Sunday, April 30, 2006

Coalition agreement on hold until June

Viktor Yushchenko puts Ukraine's economic and political future development future at risk

Ukraine's President, Viktor Yushchenko, has indicated that a coalition agreement may not be singed until June 2006.

Whilst other players have all signed agreements on the formation of a coalition government Our Ukraine which is spearheaded by Ukraine's President has to date refused to sign any agreement. Under dispute is Ukraine's choice of Prime-minister and other cabinet positions.

Yulia Timoshenko party and the Socialist Party of Ukraine both who are part of the Orange coalition have agreed to the formation of an Orange coalition with Yulia Tymoshenko who received 22% of the Parliamentary vote taking the Prime-ministers position and the leader of the Socialist Party ( 7.5%) as the Parliamentary Chairman/Speaker.

On the surface of it this proposal seams fair and justified given that Our Ukraine who only received 14% of voters support currently holds the Presidency.

Problem is Our Ukraine are not happy about Yulia Tymoshenko being re-appointed as Prime Minister.  Yulia Tymoshenko was sacked by Viktor Yushchenko last year following Yulia's allegations of corruption in the Our Ukraine ministerial and Presidential offices.

The announcement by the President that a coalition agreement would not be agreed to until June seriously undermines Ukraine's economic and political stability. 

Uncertainty and procrastination only undermine Ukraine's future

If the parties can not quickly and amicable agree to a coalition within the first week of Parliament sitting then it all over but for the shouting.  Yushchenko and Our Ukraine would have singly handed destroyed the Orange Revolution before it started. What confidence can their be in any marriage when it starts off on a bad footing? 

Any delay in the formation of a government would be a disaster for Ukraine and Ukraine's democratic development. 

loss of confidence would seriously effect Ukraine's economy with Ukraine potentially facing meltdown.

The President, who is currently travelling around the Baltic countries, should be back in Ukraine trying to avoid any possible fall-out as a result of his parties failure to sign up to a working coalition.  The formation of a working coalition government should and must be his first priority.

It is of serious concern that the president is prepared to place at risk Ukraine's economic and p[locity development for the sake of power politics.

Politics is the art of compromise

Our Ukraine needs to decide if they support the formation of an Orange coalition or they don't. With any coalition the division of power needs to be balanced and given the outcome of the results of the election the proposal on the table that has been signed by all parties involved in the Orange camp except Our Ukraine is reasonable.

Our Ukraine with only 14% of voters support is not in the position to make unrealistic demands.  They already have the Presidency and they must now demonstrate that they are reasonable and considerate and prepared to work together for the sake of Ukraine and not just the interest of a minor party.

If they can not agree and live up to the ideals of the orange movement then they should form a coalition with the Party or Regions.

Fresh elections out of the question.

History shows that disunity and indecisiveness is the death of any government. The other alternative of holding fresh elections would be a disaster.  Our Ukraine would be the biggest loser as the costs of holding fresh elections are prohibitive and are unlikely to produce a different outcome other then provide Party of Regions with the opportunity of a clean sweep win.  

Politics aside.

The most important at risk in Our Ukraine's procrastination and refusal to agree to a coalition is Ukraine's economy.  To weeks is a long time in politics and two moths is even longer in terms of economic stability.

If, as LEvko reports, this mess won't be sorted out until June, will the markets hold still for that? That is a long time for politics and an eternity for markets. Will there be any confidence in the government after all that? It is quite possible that any confidence could evaporate and start a selloff. It happened in the 90s in both Mexico and Venezuela for a lot less.

A rapid devaluation of the currency is not a pretty thing. I was in Venezuela when it happened there. The bolivar crashed, there was a run on the dollar and that caused the central bank to put controls on dollar buys. They needed to do this to be able to use dollars to control the descent (soaking up the bolivars on the market requires buying with dollars) and dollars reserves are needed to pay for goods coming in the the country.

The restrictions pretty much put a halt on imports. I talked with a grain trader at one point and he said the whole country was down to a 3 days supply of wheat. And the owners of any tankers with wheat bound for Venezuelan ports were seriously considering turning them back around because they thought they wouldn't get paid when the grain landed.

People tend to get surly when they get hungry and the Venezuelans have been known to riot. The owners didn't turn them back in the end and there were no riots and Venezuela came through it but came butt up against nationalism. Enter Hugo Chavez. Not a good ending, really.

I hope it doesn't happen here (and I should add, there are many, many reasons why it shouldn't.) But one thing is for certain: The parties on all sides believe they are in a fight to the death with their opponents only and with no others. But there are other interests and other actors who also have a say in what happens in Ukraine. The politicians here need to take that into account in their deliberations and in their public statements. Because those other actors, acting on the basis of self interest, criticize it for that reason as we will, can have a very significant effect on the lives of Ukrainians. (That has been my point with the very careless— irresponsible, really— way the investment situation here has been handled.)

But noting what has been said and done in the past, I won't be holding my breath.