoshenko's bloc called for new parliamentary elections, and the pro-Russian parliamentary majority threatened to impeach the President if he does not accept Party of the Regions' Victor Yanukovych as prime minister.

Yanukovych's fraudulent bid for the presidency in 2004 sparked the Orange revolution.

However, after months of political wrangling to form a ruling coalition in the country's parliament, the pro-Russian Party of the Regions, led by Yanukovych, managed to form a ruling coalition with the communists and the socialists, who defected from the originally planned coalition with Yushchenko's Our Ukraine party, and Tymoshenko's eponymous party bloc.

The Party of the Regions actually made the best showing in the parliamentary elections last March, with Tymoshenko's bloc and Our Ukraine coming in second and third respectively.

The government has yet to stabilise, and the coalition pressed the President to approve Yanukovych, a decision that he has been reluctant to make. On August 1, Taras Chornovil, a senior member of the Party of Regions, threatened the President with impeachment if he dissolved parliament and held new elections, a move Tymoshenko had called for. She led her party out of parliament on July 27 to underline her unwillingness to compromise and allow the coalition to take power.

New elections are likely not in the interest of the pro-Western parties, as, according to the Kyiv Post, polls suggest that the pro-Russian coalition could gain even more seats in the parliament. If it managed to control 300, it could then begin proceedings for the impeachment of the President, said Chornovil.

The President's popularity has waned since his victory in the autumn 2004 presidential elections, as many see him as having failed to put forth the reforms he promised and raise living standards.

"We then, acting absolutely in line with the constitution, could announce the impeachment of the President, choose a new one or possibly transform the constitution so that the President is elected by parliament," he said.

President Yushchenko reportedly would not accept Yanukovych as prime minister if the party leaders of the new coalition would not sign a national unity agreement. This would in effect force the parties to agree to support the President's pro-Western goals, such as NATO, EU and World Trade Organisation (WTO) membership, and to safeguard Ukrainian as the country's only official language. The parties in the new coalition favour a co-operative relationship with NATO over membership, closer ties with Russia, some power devolved to Ukraine's regional governments, and making Russia the country's second official language.

Some have said the document is a ploy to force Yanukovych to renege on his campaign platform, but on July 31, he said there was room for compromise.
On August 3, the document was initialled by Yanukovych, President Yushchenko and parliamentary speaker Alexander Moroz. It still contained statements on the country's foreign policy direction, federalisation, language policy and some other unspecified issues that had been under dispute since the elections.

In exchange for this, the President has accepted Yanukovych as the prime ministerial candidate, to be decided by vote in the parliament on August 3, and the Our Ukraine party will now join the ruling coalition. It is not clear who will get key ministerial posts with this new coalition, to be signed August 3, with the new government formed as early as the following day.

At a press conference on the same day, Yushchenko said, "My decision is absolutely necessary for the nation's development, I have made a step toward parliament and I am convinced that it will use it in a proper way to bring prosperity to the country."

Tymoshenko's bloc will likely remain in opposition, as she has flatly refused to work with Yanukovych.

While some deals had managed to go through and the country's banking system saw some major acquisitions by foreign firms during the political wrangling, the economy managed to grow by 5% in the first half of 2006.

A government including Yanukovych and his party may also be able to smooth relations with Russia following January's so-called gas wars and allow more business deals between the two countries.

Kirill Dmitriev, who manages $500m at Moscow-based Delta Private Equity Partners, told Bloomberg, "Yushchenko has definitely done the right thing for the country and for the economy. Just bringing stability. . . could increase foreign investment in Ukraine by more than 10 times in the next three years."

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