Showdown Between President And Government

KIEV, Ukraine -- Tensions between Prime Minister Yulia Tymoshenko and President Viktor Yushchenko escalated sharply on Tuesday when the presidential office urged the government to dismiss ministers responsible for Ukraine’s skyrocketing inflation.

Viktor Yushchenko and Yulia Tymoshenko in better days.

The call for the dismissals came as Yushchenko also suspended the government's privatization plan, which may significantly worsen the budget revenue forecast and may hit hard Tymoshenko's popular support rating.

The developments underscore the significantly strained relations between Yushchenko and Tymoshenko that may eventually lead to the collapse of the pro-Western government coalition they lead.

"The ministers that have failed to handle the negative trends and failed to suggest quick and market-oriented instruments in reaction must leave their posts," Viktor Baloha, Yushchenko's chief of staff, said in a statement.

Baloha's criticism was aimed at the government's failure to curb inflation, which has been growing fast this year, partially due to Tymoshenko's populist campaign to massively pay out failed Soviet-era bank deposits.

The campaign helped Tymoshenko to significantly increase popular support rating, but the massive payments also strained the budget and spurred consumer prices increase that now threatens economic stability.

Ukraine’s consumer prices rose 3.8% on the month in March, the highest figure so far this year, pushing the cumulative inflation to 9.7% in January through March, outpacing inflation that had been forecast by the government for the entire year of 2008.

Measured on an annual basis, inflation rose to a shocking 26.2% in March compared with March 2007, which puts a mounting pressure on the National Bank of Ukraine to intervene by hiking its key interest rates.

Oleksandr Turchynov, the first deputy prime minister and Tymoshenko's closest ally, responded sharply to Baloha's comments, suggesting no action will be taken against the ministers.

"We do not accept the next portion of dirt that is being poured from the office of the president this week," Turchynov said in a statement. "It's beyond our dignity to give an assessment to this intellect."

Tymoshenko, who until recently insisted on meeting her original forecast of 9.6% inflation in 2008, had last week admitted the government had failed to curb the price growth. She said the government needs another three month to get things under control.

But Baloha the new timeframe was too short to actually change the trend, and again criticised the government for planning to resort to administrative price controls while combating inflation.

"The prime minister's statements of overcoming inflation within 5-6 months look too optimistic," Baloha said. "Honestly speaking, these statements must be called populist. On the top of that the government resorted to administrative price controls and that only fuels the inflation."

Meanwhile, Yushchenko also suspended the government's decree that had been calling for the quick privatization of the Odessa Portside Plant, the major producer and exporter of ammonia.

Tymoshenko needs to sell the plant quickly to raise enough money to keep up massive payments of the failed Soviet-era bank deposits, while the president fears the move would only further increase inflation.

On the other hand, the suspended privatization jeopardizes Tymoshenko's plans to keep up the payments that may hit hard her popular support rating, analysts said.

Turchynov lashed out at the president for the move.

"Unfortunately, a number of decrees has been signed by the president that completely block fair and transparent privatization in Ukraine," Turchynov said. "I believe this is a demonstrative abuse of powers and secondly conscious and aggressive policy aimed at destroying this year's budget, economic destabilization and maintaining a corrupt way of privatization."

Source: Ukrainian Journal

Comments

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